May 2, 2018
Re: § 58.1-1821 Application: Individual Income Tax
Dear *****:
This will respond to your letter in which you seek correction of the individual income tax assessment issued to ***** (the “Taxpayer”) for the taxable year ending December 31, 2013. I apologize for the delay in responding to your appeal.
FACTS
The Department received information from the Internal Revenue Service (IRS) indicating that the Taxpayer may have income subject to Virginia income tax for the 2013 taxable year. Under audit, the Department discovered that the Taxpayer filed a joint federal return with his wife; however, no return was on file for the Taxpayer and his wife filed a separate 2013 Virginia resident income tax return. The Department issued an assessment to the Taxpayer based on his portion of the federal taxable income (FAGI). The Taxpayer filed an appeal, contending he served in ***** (Country A) as a missionary from July 2010 to August 2016 and was not subject to Virginia income tax for the 2013 taxable year.
DETERMINATION
Two classes of residents, a domiciliary resident and an actual resident, are set forth in Virginia Code § 58.1-302. The domiciliary residence of a person means the permanent place of residence of a taxpayer and the place to which he intends to return even though he may reside elsewhere. For a person to change domiciliary residency to another state or country, that person must intend to abandon his Virginia domicile with no intention of returning to Virginia. Concurrently, that person must acquire a new domicile where that person is physically present with the intention to remain there permanently or indefinitely. An actual resident of Virginia means a person who, for an aggregate of more than 183 days of the taxable year, maintained his place of abode within Virginia. A Virginia domiciliary resident, therefore, working in other parts of the country or in another country who has not abandoned his Virginia residency continues to be subject to Virginia taxation. Additionally, a person who is not a domiciliary resident of Virginia, but who stays in Virginia for an aggregate of more than 183 days is also subject to Virginia taxation.
In order to change from one legal domicile to another legal domicile, there must be (1) actual abandonment of the old domicile, coupled with an intent not to return to it, and (2) an acquisition of a new domicile at another place, which must be formed by personal presence and an intent to remain there permanently or indefinitely. The burden of proving that the domicile has been changed lies with the person alleging the change.
In determining domicile, consideration may be given to the individual's expressed intent, conduct, and all attendant circumstances including, but not limited to, financial independence, profession or employment, income sources, residence of spouse, marital status, situs of real or tangible property, motor vehicle registration and licensing, and such other factors as may be reasonably deemed necessary to determine the person's domicile. A person's true intention must be determined with reference to all the facts and circumstances of the particular case. A simple declaration is not sufficient to establish residency.
The Department determines a taxpayer's intent through the information provided. A taxpayer has the burden of proving that he or she has abandoned his or her Virginia domicile. This includes missionaries serving in foreign countries. See Public Document (P.D.) 10-53 (5/7/2010), P.D. 10-114 (7/1/2010), and P.D. 12-8 (2/23/2012). If the information is inadequate to meet this burden, the Tax Commissioner must conclude that he or she intended to remain indefinitely in Virginia.
The Taxpayer was a domiciliary resident of Virginia prior to moving to Country A. He maintained a permanent place of abode, registered motor vehicles, was employed by a Virginia business, filed Virginia resident income tax returns, and held a Virginia driver's license since 1973.
The Taxpayer performed a number of actions indicating an intent to establish domicile in Country A. The Taxpayer, who worked for a nonprofit missionary organization based in Virginia, was assigned to work with another missionary organization in Country A. He surrendered his Virginia driver's license in 2010 and rented a place of abode in Country A.
While he was assigned to a missionary organization in Country A, the Taxpayer continued to receive a stipend from the Virginia missionary organization. The information also indicates the purpose of the assignment was to gain experience in Country A. While the Taxpayer remained in Country A for nearly six years, the Department would generally consider the activity of gaining experience to be similar to receiving training, which would be a temporary employment activity. The Department has ruled that individuals generally lack the intent to abandon their Virginia domicile when they engage in temporary employment outside the Commonwealth. See P.D. 86-219 (11/3/1986), P.D. 94-353 (11/23/1994), P.D. 96-207 (8/26/1996), P.D. 02-33 (3/13/2002), P.D. 05-8 (2/1/2005), P.D. 10-134 (7/12/2010) and P.D. 16-39 (3/31/2016). The Taxpayer returned to Virginia during 2016. In addition, even after moving to Country A, the Taxpayer's family, including his wife and children, remained in Virginia.
The concept of domicile requires both the establishment of new residency, which may cause the taxpayer to meet the requirements of a bona fide resident, and the intent to abandon the old domicile and remain in the new. See Mitchell v. United States, 88 U. S. 350, 1874 WL 17410 (1874). The mere absence from a previous domicile, however long, is insufficient to prove intent. Even though the Taxpayer may have a tax home in Country A, he must prove he intended to change his domicile permanently. Absent of such proof, the Department must conclude that the Taxpayer intended to return to Virginia.
In this case, the evidence fails to show clearly that the Taxpayer established domicile in Country A with the intent to live there permanently and indefinitely. Furthermore, the evidence is not sufficient to show the Taxpayer abandoned Virginia as his domicile. Accordingly, the Department finds that the Taxpayer remained domiciled in Virginia for the 2013 taxable years.
The 2013 assessment is based on the best information available to the Department pursuant to Virginia Code § 58.1-111. The Taxpayer, however, may have information that better represents his Virginia income tax liability for the taxable years at issue. Therefore, he should file a 2013 income tax return as a resident or an amended joint return with his wife to reflect more accurately his Virginia tax liability.
The returns should be submitted within 45 days from the date of this letter to: Virginia Department of Taxation, Office of Tax Policy, Appeals and Rulings, P.O. Box 27203, Richmond, Virginia 23161-7203, Attention: *****. Upon receipt, the documentation will be reviewed and assessment will be adjusted as appropriate. If the documentation is not received within the allotted time, the assessment will be adjusted based on the information available.
The Code of Virginia sections and public documents cited are available on-line at www.tax.virginia.gov in the Laws, Rules & Decisions section of the Department's web site. If you have any questions regarding this determination, you may contact ***** in the Office of Tax Policy, Appeals and Rulings, at *****.
Sincerely,
Craig M. Burns
Tax Commissioner
AR/1202.o