May 16, 2018
Re: § 58.1-1821 Application: Individual Income Tax
Dear *****:
This will reply to your letter in which you seek correction of the individual income tax assessment issued to ***** (the “Taxpayer”) for the taxable year ended December 31, 2014.
FACTS
The Department received information from the Internal Revenue Service (IRS) indicating that the Taxpayer may have been required to file a Virginia income tax return for the 2014 taxable year. A review of the Department's records showed that the Taxpayer had not filed a return. The Department requested additional information from the Taxpayer in order to determine if his income was taxable in Virginia. The Taxpayer submitted documentation to show that he was temporarily living in ***** (Country A), but had been previously domiciled in ***** (State A). Upon review of the information provided, the Department determined the Taxpayer was a domiciliary resident of Virginia during the 2014 taxable year and issued an assessment. The Taxpayer appealed, contending he did not establish a Virginia domicile.
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. If the information is inadequate to meet this burden, the Department must conclude that he or she intended to remain indefinitely in Virginia.
The Taxpayer has owned a personal residence in State A since 2002. He has not resided in State A since 2012 when he was assigned to work for a three to five year period in Country A. The Taxpayer asserts that he expected to return to State A and continue his employment for at least five more years before retiring. The Taxpayer also maintained a State A driver's license and vehicle registration until July 2014.
The Taxpayer performed a number of actions indicating an intent to establish a Virginia domicile. In 2013, the Taxpayer purchased a personal residence in Virginia, at which he intended to live after retirement. No information has been provided to indicate that the residence was leased during the taxable year in question, and it appears to have been unoccupied for the entire year. The Taxpayer also received tax documents at a different Virginia address. The Taxpayer explains his daughter lived at that address, and they had mail sent to her because it was difficult to receive mail in Country A. The Taxpayer also obtained a Virginia driver's license in July 2014.
Virginia Code § 46.2-323.1 states, “No driver's license ... shall be issued to any person who is not a Virginia resident.” In fact, this section states that every person applying for a driver's license must execute and furnish to the Commissioner of the Department of Motor Vehicles (DMV) a statement that certifies that the applicant is a Virginia resident. The Department has found that an individual may successfully establish a domicile outside Virginia even if he retains a Virginia driver's license. See Public Document (P.D.) 00-151 (8/18/2000). However, obtaining or renewing a Virginia driver's license is considered to be a strong indicator of intent to retain domiciliary residency in Virginia. See P.D. 02-149 (12/9/2002). The Taxpayer stated that he obtained a Virginia driver's license in order to drive legally while he was visiting from overseas. He further explained that he obtained a Virginia license instead of a State A license because he was in Virginia at the time, had his Virginia residence information available and would have had to sacrifice two days of his vacation to travel to State A in order to obtain a new State A license.
In addition, the Taxpayer registered two vehicles in Virginia in July 2014, and garaged both at the Virginia residence. Although residency is not a requirement to register a vehicle in the Commonwealth, registration is generally required before the vehicle can be operated on any Virginia highway. See Virginia Code § 46.2-600. Certain exceptions apply, such as temporary usage by nonresidents who have vehicles registered elsewhere. See Virginia Code § 46.2-656. In this case, the Taxpayer states that he used the vehicles during the times he returned to the United States from overseas.
In order to show that the Taxpayer was a domiciliary resident of Virginia, the evidence must show that the Taxpayer both acquired domicile in Virginia and abandoned domicile elsewhere. While the Taxpayer admits that he took steps to establish domicile in Virginia, he has offered evidence to demonstrate that he was not physically present in the Commonwealth except for two short vacations during the 2014 taxable year. Acquiring domicile in a new location requires both intent and personal presence. The Virginia Supreme Court has observed that neither physical presence alone, nor expressed intention alone, are sufficient to create a legal domicile for taxation purposes. See Coopers Adm'r v Commonwealth, 121 Va. 338, 93 S.E. 680 (1917).
The information provided indicates that the Taxpayer never resided in Virginia and only visited Virginia briefly on a few occasions from 2012 through the end of 2014. Because the: Taxpayer was not physically present in Virginia at the same time he intended to remain permanently or indefinitely, the Department must conclude that the Taxpayer was not a domiciliary resident of Virginia in 2014. Accordingly, the assessment issued to the Taxpayer for the 2014 taxable year will be abated.
While the Department concedes that the Taxpayer was not a domiciliary resident of Virginia for the taxable year at issue, the Taxpayer should be aware that continuing connections with Virginia, such as registering vehicles, obtaining a driver's license, owning real property, having financial documents delivered to a Virginia address or other indicators of a permanent residence in Virginia, will likely result in future contacts by the Department with respect to the situs of the Taxpayer's domicile. As in any determination, a change in the facts and circumstances could result in a change in the Department's determination in subsequent taxable years. In addition, the Taxpayer should be aware that Virginia law does not permit nonresidents to obtain Virginia driver's licenses. Any person providing a false statement to an agency of the commonwealth may be subject to penalty under Virginia law.
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/1573.A