May 18, 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, 2015.
FACTS
The Taxpayers, husband and wife, filed a joint Virginia part-year resident individual income tax return for the 2015 taxable year. Under review, the Department determined that the Taxpayers were taxable as domiciliary residents of Virginia for the entire taxable year and issued an assessment. The Taxpayers appealed, contending the husband remained a resident of ***** (State A) until May 2015.
DETERMINATION
Domicile
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 Taxpayers assert that the husband was a resident of State A until May 2015, when they claim he moved to Virginia permanently. The Taxpayers also claim that the husband remained employed in State A until then and did not register his vehicle or register to vote in Virginia until November 2015.
The Department's records indicate that the Taxpayers have owned a personal residence in Virginia since 2013. The Department's records also indicate that the husband registered his vehicle in Virginia and obtained a Virginia driver's license in November 2014. The Taxpayers, however, were able to provide documentation that the husband did not vote in Virginia until 2016.
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 Taxpayers explain that the residence they purchased in Virginia in 2013 was a second home until they moved to Virginia permanently in May 2015. The Taxpayers also confirm that the husband's vehicle was registered in Virginia in November 2014, but they explain that was to prevent having to register the vehicle again in State A.
Although the husband already established some connections with Virginia that would indicate the intent to establish domiciliary residency, it appears that he did not yet establish his physical presence in Virginia with the necessary intent to remain permanently or indefinitely until May 2015. In addition, because he was still living and working most of the time in State A, he had not yet abandoned his State A domicile. Therefore, the husband did not complete the process of changing his domicile to Virginia until May 2015.
Actual and Part-Year Residency
Virginia Code § 58.1-303 provides that a person who becomes a resident of Virginia is subject to taxation during the period in which he or she is a Virginia resident and is taxed as a resident only for the portion of the year that he or she resides in Virginia. Accordingly, Virginia taxable income is computed by determining income, deductions, subtractions, additions and modifications attributable to the period of residence in Virginia. In addition, a part-year resident may claim a portion of his Virginia personal exemptions, but the exemptions will be prorated based upon the number of days that the taxpayer was a Virginia resident. Further, a part-year resident may claim a prorated Virginia standard deduction if he claims the standard deduction for federal income tax purposes. See P.D. 14-67 (5/20/2014).
Because the Taxpayers already owned a personal residence and spent more than 183 days in Virginia in 2015, it is necessary to determine when the husband's period of part-year residency began or whether he should be considered an actual resident of Virginia for the entire 2015 taxable year. The Taxpayers contend that the husband's period of part-year residency did not begin until he permanently moved to Virginia on May 7, 2015.
The Department has ruled in a case where a married couple traveled back and forth between Virginia and another state throughout several taxable years. See P.D. 15-99 (5/11/2015). Because Virginia Code § 58.1-303 considers an individual to have become a resident of Virginia “by moving to the Commonwealth” from outside Virginia, the Department concluded that individuals who travel into and out of Virginia multiple times during a taxable year were residents of Virginia who visited another state or other states, including domiciliary states, for short periods of time. Under such circumstances, the Department will consider domiciliary residents of another state who spend more than 183 days in Virginia during a taxable year to be actual residents from the date they first enter Virginia to the last date they spend in Virginia. See also P.D. 17-118 (6/29/2017).
The information provided indicates that the husband was first physically present in Virginia in 2015 on March 8. Because he spent more than 183 days in Virginia during 2015, the Department will consider the husband's period of actual residency to have begun on March 8.
CONCLUSION
Under the circumstances presented, the husband did not complete the process of changing his domicile from State A to Virginia until May 2015. Because the husband was present in Virginia for more than 183 days during 2015, however, and was first present in Virginia on March 8, the Department will consider his period of actual residency to have begun on March 8.
The Taxpayers, therefore, should file an amended Virginia part-year resident individual income tax return reflecting the husband's beginning date of residence of March 8. As stated above, the husband's Virginia taxable income would be computed by determining income, deductions, subtractions, additions and modifications attributable to the period of residence in Virginia.
The Taxpayers should file the requested return within 30 days of the date of this letter. The return should be mailed to: Virginia Department of Taxation, Office of Tax Policy, Appeals and Rulings, Attention: *****, P.O. Box 27203, Richmond, Virginia 23218-7203. A copy of this determination letter should be attached to the return. Once the return is received, it will be forwarded to the auditor for review and the assessment will be adjusted accordingly. If the return is not filed within the allotted time, the assessment will be considered to be correct.
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/1476.M