August 27, 2019
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 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 2015 taxable year. A review of the Department’s records showed that the Taxpayer had not filed a return. The Department reviewed the documentation sent by the Taxpayer and determined that his income was taxable in Virginia. As such, the Department issued an assessment. The Taxpayer appeals, contending he was a resident of ***** (State A) and audits of previous years resulted in no assessment.
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 Taxpayer contends he was not subject to Virginia income tax because he was a resident of State A during the taxable year at issue. The Taxpayer was transferred by his employer to State A from November 2011 to September 2016. During that time, the Taxpayer purchased a personal residence in State A in which he and his family lived. The Taxpayer joined a church, established physician-patient relationships and was active in charities in State A.
The Taxpayer also retained connections with Virginia. He and his wife owned a personal residence in Virginia to which he and his family returned in 2016. They did not attempt to sell or rent the Virginia residence during the period they lived in State A. The Taxpayer and his spouse also both retained Virginia driver’s licenses and voter’s registrations. Two vehicles owned by the Taxpayer were registered in Virginia.
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 states that he didn’t obtain or renew his driver’s license during 2015. DMV records indicate, however, that his Virginia driver’s license didn’t expire until 2018. The Taxpayer asserts that had the license expired, he would have obtained a State A license. The fact that the Taxpayer failed to obtain a State A’s driver’s license even though he purportedly resided there for five years raises doubts to his intent. State A rules require an individual to obtain a driver’s license if they claim to be domiciled for a period of more than six consecutive months, registered to vote, made a statement of domicile pursuant to state statutes, or filed for homestead exemption. While the simple retention of a driver’s license may not be an indication of intent, the Taxpayer’s disregard for State A’s statutory requirements for five years raises doubts as to his stated intent to move there permanently.
In addition, the Taxpayer was registered to vote in Virginia during the taxable year at issue. The Department has found voter registration statutes do not precisely mirror residency as it applies to income tax. Under Virginia Code § 24.2-101, an individual qualified to vote in Virginia must be a resident of the precinct in which she offers to vote. This statute requires a resident to have both legal domicile and a place of abode in Virginia. For Virginia voting purposes, domicile is determined by the intention of the individual, supported by an individual’s factual circumstances. See State Board of Elections (SBE) Policy 2009-005 and P.D. 17-21 (3/15/2017). By registering to vote in Virginia, the Taxpayer asserted to the SBE that he was a domiciliary resident of Virginia.
As stated above, a change of domicile requires (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 Taxpayer was transferred to State A by his employer, where he purchased a residence. While there, he established relationships with healthcare professionals and got involved with the local community. The Taxpayer asserts that these facts indicate that he had the requisite intent to establish domicile in State A by remaining there permanently or indefinitely.
Even if a Taxpayer establishes domicile outside of Virginia, he must also show he intended to abandon his Virginia domicile. The Taxpayer retained his Virginia vehicle registrations and driver’s license. He also returned to the Virginia residence that was not offered for sale or lease and to which he was free to return. All of these facts raise significant doubts as to the Taxpayer’s intent to permanently or indefinitely change his domicile.
Written Advice
The Taxpayer argues that he was audited for previous years and no assessments were issued. The Taxpayer was selected for review in 2016 for failing to file a 2013 Virginia income tax return. After an assessment was made, the Taxpayer sent copies of his federal tax return, deed for his State A residence, and utility bills for the State A real estate. The Department’s auditor abated the assessment and informed the Taxpayer by letter dated October 31, 2016 that, based on the information he submitted about his residency in State A, he was not required to file a Virginia return for the 2013 taxable year. The Department also selected the Taxpayer for review for 2014 and abated the assessment in a letter dated October 27, 2017.
Virginia Code § 58.1-1835 provides that the Department must abate any portion of tax, interest and penalty attributable to erroneous written advice by the Department under the following conditions:
1. The written advice was reasonably relied upon by the taxpayer and was in response to a specific written request by the taxpayer;
2. The portion of the penalty or tax did not result from a failure by the taxpayer to provide adequate or accurate information; and
3. The facts of the case described in the written advice and the request thereof are the same, and the taxpayer’s business or personal operations have not changed since the advice was rendered.
Based on the above statutory provisions, the erroneous advice must be reasonably relied upon by a taxpayer, and such advice must be in writing. In addition, such written advice must be provided based on a specific request by a taxpayer who has provided sufficient and accurate facts so that the Department may issue a correct decision. See P.D. 13-229 (12/18/2013).
In this case, a 2015 Virginia individual income tax return would have been due either on May 1, 2016 or the extended due date of October 31, 2016. The letter abating the 2013 assessment was mailed on October 31, 2016. As such, the Taxpayer could not have relied on the Department’s written response as required by Virginia Code § 58.1-1835 when deciding not to file a Virginia individual income tax return for the 2015 taxable year.
CONCLUSION
Accordingly, after carefully considering all of the evidence presented, I find that the Taxpayer failed to change his domicile from Virginia to State A, and thus he remained taxable as a domiciliary resident of Virginia for the 2015 taxable year.
The assessment at issue was made based on the best information available to the Department pursuant to Virginia Code § 58.1-111. The Taxpayer may have information that better represents his Virginia income tax liability for the year at issue. Therefore, the Taxpayer should file a 2015 Virginia resident income tax return. The return should be submitted within 30 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 return will be reviewed and the assessment will be adjusted, as appropriate. If the return is not received within the allotted time, the assessment will be considered to be correct as issued and will become immediately due and payable.
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 (804) 371-6597.
Sincerely,
Craig M. Burns
Tax Commissioner
AR/1968.B