June 23, 2020
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 assessments issued to ***** (the “Taxpayer”) for the taxable years ended December 31, 2015 and 2016.
FACTS
The Department received information from the Internal Revenue Service (IRS) indicating that the Taxpayer may have been required to file a Virginia individual income tax return for the 2015 and 2016 taxable years. 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. Based on the information provided by the Taxpayer and otherwise available to the Department, the Department concluded that the Taxpayer was taxable as a domiciliary resident of Virginia. The Taxpayer appeals, contending he was a resident of ***** (“Country A”).
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 explains the he retired from his employer in 2010 and began living in Country A because of his spouse’s health. He registered one vehicle there in 2010 and another in May 2019. The Taxpayer held a bank account in Country A and was paying telephone and utility bills for services provided in Country A.
The Taxpayer also maintained numerous connections to Virginia. He continued to own a personal residence in Virginia and receive mail there. The Taxpayer explains that he received mail at the Virginia residence because the mail in Country A was unreliable. The residence, however, was available for his use when he would return to Virginia to visit family or perform contract work in the ***** (State A). During 2015 and 2016, the Taxpayer spent a significant amount of time in Virginia, 145 and 154 days respectively. Because of these return visits, the Taxpayer explains that he has been unable to apply for permanent residency in Country A because he could not satisfy Country A’s uninterrupted stay requirement. He also kept a vehicle registered in Virginia and retained his Virginia driver’s license. In addition, he maintained a Virginia voter’s registration and continued to vote in elections.
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).
With regard to eligibility to vote, Article II, Section 1 of the Constitution of Virginia states in relevant part as follows:
In elections by the people, the qualifications of voters shall be as follows: Each voter shall be a citizen of the United States, shall be eighteen years of age, shall fulfill the residency requirements set forth in this section, and shall be registered to vote pursuant to this article.
The residence requirements shall be that each voters shall be a resident of the Commonwealth and of the precinct in which he votes. Residence, for all purposes of qualification to vote, requires both domicile and place of abode.
The domicile and place of abode requirement found in the Constitution of Virginia is also reflected in the definition of “residence” or “resident” used in Virginia election statutes. See Virginia Code § 24.2-101. Consistent with the precedent established by the Virginia Supreme Court in Coopers Adm’r v. Commonwealth, 121 Va. 338, 93 S.E. 680 (1917), the Department will consider the fact that a taxpayer obtained a Virginia voter’s registration and voted in elections in Virginia to be very strong evidence that that individual considered Virginia to be his domicile during the time he held and used such registrations.
The Department, however, has observed that federal law generally allows United States citizens living abroad to vote in federal elections using a voter’s registration from the state of the individual’s last domicile. See 52 U.S.C. § 20310. See also P.D. 14-141 (8/13/2014). The exercise of such federal voting rights by an overseas citizen shall not affect the domicile or residence of such citizen for purposes of any federal, state or local tax. See 52 U.S.C. § 20309.
The Department acknowledges that a change of domicile occurs as part of a process in which no single factor is dispositive. As stated above, a change of domicile requires both establishing a new domicile and abandoning the old. Although the Taxpayer in this case may have resided for a sufficient length of time to have proven his intent to remain permanently or indefinitely in Country A, he has been unable to prove his intent to abandon his Virginia domicile because of the number of connections he retained with Virginia over that time. By those substantial connections, the Taxpayer continued to avail himself of the protections and privileges afforded to resident individuals under Virginia law.
Written Advice
The Taxpayer states that his circumstances have not changed since the Department notified him in September 2018 that a previous assessment for the 2014 taxable year was abated.
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:
- The written advice was reasonably relied upon by the taxpayer and was in response to a specific written request by the taxpayer;
- The portion of the penalty or tax did not result from a failure by the taxpayer to provide adequate or accurate information; and
- 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.
The Department has agreed to abate an assessment that was based on residency when it was clear that erroneous written advice had been given prior to the taxable years in question. See P.D. 19-80 (8/2/2019). The Department has declined to do so, however, when the advice was received after the taxable year in question. See P.D. 19-98 (8/27/2019). In this case, it appears that the Department had adequate and accurate information regarding the Taxpayer’s personal circumstances when the 2014 assessment was abated in September 2018. The 2016 Virginia individual income tax return was due in May 2017, or November 2017 at the latest on extension. In either case, the notification that the 2014 taxable year assessment was abated was not issued until well after the due dates for the 2015 and 2016 returns.
CONCLUSION
Although the facts of this case may suggest that the Taxpayer established domicile in Country A, the Taxpayer has been unable to prove his intent to abandon his Virginia domicile because of the connections he retained with Virginia. Therefore, the Taxpayer remained taxable as a domiciliary resident of Virginia for the 2015 and 2016 taxable years. In addition, although an assessment based on residency was abated for the 2014 taxable year, the Taxpayer did not receive notification of such abatement until September 2018, well after the due dates for the individual income tax returns for the taxable years at issue. Therefore, such notification did not constitute erroneous written advice on which the Taxpayer could have relied for the 2015 and 2016 taxable years.
The assessments at issue were 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 years at issue. Therefore, the Taxpayer should file 2015 and 2016 Virginia resident income tax returns. The returns 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 returns will be reviewed and assessments will be adjusted, as appropriate. If the returns are not received within the allotted time, the assessments 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/3358.M