August 25, 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, 2016 and 2017.
FACTS
The Department received information from the Internal Revenue Service (IRS) indicating that the Taxpayer may have been required to file Virginia individual income tax returns for the 2016 and 2017 taxable years. A review of the Department's records showed that the Taxpayer had not filed the returns. The Department requested additional information from the Taxpayer to determine if his income was subject to Virginia individual income tax. Upon receipt and review of the Taxpayer’s documentation, the Department issued an assessment. The Taxpayer appeals, contending he was a resident of ***** (State A) and an audit of the previous taxable year resulted in no assessment.
DETERMINATION
Prior Audits
The Taxpayer argues that he was audited for a previous year and no assessment was issued. He was selected for review in 2019 for failing to file a 2015 Virginia income tax return. The determination as to whether an individual is a resident for Virginia income tax purposes is factual. The fact that a taxpayer is found not to be a Virginia resident in a prior year does not automatically mean that he cannot establish residency in a subsequent year. A slight change in the facts could be the difference as to whether an individual is or is not a Virginia resident.
Based on a review of the Taxpayer’s documentation, the Department’s auditor abated the assessment and informed the Taxpayer by letter dated February 15, 2019 that, based on the information he submitted, he was not required to file a Virginia return for the 2015 taxable year.
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.
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 Public Document (P.D.) 13-229 (12/18/2013).
In this case, a 2016 Virginia individual income tax return would have been due either on May 1, 2017, or the extended due date of October 31, 2017. A 2017 Virginia individual income tax return would have been due either on May 1, 2018 or the extended due date of October 31, 2018. The letter abating the 2015 assessment was mailed on February 15, 2019. 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 2016 or 2017 taxable years.
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 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 resided in ***** (State B) through 2014. He traveled extensively for business and stayed rent free at a friend’s house in State A for more than half the year in both 2016 and 2017. He did not lease or own a residence in Virginia.
The Taxpayer, however, established some connections with Virginia. In 2014, the Taxpayer registered two vehicles in Virginia. The Taxpayer states that he kept the vehicles in Virginia as a matter of convenience and also to avoid transporting them to State A in order to register them. Further, in June 2016, the Taxpayer acquired a Virginia driver’s license when his State B driver’s license expired.
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 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).
Having connections such as personal residences, driver’s licenses, motor vehicle registrations and voter’s registrations indicates that an individual had the intent to establish domicile in the state or country where such connections were established. Acquiring domicile, however, in a new location requires both intent and personal presence. See Coopers Adm’r v. Commonwealth, 121 Va. 338, 93 S.E 680 (1917), in which the Virginia Supreme Court observed that neither physical presence alone, nor expressed intention alone are sufficient to create a legal domicile for taxation purposes. The Department has determined that individuals cannot establish a domicile despite having some or all of the above connections if they have not yet resided in the jurisdiction with the intention to remain permanently or indefinitely. See, e.g., P.D. 13-97 (6/11/2013) and P.D. 15-4 (1/8/2015).
It appears in this case that the Taxpayer was a domiciliary resident of State B through at least 2014. The Taxpayer contends that he was a State A resident during the 2016 and 2017 taxable years. He did not establish a permanent place of abode in State A because he merely stayed at a friend’s residence when he was not traveling for business. To have become a domiciliary resident of Virginia, however, he would need to have established a physical presence in Virginia with the intention to remain permanently or indefinitely in Virginia at that time. Although the Taxpayer registered vehicles in Virginia and acquired a Virginia license, he did not begin residing in the Commonwealth until 2018. Thus, it appears that the Taxpayer had not established physical presence in Virginia during the 2016 and 2017 taxable years with the intention to remain in Virginia permanently or indefinitely.
CONCLUSION
The Department acknowledges that a change of domicile occurs as part of a process in which no single factor is dispositive. After carefully considering all of the evidence presented, I find that the Taxpayer did not reside in Virginia permanently or indefinitely for the 2016 and 2017 taxable years and, therefore, was not taxable as a domiciliary resident of Virginia. The assessments at issue will be abated.
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/3388.B