March 10, 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 “Taxpayers”) for the taxable years ended December 31, 2015 and 2016.
FACTS
The Taxpayers, a husband and wife, filed a 2014 Virginia individual income tax return as residents. The Department received information from the Internal Revenue Service (IRS) indicating that the Taxpayers may have been required to file Virginia income tax returns for the 2015 and 2016 taxable years. A review of the Department’s records showed that the husband had not filed returns for the taxable years at issue. The records also show that the wife filed a Virginia resident income tax return for the 2015 taxable year and a non-resident return for the 2016 taxable year indicating that her husband had no income. The Department requested additional information from the Taxpayers in order to determine if their income was taxable in Virginia. After reviewing the information provided, the Department issued an assessment against the husband for the 2015 taxable year and against the Taxpayers jointly for the 2016 taxable year. The Taxpayers appeal, contending that the husband was a resident of ***** (State A) in 2015 and 2016 and the wife was a State A resident in 2016.
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 Taxpayers have provided evidence indicating their intent to establish domicile in State A. The husband began living at a relative’s residence in State A at the end of 2014 and paid some of the household expenses. He had acquired a State A driver’s license in 2011. The wife acquired a State A driver’s license in September 2016. In addition, the Taxpayers registered to vote in State A in 2016.
The Taxpayers attempted to purchase unimproved real property in State A both in January 2015 and in May 2015, with the intent to build a residence, but the sales were voided. They began leasing a residence in State A in December 2015 and purchased a place of abode there in July 2016.
The Taxpayers also maintained connections with Virginia. The husband renewed his Virginia driver’s license in December 2012, and he did not surrender the license until July 2019. The Taxpayers maintained a Virginia residence that was not placed on the market until June 2017. They kept multiple motor vehicles registered in the locality where their Virginia home was located.
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 Department acknowledges that a change of domicile occurs as part of a process in which no single factor is dispositive. Unless a change in domicile has clearly been established through the preponderance of evidence, the Department will generally consider a change to have occurred toward the beginning of the process. See P.D. 16-138 (6/24/2013).
The husband moved to State A for his employment, and the Taxpayers stayed with a relative pending their move into a permanent residence. They both acquired driver’s licenses and registered to vote in State A. The Taxpayers sold their Virginia place of abode and purchased and moved into a permanent State A residence. They eventually either sold all their vehicles registered in Virginia or transferred them to State A.
Although it took two years, the Taxpayers ultimately abandoned substantially all their Virginia connections and established domicile in State A where they continued to reside. After carefully considering the information provided, I find that that the Taxpayers were not taxable as Virginia residents for the 2015 and 2016 taxable years. Accordingly, the assessments 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/2153.B