March 18, 2020
Re: § 58.1-1821 Application: Individual Income Tax
Dear *****:
This will reply to your letter in which you seek correction of the assessment of individual income tax issued to ***** (the “Taxpayers”) for the taxable year ended December 31, 2016.
FACTS
The Taxpayers, a husband and wife, filed a Virginia nonresident individual income tax return for the 2016 taxable year. Under audit, the Department determined that the husband remained taxable as a domiciliary resident of Virginia for the 2016 taxable year and issued an assessment for additional tax due. The Taxpayers appealed, contending the husband was living and working in State A and was not present in Virginia for more than 183 days 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 husband was a full time consultant working in State A in 2016. According to the husband, he stayed at a hotel because it was cheaper than renting a personal residence. The husband, however, also maintained a number of connections with Virginia. He owned a personal residence in Virginia, held a Virginia driver’s license and owned vehicles that 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 argues that he was not a resident of Virginia because he did not reside in Virginia more than 183 days during 2016. As stated above, however, there are two types of residents for tax purposes, domiciliary and actual. Although the husband may not have been an actual resident of Virginia in 2016, he appears to have remained a domiciliary resident. He could only change his domicile to State A by: (1) abandoning Virginia as his domicile and having no intent to return; and (2) establishing a new domicile in State A by his physical presence there with the intention to remain permanently or indefinitely. An individual who intends to remain permanently or indefinitely in a state must establish a permanent place of residence. The Department does not consider hotels to be a permanent or indefinite residence. See P.D. 99-75 (4/19/1999) and P.D. 16-198 (10/13/2016). Even if the Taxpayer established domicile in State A, he failed to prove that he abandoned his Virginia domicile because he continued to own a home in Virginia, register vehicles in Virginia and use a Virginia driver’s license. Therefore, no change of domicile occurred, and the Taxpayer remained taxable as a Virginia resident for the 2016 taxable year.
Accordingly, the assessment is upheld. The Taxpayer will receive an updated bill which will include accrued interest to date. The Taxpayer should remit the balance due within 30 days of the bill date to avoid the accrual of additional interest and possible collections actions.
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/2179.M