March 16, 2021
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 years ended December 31, 2015 through 2017.
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 requested additional information from the Taxpayer in order to determine if his income was taxable in Virginia.
After the Taxpayer responded, the Department requested more information to determine whether the Taxpayer was a domiciliary resident of Virginia. Based on those responses, the Department found that the Taxpayer was taxable as a domiciliary resident of Virginia for the 2015 through 2017 taxable years. The Taxpayer appeals, contending he was a resident of ***** (State 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 that he has not lived in Virginia since 2006 when he left the United States to work in ***** (Country A). He states that he worked in Country A for approximately seven years and that when he returned to the United States, he went to live and work in State A. Information the Taxpayer supplied to the Department indicates that he lived in State A in a residence owned by his employer.
The Taxpayer, however, maintained substantial connections with Virginia. He owned a personal residence which he says was leased to friends. He also maintained Virginia vehicle registrations, a Virginia driver’s license and a Virginia voter’s registration.
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 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 even if the Taxpayer formed the intent to establish domicile in State A, the extent of the connections he retained with Virginia indicates that he has failed to abandon his Virginia domicile. Accordingly, a change of domicile did not occur, and thus the Taxpayer remained taxable as a domiciliary resident of Virginia.
Prior Audit
The Taxpayer argues that he was audited for a taxable year prior to 2015 and found not to be subject to Virginia income tax. He was selected for review in 2018 for failing to file a 2014 Virginia income tax return. Based on a review of the Taxpayer’s documentation, the Department’s auditor abated the assessment and informed the Taxpayer by letter dated May 31, 2018, that, based on the information he submitted, he was not required to file a Virginia return for the 2014 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.
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, the Department did not do a complete evaluation of the Taxpayer’s domicile status when reviewing the 2014 taxable year assessment. The audit staff merely relied on a letter from the Taxpayer’s employer saying that he had been living and working in State A and abated the assessment. Without a full evaluation, it is questionable whether the Department’s letter abating the 2014 assessment constituted written advice as to the Taxpayer’s domicile status. In any event, the letter was not issued until May 31, 2018, after the taxable years at issue in this case had already passed. Therefore, it was not written advice on which the Taxpayer could have relied in deciding whether or not to establish further connections with State A or abandon his Virginia connections at some time before or during the 2015 through 2017 taxable years.
CONCLUSION
The Taxpayer remained taxable as a domiciliary resident of Virginia for the 2015 through 2017 taxable years. In addition, even if the May 31, 2018, letter abating his 2014 taxable year assessment could have been considered written advice as to his domicile status, it was not issued until after the taxable years at issue had already passed. Therefore, the assessments cannot be abated on the basis that the Taxpayer received erroneous written advice.
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 Virginia resident income tax returns for the 2015 through 2017 taxable years. 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 the 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/3575.M