February 08, 2022
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, 2017 and 2018.
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 2017 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 her income was taxable in Virginia. When a response was not received, the Department issued an assessment. After the Taxpayer provided her 2017 income tax return from ***** (State A), the assessment was adjusted to account for a credit for income tax paid to State A. The Taxpayer subsequently filed a 2018 Virginia resident return and paid the resulting assessment, which included the balance of tax due, plus a late filing penalty and interest. Based on the Department’s determination that she was a Virginia domiciliary resident, the Taxpayer also submitted Virginia resident returns for the 2019 and 2020 taxable years. The Taxpayer has now filed a claim asserting she was not a resident of Virginia.
DETERMINATION
Protective Claim
Virginia Code § 58.1-1824 permits any person who has paid an assessment of taxes administered by the Department to file a protective claim for refund within three years of the date of an assessment. A protective claim for refund can be held pending the outcome of another case before the courts or the claim may be decided upon its merits pursuant to Virginia Code § 58.1-1821. The Taxpayer satisfied the requirements of filing a protective claim by paying the 2017 and 2018 assessments in full and asserting her rights within the statutory deadline. Because the protective claim does not involve facts or law which depend upon the resolution of a pending case, the Department will consider the claim on the merits pursuant to the administrative appeal procedures.
Residency
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 took several steps that indicated her intent to establish domicile in State A. The Taxpayer accepted employment in State A in late 2016. The Taxpayer stated the job was for an indefinite period and at the time she anticipated remaining in State A permanently. She had State A taxes withheld from her wages and filed State A resident income tax returns for the 2017 through 2020 taxable years. She filed a part year Virginia return in 2016 indicating a Virginia residence ending date in October 2016. The Taxpayer leased several personal residences in State A. The Taxpayer’s fiancée also lived in State A. In addition, the Taxpayer registered to vote in State A in 2020 and voted in State A in 2020 and 2021.
The Taxpayer also maintained some connections with Virginia. She retained her Virginia driver’s license and had a vehicle registered in Virginia. Her parents also continued to live in Virginia, and she lived at their residence when she returned to Virginia in 2021. In addition, the Taxpayer was registered to vote in Virginia, but she had not voted in Virginia since 2016.
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 explains that she retained her Virginia driver’s license because it had not yet expired and she did not need to drive her car in State A. In addition, the vehicle that was registered in Virginia was co-owned with her father, a Virginia resident. He was listed as the primary owner on the title and paid all taxes on the vehicle.
The Department acknowledges that a change of domicile occurs as part of a process in which no single factor is dispositive. Further, the change is generally considered to have occurred at the beginning of that process. See P.D. 16-138 (6/24/2016). After carefully considering all of the evidence presented, I find that the Taxpayer successfully changed her domicile to State A as of the 2017 taxable year and did not reestablish her domicile in Virginia until she moved back in 2021. Accordingly, the assessments for the 2017 and 2018 taxable years will be abated and refunds issued accordingly. In addition, the Department’s records indicate that an assessment was issued for the 2020 taxable year based on the Virginia resident return filed by the Taxpayer. This assessment will be abated. Further, the 2019 return submitted by the Taxpayer will not be processed, and no assessment will be issued for this tax year on a residency basis.
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/3835.X