March 8, 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 assessment issued to your client, ***** (the “Taxpayer”), for the taxable year ended December 31, 2017. I apologize for the delay in responding to your appeal.
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 his income was taxable in Virginia. Based on the Taxpayer’s responses, the Department found that the Taxpayer was taxable as a domiciliary resident of Virginia for the 2017 taxable year and issued an assessment. 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 has abandoned his Virginia domicile. If the information is inadequate to meet this burden, the Department must conclude that he intended to remain indefinitely in Virginia.
The Taxpayer took some steps to establish domicile in State A. He accepted full-time employment in State A in 2013. He leased several personal residences in State A from October 2013 to September 2020. He also leased vehicles in State A. During the year at issue, he spent 203 nights in State A and 162 nights in Virginia.
The Taxpayer, however, maintained numerous connections with Virginia. His wife and children remained in Virginia. He and his wife owned a personal residence in Virginia in which his family continued to reside while he was in State A. The Taxpayer was free to return to this residence at any time and did so for a significant portion of the 2017 taxable year. He filed his 2017 federal tax return jointly with his wife using their Virginia address. He also maintained Virginia vehicle registrations, a Virginia driver’s license and a Virginia voter’s registration. He renewed his Virginia driver’s license in October 2017. Further, he voted a full Virginia ballot in person in the November 2016 and 2017 general elections.
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 had 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 2017 and found not to be subject to Virginia income tax. He was selected for review in 2017 for failing to file a 2014 Virginia income tax return. Based on a review of the documentation submitted by the Taxpayer, the Department’s examiner replied that the information supplied resolved their questions and no further action was necessary.
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 therefor are the same, and the taxpayer’s business or personal operations have not changed since the advice was rendered.
In P.D. 19-80 (8/2/19) the Department agreed to abate an assessment because of reliance on written advice from a prior audit where the taxpayer had submitted a complete domicile questionnaire disclosing all of his Virginia connections. In that case, the auditor performed a complete domicile analysis and the facts did not change between the taxable year at issue in the prior audit and the year at issue in the appeal.
Contrarily, the Department’s conclusion for 2014 merely relied on a letter from the Taxpayer’s accountant stating the Taxpayer was a State A resident, living and working in State A, and including a copy of his State A residence lease. As indicated above, the Department determines an individual’s domiciliary intent based on information provided. Because the determination of domicile is a factual matter, changes in the facts or new information can change the results from year to year. Because significantly more information was provided for the 2017 taxable year, the Department’s letter stating no further action was required for the 2014 taxable year did not meet the required standards of written advice as to the Taxpayer’s domicile status.
CONCLUSION
Based on the information provided, the Taxpayer remained taxable as a domiciliary resident of Virginia for the 2017 taxable year. In addition, the Department’s letter regarding his 2014 taxable year filing requirement did not meet the requirements to qualify as written advice as to his domicile status. Therefore, the assessment cannot be abated on the basis that the Taxpayer received erroneous written advice.
The assessment at issue was 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 year at issue. Therefore, the Taxpayer should file a Virginia resident income tax return for the 2017 taxable year. The return should be submitted within 30 days from the date of this letter to: Virginia Department of Taxation, Office of Compliance, Desk Audit, P.O. Box 5610, Richmond, Virginia 23220-0610, Attention: *****. Upon receipt, the return will be reviewed and the assessment will be adjusted, as appropriate. If the return is not received within the allotted time, the assessment will be considered to be correct.
Further, in light of this determination, the Taxpayer should reevaluate his residency status for the 2015, 2016 and 2018 taxable years to determine if he had a Virginia filing requirement and, if necessary, file the appropriate returns. Under Virginia Code § 58.1-312 A, the Department may assess underreported tax at any time when a taxpayer fails to file a return or files a false or fraudulent return with the intent to evade tax.
In addition, the Taxpayer should be aware that Virginia law does not permit nonresidents to obtain Virginia driver’s licenses, and persons providing a false statement to an agency of the Commonwealth may be subject to penalty under Virginia law. Any applicant who knowingly makes a false statement to DMV is subject to penalties under Virginia Code § 46.2-348. Further, individuals who obtain or use Virginia voter’s registrations for which they were not qualified may be subject to penalties under Virginia elections laws.
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/3712.X