April 19, 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 ***** (the “Taxpayer”) for the taxable year ended December 31, 2017.
FACTS
The Department received information from the Internal Revenue Service (IRS) indicating that the Taxpayer may have been required to file a Virginia individual income tax return for the 2017 taxable year. Because no return was on file, the Department requested additional information in order to determine if his income was taxable in Virginia. When a response was not received, the Department issued an assessment. The Taxpayer appeals, contending he was a resident of ***** (State A).
DETERMINATION
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.
Based on the information provided with the Taxpayer’s appeal, the Taxpayer was not a domiciliary resident of Virginia for the 2017 taxable year. Further, the information provided indicated that he was not in Virginia for enough days in 2017 to qualify as an actual resident. The Taxpayer, therefore, was not taxable as a Virginia resident and was not required to file a 2017 Virginia resident income tax return.
Nonresidents
Individuals who are neither domiciliary nor actual residents of Virginia and have income from Virginia sources are taxed as nonresidents, unless the individual meets the filing exception described in Virginia Code § 58.1-321. See Virginia Code § 58.1-325. The Virginia taxable income of a nonresident is computed by multiplying his Virginia taxable income (computed as if he were a resident) by the ratio of his net income, gain, loss, and deductions from Virginia sources to his net income, gain, loss, and deductions from all sources. Virginia Code § 58.1-302 limits the term income and deductions from Virginia sources to the items of income, gain, loss, and deductions attributable to (1) the ownership of any interest in real or tangible personal property in Virginia, (2) a business, trade, profession or occupation carried on in Virginia, or (3) prizes paid by the Virginia Lottery Department, and gambling winnings from wagers placed or paid at a location in Virginia. Thus, a nonresident with Virginia source income is required to file a nonresident Virginia income tax return unless the filing exemption applies. See Virginia Code § 58.1-341 A 2.
The Department’s records indicate that the Taxpayer received wage income from an employer that withheld Virginia income tax. While the appeal was pending, the Department requested further information from the Taxpayer by letters dated November 19, 2021, and January 7, 2022, regarding the nature and sourcing of this income. To date, the Taxpayer has not responded to the information requests. As such, it is reasonable for the Department to assume this income was from Virginia sources. In addition, the Taxpayer’s Virginia adjusted gross income, defined as federal adjusted gross income with the modifications specified in Virginia Code § 58.1-322.01 and § 58.1-322.02, exceeded the filing threshold set forth in Virginia Code § 58.1-321. The Taxpayer, therefore, was required to file a Virginia nonresident income tax return.
CONCLUSION
Although the Taxpayer was not a resident of Virginia during the 2017 taxable year, it appears he was required to file a nonresident Virginia income tax return to report income from Virginia sources.
The Taxpayer, therefore, will be given the opportunity to file a nonresident Virginia income tax return for the 2017 taxable year. In addition, the Taxpayer should include a complete copy of his 2017 federal return and all Forms W-2. The return should be submitted within 30 days from the date of this letter to: Virginia Department of Taxation, Attn: *****, Appeals & Rulings Unit, P.O. Box 27203, Richmond, Virginia 23261-7203. 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 adjusted based on the best information available.
The Code of Virginia sections 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/3822.X