Rulings of the Tax Commissioner

October 5, 2023

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, 2019.

FACTS

The Taxpayer filed a part-year Virginia resident income tax return for the 2019 taxable year indicating that he became a Virginia resident on March 23, 2019. The Taxpayer also filed a part-year ***** (State A) income tax return for the same year, indicating that his last day of residency in State A was March 23, 2019. Under review, the Department discovered that the Taxpayer had received a taxable life insurance distribution on March 28, 2019. The auditor adjusted the return to include the distribution in income attributable to his period of Virginia residency and issued an assessment. The Taxpayer appeals, contending that, because his move to Virginia was not complete as of March 28, 2019, the distribution was attributable to State A.

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. While a simple declaration is not sufficient to establish residency, a simple declaration alone is also not sufficient to disprove an established residency. 

Once a domicile is established, it continues until the individual establishes a new domicile elsewhere in accordance with the two-pronged test above. See 23 VAC 10-110-30 B 3. In addition, an individual may only have one domicile at a time. See id. The implication of these rules is that an individual always has a domicile somewhere at all times. The Department has acknowledged often that a change in domicile occurs as part of a process in which no single factor is dispositive, and that the exact timing of when the true intent of an individual to change domiciliary residence occurs can be difficult to discern. Unless some other time is clearly established by a preponderance of the evidence, the Department will generally consider the change to have occurred toward the beginning of the process. See Public Document (P.D.) 16-130 (6/22/2016).

In this case, the Taxpayer clearly took steps to change his domicile to Virginia by obtaining a Virginia driver’s license, vehicle registration, and voter’s registration. It also appears that he clearly formulated the intent to abandon his State A domicile. Therefore, the question becomes when the Taxpayer first established physical presence in Virginia with the intent to change his domicile. 

Because the Taxpayer spent more than 183 days in Virginia, he would also have been an actual resident of Virginia. The Department has determined that such an individual, even if they remained a domiciliary resident of another state, is subject to tax as an actual resident from the date they first entered Virginia to the last day they spent in Virginia in such taxable year. See P.D. 15-99 (5/11/2015), P.D. 17-118 (6/29/2017), P.D. 18-92 (5/18/2018), and P.D. 21-158 (12/28/2021). In addition, for purposes of determining actual residency, a “day” is any portion of a day in which a person is physically present except for a part of a day during which an individual is present solely while in transit to a destination outside Virginia. See P.D. 98-183 (10/31/1998) and P.D. 17-118. 

The Taxpayer explains that, on March 28, 2019, pursuant to a divorce decree settlement, the distribution at issue was deposited into an account that he held jointly with his ex-spouse. He also explains that he used March 23, 2019, as his residency start and end date on his state tax returns because that was the first date he was able to move his belongings into his leased Virginia residence. He states that, while he began his move that day, he did not complete the move until April 2019 when he started working in Virginia and obtained his Virginia driver’s license, vehicle registration, and voter registration. In the absence of information that would clearly indicate the Taxpayer was not physically present in Virginia on or before March 28, 2019, the Department must assume the move-in and move-out dates reported by the Taxpayer on the Virginia and State A returns, respectively, represent the day he changed residency.

In addition, the Taxpayer claims that he reported the distribution to State A because he requested the distribution while he was a State A resident and it was deposited into the joint account held with his ex-spouse in State A. A review of his part-year State A return revealed that, contrary to the Taxpayer’s assertion, the distribution was not in fact taxed by State A because it was attributed to his period of nonresidency on the State A return.

CONCLUSION

Based on the facts presented and established Virginia policy, it appears that the Taxpayer’s period of actual residency began as of March 23, 2019, even if he had not perfected a domicile change as of that date. The Department has consistently held that income is attributable to the period of residence in Virginia if the taxpayer is a Virginia resident on the date the income is received. See P.D. 16-130, P.D. 17-65 (5/10/2017), P.D. 19-20 (3/26/2019), P.D. 20-30 (3/4/2020), and P.D. 21-15 (2/16/2021). Therefore, any income he received on or after March 23, 2019, is income attributable to Virginia. 

Accordingly, the assessment is upheld. The Department’s records indicate that the assessment has been paid in full. Therefore, no further action is required.

The Code of Virginia sections, regulation 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/4194.Y