September 24, 2025
Re: § 58.1-1821 Application: Individual Income Tax
Dear *****:
This will respond to your letter in which you seek correction of the individual income tax assessment issued to you (the “Taxpayer”) for the taxable year ended December 31, 2019.
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 2019 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. Based on the Taxpayer’s response, the Department determined that the Taxpayer was taxable as a domiciliary resident of Virginia and issued an assessment. The Taxpayer applied for correction, contending she was a resident of ***** (State A) during 2019.
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 that person and the place to which that person intends to return even though they may be residing elsewhere. An actual resident of Virginia means a person who, for an aggregate of more than 183 days of the taxable year, maintained their place of abode within Virginia. A Virginia domiciliary resident continues to be subject to Virginia taxation even if they work in another state or country. 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 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. See Cooper’s Adm’r v. Commonwealth, 121 Va. 338, 347 (1917). The burden of proof that an individual has abandoned or failed to establish domicile in Virginia rests with the individual. See Title 23 of the Virginia Administrative Code (VAC) 10-110-30 B 3.
The determination of whether a change of domicile has occurred is highly dependent on the facts and circumstances of the individual case and no single factor is dispositive. Factors to be considered include, but are not limited to, the following:
sites of real and tangible property, location of savings and checking accounts, motor vehicle registration and licensing, motor vehicle operator’s license, voter registration, membership in clubs and civic groups, place of business, profession or employment, charitable contributions, location of schools attended by children, length of time of residence, place of birth and marriage, residence of family, reason for abandoning or acquiring domicile, and, in the case of a minor or married person, domicile of parents, husband, or wife and/or children. Id.
The Taxpayer engaged in actions consistent with establishing domicile in State A. In 2015, she moved out of her Virginia residence and into a residence, located in State A, which she had owned since 1996. In addition, the Taxpayer obtained a State A identification card and registered to vote in State A in 2015. She also obtained a State A driver’s license in 2023. The Taxpayer has resided in State A since 2015 and has returned to Virginia only occasionally to visit family.
The Taxpayer, however, also maintained various connections with Virginia. She owned two residences in Virginia which were rented to family members. The Taxpayer also owned vehicles that were registered in Virginia, and she maintained a Virginia driver’s license, which she renewed in 2017.
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 they retain 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).
In addition, the Department considers registering to vote in Virginia and voting in Virginia elections as strong evidence of an intent to remain domiciled in Virginia. See Cooper’s Adm’r, 121 Va. at 349. The Department has consistently found that individuals must be domiciliary residents of Virginia in order to be eligible to vote under the Constitution of Virginia. See P.D. 17-97 (6/12/2017) and P.D. 18-84 (5/9/2018).
Consistent with the Department’s policy with respect to registering to vote and voting in Virginia, the Department considers the fact that a taxpayer obtained a voter’s registration and voted in elections in another state as very strong evidence that such individual considered the other state to be their domicile during the time they held and used such registration.
The Taxpayer explains that she obtained a State A identification card rather than a driver’s license because she did not drive in State A. She further explains that she renewed her Virginia driver’s license as a convenience to use when visiting family in Virginia. In addition, the Taxpayer states that she maintained vehicles garaged and registered in Virginia so her family members would have a means of transportation and she could use them when visiting.
The Department acknowledges that a determination of a change in domicile is evidenced by a process in which no single factor is dispositive. After carefully considering all of the information presented, the Department finds that the Taxpayer adequately established her intent to abandon her Virginia domicile and establish domicile in State A prior to the 2019 tax year. In particular, the Department considers the fact that she voted in State A to be strong evidence of her intent to abandon Virginia and establish a new domicile in State A. Further, the fact that she maintained her Virginia driver’s license and obtained a State A identification card rather than a driver’s license is understandable because she did not drive in State A. Accordingly, the Department finds that the Taxpayer was not domiciled in Virginia during the 2019 taxable year. The assessment, therefore, will be abated.
Nonresident Individuals
Under Virginia Code § 58.1-325, individuals who are neither domiciliary nor actual residents of Virginia and have income from Virginia sources are taxed as nonresidents. 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 the ownership of property in Virginia or the conduct of a business, trade, profession, or occupation in Virginia. Leasing property in Virginia is conducting a business in Virginia for Virginia income tax purposes.
In accordance with Title 23 VAC 10-110-180 A, the Virginia taxable income of a nonresident is computed by multiplying their Virginia taxable income (computed as if they were a resident) by the ratio of their net income, gain, loss, and deductions from Virginia sources to their net income, gain, loss, and deduction from all sources. Thus, a nonresident individual who has income from carrying on a business, trade, profession, or occupation within Virginia is required to file a Virginia Nonresident Individual Income Tax Return, currently Form 763, pursuant to Virginia Code § 58.1-341, unless the individual meets the filing exception described in Virginia Code § 58.1-321. See P.D. 07-148 (9/12/2007).
For purposes of determining whether the threshold has been met, a taxpayer’s federal adjusted gross income (FAGI) is taken into account, along with certain additions to, or subtractions from, FAGI that are specifically set out in Virginia statutes. This amount is referred to as “Virginia adjusted gross income.” See Virginia Code § 58.1-321. In this case, it appears that the Taxpayer’s Virginia rental properties operated at a loss in 2019. The Taxpayer, however, had sufficient Virginia adjusted gross income, as defined, to exceed the filing threshold under Virginia Code § 58.1-321. The fact that the rental property may have been operating at a loss did not eliminate the requirement to file a return. If an individual owns property in Virginia that produces rental income, it is the Department’s position that the individual must file a nonresident return regardless of whether the net amount of Virginia taxable income ultimately computed is positive or negative. See P.D. 17-133 (7/19/2017).
CONCLUSION
While the Department concedes that the Taxpayer was not a domiciliary resident of Virginia for the taxable year at issue, she should be aware that continuing connections with Virginia, such as maintaining vehicle registrations, will likely result in future contacts by the Department with respect to the situs of the Taxpayer’s domicile. As in any determination, a change in the facts and circumstances could result in a change in the Department’s determination in subsequent taxable years. 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. See Virginia Code § 46.2-348.
Finally, pursuant to Virginia Code § 58.1-341, if a taxpayer receives income from operating a rental property in the state or otherwise has Virginia source income and the taxpayer has sufficient Virginia adjusted gross income to exceed the filing threshold under Virginia Code § 58.1-321, then the taxpayer must file a return regardless of whether the property may have been operating at a loss. Accordingly, the Taxpayer is instructed to file a 2019 nonresident return, and a return for any other year she received income from operating a rental property in Virginia and otherwise had sufficient total income to exceed the filing threshold described in Virginia Code § 58.1-321.
The Code of Virginia sections and regulations cited are available online at law.lis.virginia.gov. The public documents cited are available at tax.virginia.gov in the Laws, Rules, & Decisions section of the Department’s website. If you have any questions regarding this determination, you may contact ***** in the Office of Tax Policy and Legal Affairs, Tax Adjudication and Resolution Division, at ***** or *****.
Sincerely,
James J. Alex
Tax Commissioner
Commonwealth of Virginia
AR/4796.Y