April 25, 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 ***** and ***** (the “Taxpayers”) for the taxable year ended December 31, 2020.
FACTS
The Department received information from the Internal Revenue Service (IRS) indicating that the Taxpayers, a husband and wife, may have been required to file a Virginia income tax return for the 2020 taxable year. A review of the Department’s records showed that the Taxpayers had not filed a return. The Department requested additional information from the husband to determine if his income was taxable in Virginia. In response, the Taxpayers submitted a joint Virginia nonresident income tax return along with other information. After reviewing the information provided, the Department determined they were domiciliary residents of Virginia and issued an assessment accordingly. The Taxpayers submitted an application for correction, contending they were residents 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 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 husband accepted employment in State A and began living and working there in December 2019. The Taxpayers explained that they intended to move to State A permanently. During the tax year at issue, the husband registered a vehicle in State A, registered to vote, and voted in State A. In addition, the husband surrendered his Virginia driver’s license and obtained a State A driver’s license in January 2021. Except for brief periods when he visited family in Virginia, he remained in State A until his position there was terminated in June 2021.
The Taxpayers also retained some connections to Virginia. They owned a residence in Virginia where the wife continued to reside during the period the husband was in State A. The wife owned a vehicle registered in Virginia and maintained a Virgina driver’s license. In addition, the Taxpayers received rental income attributable to leasing space in their Virginia residence.
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). Similarly, obtaining a driver’s license in another state is a strong indicator of intent to establish domiciliary residency in such state.
In addition, the Department considers registering to vote in Virginia and voting in Virginia elections to be 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 the registering to vote and voting in Virginia, the Department considers the fact that a taxpayer obtained a voter registration and voted in elections in another state to be very strong evidence that such individual considered the other state to be their domicile during the time they held and used such registration.
The Department acknowledges that a change of domicile is evidenced by a process in which no single factor is dispositive. The change is generally considered to have occurred at the beginning of that process even when official connections such as driver’s licenses, vehicle registrations, and voter’s registrations were not obtained until later. See P.D. 16-138 (6/24/2016) and P.D. 19-19 (3/26/2019). After carefully considering all of the information presented, the Department finds that the husband established domicile in State A and was not taxable as a Virginia resident for the 2020 taxable year. The wife, however, never established physical presence in State A and, thus, remained a Virginia domiciliary resident for the 2020 taxable year.
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 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 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.
In this case, the husband, who was a nonresident for the taxable year at issue, was leasing property in Virginia and thus had income attributable to the ownership of real property in Virginia. In addition, he had sufficient Virginia adjusted gross income to exceed the filing threshold described under Virginia Code § 58.1-321. As such, he was required to file a nonresident Virginia income tax return to report his Virginia source income.
CONCLUSION
For the reasons discussed above, the husband was a nonresident of Virginia, and the wife was a domiciliary resident of Virginia for the taxable year at issue. In cases in which one spouse is a nonresident and the other is a resident, Virginia Code § 58.1-326 permits married individuals to elect to determine their joint Virginia taxable income as if they were both residents. Considering the tax consequences in this case, it is unlikely that the Taxpayers would wish to make this election for the 2020 taxable year. When such an election is not made, Virginia Code § 58.1-326 provides that the spouse’s separate taxes shall be determined on their separate Virginia taxable incomes. The husband will be permitted to make an amended separate filing for the 2020 taxable year as a nonresident. Based on the available information, the wife’s separate income is below the filing threshold described in Virginia Code § 58.1-321, and she is not required to file a separate Virginia return.
The return should be submitted within 60 days from the date of this letter to: Virginia Department of Taxation, Attn: *****, Tax Adjudication and Resolution Division, 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 considered correct, and collections actions may result.
The Code of Virginia sections and regulation 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 *****@tax.virginia.gov.
Sincerely,
James J. Alex
Tax Commissioner
Commonwealth of Virginia
AR 5014.Q