May 14, 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 ***** (the “Taxpayer”) for the taxable year ended December 31, 2020.
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 2020 taxable year. A review of the Department’s records showed that the Taxpayer had not filed a Virginia return. The Department requested additional information from the Taxpayer in order to determine if his income was taxable in Virginia. Based on his responses and the information otherwise available, the Department determined that the Taxpayer was taxable as a domiciliary resident of Virginia and issued an assessment. The Taxpayer filed an application for correction, contending he was a resident of ***** (State A) during the 2020 taxable year.
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 lived and worked in Virginia until 2011, when he retired and moved to ***** (State B). The Taxpayer explains that he returned to Virginia briefly in 2014 and then moved to State A after receiving an employment offer there. He states that he has lived and worked in State A ever since. During this time, he purchased a residence in State A, registered three cars in State A, and filed State A resident income tax returns.
The Taxpayer, however, retained significant connections to Virginia. He has owned a residence in Virginia since 1996. He maintained a Virginia driver’s license, which he renewed in 2018, long after he moved to State A. He also remained registered to vote in Virginia and has voted by absentee ballot during the period he claimed to be a State A resident. In addition, he owned a car registered in Virginia.
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).
The fact that an individual has a Virginia driver’s license is one factor to consider, among other possible factors, in any given domicile case. Nonresidents are not permitted to hold Virginia driver’s licenses. See Virginia Code § 46.2-323.1. They are, however, permitted to continue to use their licenses from their home states or countries. See Virginia Code § 46.2-307. For the purposes of Title 46.2 of the Code of Virginia, “nonresident” is generally defined as every person who is not domiciled in the Commonwealth. See Virginia Code § 46.2-100. Thus, in general, an individual must be a domiciliary resident of Virginia in order to hold a Virginia driver’s license.
Once it is clear that an individual has established domiciliary residency in Virginia, subsequent renewals of a Virginia driver’s license even while absent from the state will be considered very strong evidence of the individual’s intent to remain a domiciliary resident of Virginia. That is because the basis of the individual’s claim to be entitled to a Virginia driver’s license would no longer be based on the length of time they were physically present in Virginia as an actual resident, but rather on the implication that they remained a domiciliary resident of Virginia.
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 voter shall be a resident of the Commonwealth and of the precinct where 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, the Department will consider the fact that an individual obtains a Virginia voter’s registration and actively votes as a Virginia resident in elections in Virginia to be conclusive evidence that that individual considered Virginia to be their domicile during the time they held and used such registration. See Cooper’s Adm’r, 121 Va. at 349-50.
The Taxpayer explains that he maintained his Virginia driver’s license because he did not want a State A driver’s license. He asserts that his Virginia driver’s license lists his State A address, which evinces his State A residency. He further explains that his adult children live in his Virginia residence and that the car registered in Virginia is used by his ex-spouse.
Virginia Code § 58.1-205 provides that, in any proceeding relating to the interpretation of the tax laws of Virginia, an “assessment of a tax by the Department shall be deemed prima facie correct.” As such, the burden of proof is on the Taxpayer to show he was not subject to income tax in Virginia.
As stated above, a change of domicile requires that an individual prove two elements concurrently: 1) that the individual abandoned the old domicile and had no intent to return to it; and 2) that the individual established a new domicile, which must have been formed by physical presence coupled with the intent to remain permanently or indefinitely. The Department expects that when individuals are seeking a permanent change of domicile, they will normally register vehicles, obtain a new driver’s license, register to vote, and perform other official acts indicating their intent to change domicile. To the extent such connections may be retained with Virginia, it suggests that the individual may not have been certain that they intended to abandon their Virginia domicile. If a permanent change of residence were intended, there would be no need to retain such connections with a former state.
Credit for Taxes Paid to Another State
Virginia Code § 58.1-332 A allows Virginia residents a credit on their Virginia return for income taxes paid to another state provided the income is either earned or business income or gain from the sale of a capital asset.
Virginia law does not necessarily allow a taxpayer to claim a credit for the total amount of tax paid to another state. Rather, the credit is limited to the lesser of the amount of tax actually paid to the other state or the amount of Virginia income tax actually imposed on the taxpayer on the income earned or derived in the other state. See P.D. 97-301 (7/7/1997). The limitation is computed by multiplying the individual’s Virginia tax liability by a fraction, the numerator of which is the income upon which the other state’s tax is imposed, and the denominator of which is Virginia taxable income. As an actual resident of State A and a domiciliary resident of Virginia, the Taxpayer would be allowed a credit against his Virginia income tax liability for income tax paid to State A to the extent permitted by Virginia Code § 58.1-332.
CONCLUSION
In this case, the Taxpayer’s ongoing connections with Virginia raise significant doubts as to his intent to abandon his Virginia domicile. In particular, using a Virginia voter’s registration to vote and having his Virginia driver’s license reissued and renewed during the period when he was not actually residing in Virginia are very strong indicators of domiciliary intent.
The Department acknowledges that a determination of a change in domicile is evidenced by a process in which no single factor is dispositive. As such, facts as they existed both before and after the exact taxable year at issue may be instructive as to the taxpayer’s intent over a broader period of time that includes such year. After carefully considering all of the information presented, the Department concludes that the Taxpayer has failed to prove that he abandoned Virginia as of the 2020 taxable year. Accordingly, he remained taxable as a domiciliary resident of Virginia for the 2020 taxable year. The Taxpayer will, however, be able to claim a credit for the income tax he paid to State A.
The assessment at issue was made based on the best information available to the Department pursuant to Virginia Code § 58.1-111. The Taxpayer, however, may have information that better represents his Virginia income tax liability for the taxable year at issue. Therefore, he should file a 2020 Virginia resident income tax return and claim credit for income tax paid to State A to the extent permitted by Virginia Code § 58.1-332. The return should be submitted within 30 days from the date of this letter to: Virginia Department of Taxation, Office of Tax Policy and Legal Affairs, Tax Adjudication and Resolution Division, P.O. Box 27203, Richmond, Virginia 23261-7203, Attention: *****. The return will be reviewed and processed, and the assessment will be adjusted as warranted. If the return is not received within the allotted time, the assessment will be adjusted based on the available information.
Further, in light of this determination, the Taxpayer should reevaluate his residency status for the 2021 and later taxable years to determine if he had a Virginia filing requirement and, if necessary, file the appropriate returns.
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 *****.
Sincerely,
James J. Alex
Tax Commissioner
Commonwealth of Virginia
AR 5028.Q