June 3, 2026
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, 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 return. The Department requested additional information from the Taxpayer in order to determine if her income was taxable in Virginia. When a response was not received, the Department issued an assessment. The Taxpayer submitted an application for correction, contending she lived and worked in ***** (State A) during 2020.
DETERMINATION
Taxation of Virginia Residents
Virginia Code § 58.1-301 provides, with certain exceptions, that the terminology and references used in Title 58.1 of the Code of Virginia will have the same meaning as provided in the Internal Revenue Code (IRC) unless a different meaning is clearly required. Conformity does not extend to terms, concepts, or principles not specifically provided in the Code of Virginia. For individual income tax purposes, Virginia conforms to federal law, in that it starts the computation of Virginia taxable income (VTI) with federal adjusted gross income (FAGI). Income properly included in the FAGI of a Virginia resident is subject to taxation by Virginia, unless it is specifically exempt as a Virginia modification pursuant to Chapter 3 of Title 58.1 of the Code of Virginia.
It is well established that a state may tax all the income of its residents, even income earned outside the taxing jurisdiction. In New York ex rel. Cohn v. Graves, 300 U.S. 308, 312-313 (1937), the United States Supreme Court explained “[t]hat the receipt of income by a resident of the territory of a taxing sovereignty is a taxable event is universally recognized.” As such, even if the Taxpayer had no Virginia source income, she would have been subject to Virginia income tax if she had been a Virginia resident.
Residency
Two classes of residents, a domiciliary resident and an actual resident, are set forth in Title 23 of the Virginia Administrative Code (VAC) 10-110-30 B. 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 information provided indicates that the Taxpayer was a domiciliary resident of Virginia prior to 2015. She lived and worked in Virginia, owned a Virginia residence, and held a Virginia driver’s license. The Taxpayer did not have connections with any other state that would raise doubts as to her domiciliary residency.
In 2015, the Taxpayer got married and moved to State A. She states that she lived and worked in State A during the 2020 taxable year. She also filed a State A resident income tax return for the 2020 taxable year using her State A address.
The Taxpayer, however, retained significant connections with Virginia. She continued to own a residence in Virginia, which was occupied by her parents. She maintained a Virginia driver’s license, which she renewed in 2018, long after she moved to State A. She also filed Virginia resident income tax returns for the 2016, 2017, and 2021 through 2023 taxable years. In addition, the majority of her tax-reporting documents for the 2020 taxable year were mailed to a Virginia address.
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.
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 she 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.
In this case, it appears that the Taxpayer performed few, if any, such official acts in State A. Rather, she continued to hold significant connections with Virginia. In particular, renewing her Virginia driver’s license in 2018, during a time she claimed to be a resident of another state, raises substantial doubts under these circumstances as to her intent to change domicile.
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. The intent of the credit is to grant Virginia residents relief in situations where they are taxed by both Virginia and another state on these types of income.
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 her Virginia income tax liability for income tax paid to State A to the extent permitted by Virginia Code § 58.1-332.
In the case of married taxpayers using different filing statuses on their Virginia and other state returns, the taxable income and tax paid to the other state must be adjusted in order to compute the allowable credit. If a Virginia resident files jointly in the other state, but separately in Virginia, only that portion of the tax paid and taxable income as shown on the other state’s return attributable to the Virginia resident is used to compute the credit. The Virginia resident’s share of the tax paid to the other state is determined by multiplying the other state’s joint tax liability by a fraction, the numerator of which is the Virginia resident’s share of the income upon which the other state’s tax is imposed, and the denominator of which is the joint income upon which the other state’s tax is imposed.
CONCLUSION
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 the information presented, the Department finds that the Taxpayer has not proven her intent to abandon her Virginia domicile and establish domicile in State A. In particular, having her Virginia driver’s license renewed during the period when she was not actually residing in Virginia is a significant factor demonstrating domiciliary intent. Accordingly, the Department finds that the Taxpayer was 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 she 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 her Virginia income tax liability for the taxable year at issue. Therefore, she 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 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.
After the assessment has been adjusted, the Taxpayer will receive an updated bill or refund, as warranted, that will include accrued interest to date. The Taxpayer should remit any balance due within 30 days of the bill date to avoid the accrual of additional interest and possible collection actions.
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 response, you may contact ***** in the Office of Legal Affairs, Tax Adjudication and Resolution Division, at ***** or *****.
Sincerely,
Kristin L. Collins
Tax Commissioner
Commonwealth of Virginia
AR 4914.Y