Tax Type
Individual Income Tax
Description
Residency; Change of domicile.
Topic
Taxpayers' Remedies
Date Issued
10-15-1997
October 15, 1997
Re: § 58.1-1821 Application: Individual Income Tax
Dear***********
This will reply to your letter concerning the 1991 through 1994 Virginia individual income tax assessments for***** (the "Taxpayer"). I apologize for the delay in responding to your letter.
FACTS
The Taxpayer was a Virginia resident at the beginning of the 1991 taxable year. In September of 1991, the Taxpayer retired and moved with his wife to another state. He filed a Virginia part year return from the beginning of the taxable year through September of 1991. In December of 1991, the Taxpayer and his wife moved to a foreign country. In September of 1994, the Taxpayer and his wife moved back to Virginia and filed a part year return for the balance of that year.
The department determined that the Taxpayer was a domiciliary resident of Virginia for taxable years 1991 through 1994. He was assessed tax, penalty and interest for these years. The penalty assessed against the Taxpayer was the fraud penalty pursuant to Code of Virginia § 58.1-308. The Taxpayer contends that he was not a domiciliary resident of Virginia from September 1991 through September of 1994. He is requesting that the assessments for the taxable years 1991 through 1994 be adjusted accordingly.
DETERMINATION
Two classes of residents, a domiciliary resident and an actual resident, are set forth in Code of Virginia § 58.1-302, copy enclosed. The domiciliary residence of a person means that the permanent place of residence of a taxpayer and the place to which he intends to return even though he may actually reside elsewhere. For a person to change domiciliary residency to another state, 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 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 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, sites of real and 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 of the facts and circumstances of the particular case. A simple declaration is not sufficient to establish residency.
The Taxpayer has not kept documentation regarding his pursuits during his time outside of Virginia. The Taxpayer contends that the department, which "reviews a limited amount of documentation" is unable to determine his state of mind regarding his intent to return to Virginia.
The Taxpayer did little to establish residency when he moved to the other state. He did not get a driver's license, register his automobiles, or register to vote. He opened a checking account in this other state one month before moving to the foreign country. Once the Taxpayer moved to the foreign country, he did engage in activities consistent with changing domicile. He got a resident retiree identification card, a foreign country drivers license and a discount card for the foreign national airline. Also, his wife owned real property in this foreign country.
In addition, while the Taxpayer performed activities consistent with a change in domicile, many of his actions were compatible with returning to Virginia. The Taxpayer maintained his Virginia condominium from 1991 through 1994. Furnishings and personal items remained in the house during this period. Taxpayer letters to the condominium management indicate that he would be gone from September of 1993 and return January of 1994. The house was "orally" listed with an agent for sale in August 1993 and was listed for sale in writing in June of 1994. The house was sold in September of 1994. The Virginia condominium was used as a mailing address for third party information returns (1099's). Also, the Taxpayer maintained a Virginia drivers license and kept his vehicles registered in Virginia for these same years.
The department concedes that it is difficult to know whether a taxpayer intends to return to Virginia. The department must determine a taxpayer's intent through the information provided. The Taxpayer has the burden of proving that he or she has abandoned his or her Virginia domicile. If a taxpayer is unable or unwilling to provide adequate information to meet its burden, the Commissioner must conclude the he or she intended to return to Virginia.
It is my opinion that the Taxpayer failed to meet his burden of proving that he did not intend to return to Virginia. While he did provide the department with some documentation which revealed an intent to stay in the foreign country, the clear weight of the evidence demonstrates that he intended to return to Virginia. Activities such as: 1) maintaining a home; 2) keeping personal belongings in this home; 3) receiving mail at the Virginia home; and 3) maintaining automobiles in the Commonwealth indicate the intent to return to Virginia, or at the very least, return if living outside the Commonwealth does not work out. Accordingly, l conclude that the Taxpayer was a Virginia domiciliary for the tax years in question.
Penalty
Code of Virginia § 58.1-308, copy enclosed, requires a penalty with interest to be assessed if the underpayment of tax is "false or fraudulent with intent to evade the tax". After reviewing the documentation provided in the instant case, it is my opinion that the evidence is insufficient to show that the Taxpayer's underpayment of tax was false or fraudulent with the intent to evade the tax. Thus, the 100 percent penalty will be reduced. Under Code of Virginia § 58.1-347, copy enclosed, an individual who fails to file a return within the statutory time limit is subject to a penalty of six percent of the assessable tax per month or fraction thereof during which such failure to file continues, not exceeding thirty percent in the aggregate. Under Code of Virginia § 58.1-351, copy enclosed, an individual who does not pay his tax in full is subject to a penalty of six percent of the assessable tax due per month or fraction thereof, not exceeding thirty percent in the aggregate. Since full year tax returns were not filed with the department to date for taxable years 1991 through 1994, and the assessed payments for these years were not made until November 1996, an aggregate thirty percent penalty will be assessed on taxes due for those years.
Accordingly, the assessments of tax for taxable years 1991 through 1994 are upheld. The 100% penalty for fraud has been reduced and replaced with the 30% penalty for failure to or failure to pay penalty. Because you have paid all assessed taxes, the 100% penalty and interest, a refund of the excess penalty with the statutory interest will be sent in due time. A schedule of the assessments is included for your convenience. If you have any questions regarding this determination, you may contact **** at *********.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/11795B
Rulings of the Tax Commissioner