Tax Type
Individual Income Tax
Description
Residency
Topic
Taxpayers
Date Issued
07-01-1999
July 1, 1999
Re: Sec. 58.1-1821 Application: Individual Income Tax
Dear***
This will reply to your letters concerning the 1994 through 1996 Virginia individual tax assessments for ***** (the ``Taxpayers'). I apologize for the delay in responding to your letters.
FACTS
The Taxpayers were residents of another state (``State A'). Because they expanded their franchise business activities from that state to Virginia and other states, they moved to Virginia and purchased a house. They, however, contend that they did not intend to abandon State A as their domiciliary residence or establish residence in Virginia because: (1) their business interests were started and based in State A; (2) their daughter attended a college in State A; (3) they could establish their franchise in only a small part of Virginia as opposed to larger portions of other states; and (4) they had significant franchise operations in other states. The department considered the Taxpayers to be domiciliary residents of Virginia at the time they moved to Virginia, and assessments were issued for the taxable years 1994, 1995, and 1996. The Taxpayers contend that they did not abandon State A as their domiciliary residence, they have filed the proper Virginia returns, and the assessments should be abated.
DETERMINATION
Two classes of residents, a domiciliary resident and an actual resident, are set forth in Code of Virginia Sec. 58.1-302. The domiciliary residence of a person means the permanent place of residence of a person and the place to which that person intends to return even ***** though he or she may actually reside elsewhere. For a person to change domiciliary residency to another state, that person must intend to abandon his domicile with no intention of returning. 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. 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 a 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 of a taxpayer's intention is not sufficient to establish residency.
Since 1975, the Taxpayers were domiciliary residents of State A. They owned a chain of franchise restaurants started when they lived in that state. After being awarded additional franchise territory, they opened franchise restaurants in certain parts of Virginia and in other states. They intended to develop franchise restaurants and, subsequently, sell the franchise. In 1993, they moved to Virginia and began developing franchise restaurants. The development in Virginia was part of a continuing business expansion into many states and, according to the Taxpayers, was not a change of domicile from State A to Virginia. In 1994 and 1995, the focus of their business shifted from Virginia to the other states and eventually back to State A. At the end of 1995, the Taxpayers sold their interest in the franchise in Virginia and other states. In 1996, they purchased 50% interest in five other restaurants and 50% interest in another franchise restaurant. All of these restaurants were located in the State A in which the Taxpayers initially claimed to be domiciliaries.
In 1993, the Taxpayers sold a house in State A and purchased another house in that state. In the same year, instead of renting a house, they decided to purchased a house in Virginia which they anticipated would have high resale potential. The furnishings of the house in State A were not moved to Virginia. Instead, separate furnishings were purchased for the Virginia house. While the Taxpayers were developing franchise restaurants in other states, they would stay in those states and periodically returned to the Virginia house. On occasions when the wife did not accompany the husband to other states to develop franchises, she would either spend time in the house in Virginia or in State A. She, however, did not stay in Virginia for more than 183 days of taxable years 1994, 1995, or through September 1, 1996. The Virginia house was also used, on occasion, by their son, who was attending college.
On September 1, 1996, the Taxpayers decided to abandon State A as their domiciliary residence and establish their domiciliary residence in Virginia. In the same month, they sold their first house in Virginia and purchased another house in Virginia. They indicated that as a result of their daughter attending a Virginia school, they preferred living in Virginia. They kept their house in State A and continued to use it for personal and business visits. The Taxpayers did not lease or rent the house in State A.
The Taxpayers' daughter obtained an undergraduate degree from a college in State A. According to her college records, her degree was awarded in December 1995. She moved to Virginia, worked in Virginia, and filed a 1996 Virginia resident return. In September 1996, she was admitted into graduate school at a Virginia college where she paid instate tuition based on her own Virginia residency.
It appears from the documentation provided that the Taxpayers were not actual residents of Virginia for the taxable years 1994, 1995, and through September 1, 1996. During those years, they traveled to other states where they developed franchise restaurants and were in Virginia for less than 183 days for each respective year. They filed a 1993 Virginia part-year return, however, indicate that they should have filed a nonresident return. Nevertheless, for the taxable years 1994 and 1995, they filed Virginia nonresident tax returns, reported income from Virginia sources, and paid the Virginia tax. They also filed a 1996 Virginia nonresident return, but changed that return by filing an amended 1996 Virginia part-year resident return showing that they moved their domiciliary residence to Virginia. There was no Virginia liability on the 1996 returns.
The Taxpayers also performed other actions that support being domiciliary residents State A while living in Virginia. Intangible tax returns, which are required to be filed by ``legal residents' or ``domiciliaries' of State A, were filed for the taxable years 1994, 1995, and 1996. They were registered to vote in State A until they established domiciliary residence in Virginia. Significant donations were made to political candidates in State A. The Taxpayers had cars registered in both State A and in Virginia. The cars in Virginia were used for business purposes while establishing franchises in Virginia and other states. They maintained their membership with a church in State A through the taxable year 1995. Bank accounts were maintained in the State A, although they also had Virginia bank accounts.
The department concedes that in some instances, it is difficult to know whether a taxpayer intends to establish Virginia as the domiciliary residency. If a taxpayer comes to Virginia from another state, the burden of proving that he or she has not abandoned his or her domicile in that state rests with the taxpayer. If the information is inadequate to meet this burden, the Commissioner must conclude that the taxpayer intended to establish Virginia as the domiciliary residence when he or she moved to Virginia.
It is my opinion that the Taxpayers have met their burden of proving that they intended to remain domiciliary residents of State A when coming to Virginia. The weight of the evidence demonstrates that their circumstances and the acts they performed were consistent with retaining their domicile in State A. The business franchise, which started in State A, was expanded to include Virginia and other states. The intention of the Taxpayers was to develop the franchise in Virginia and sell the franchise at a later date. Actions demonstrating that they retained their domiciliary residence in State A, include keeping and maintaining in State A house, voter registration, the drivers license of the husband, car registrations, and various social organizations in which they were members. Purchasing A house in Virginia is A strong indication of Virginia residency. Under these circumstances, however, it appears legitimate to conclude that the limited time spent living in the Virginia house, while engaging in business activities outside of Virginia would support the Taxpayers' intention of not abandoning their domiciliary residence in State A. Concerning the in-state tuition paid by the Taxpayers' daughter in graduate school in Virginia, the tuition was based on the daughter's residency in Virginia, instead of her parents. In this instance, had the Taxpayers maintained their domiciliary residency in State A, the daughter would still have been eligible for in-state tuition rate at the Virginia school.
Based on the information presented, I find basis to abate the tax and interest assessed against the Taxpayer for the taxable years 1994 through 1996. If you have any questions about this determination, you may contact ***** with the Office of Tax ***** Policy at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/13130N
Re: Sec. 58.1-1821 Application: Individual Income Tax
Dear***
This will reply to your letters concerning the 1994 through 1996 Virginia individual tax assessments for ***** (the ``Taxpayers'). I apologize for the delay in responding to your letters.
FACTS
The Taxpayers were residents of another state (``State A'). Because they expanded their franchise business activities from that state to Virginia and other states, they moved to Virginia and purchased a house. They, however, contend that they did not intend to abandon State A as their domiciliary residence or establish residence in Virginia because: (1) their business interests were started and based in State A; (2) their daughter attended a college in State A; (3) they could establish their franchise in only a small part of Virginia as opposed to larger portions of other states; and (4) they had significant franchise operations in other states. The department considered the Taxpayers to be domiciliary residents of Virginia at the time they moved to Virginia, and assessments were issued for the taxable years 1994, 1995, and 1996. The Taxpayers contend that they did not abandon State A as their domiciliary residence, they have filed the proper Virginia returns, and the assessments should be abated.
DETERMINATION
Two classes of residents, a domiciliary resident and an actual resident, are set forth in Code of Virginia Sec. 58.1-302. The domiciliary residence of a person means the permanent place of residence of a person and the place to which that person intends to return even ***** though he or she may actually reside elsewhere. For a person to change domiciliary residency to another state, that person must intend to abandon his domicile with no intention of returning. 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. 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 a 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 of a taxpayer's intention is not sufficient to establish residency.
Since 1975, the Taxpayers were domiciliary residents of State A. They owned a chain of franchise restaurants started when they lived in that state. After being awarded additional franchise territory, they opened franchise restaurants in certain parts of Virginia and in other states. They intended to develop franchise restaurants and, subsequently, sell the franchise. In 1993, they moved to Virginia and began developing franchise restaurants. The development in Virginia was part of a continuing business expansion into many states and, according to the Taxpayers, was not a change of domicile from State A to Virginia. In 1994 and 1995, the focus of their business shifted from Virginia to the other states and eventually back to State A. At the end of 1995, the Taxpayers sold their interest in the franchise in Virginia and other states. In 1996, they purchased 50% interest in five other restaurants and 50% interest in another franchise restaurant. All of these restaurants were located in the State A in which the Taxpayers initially claimed to be domiciliaries.
In 1993, the Taxpayers sold a house in State A and purchased another house in that state. In the same year, instead of renting a house, they decided to purchased a house in Virginia which they anticipated would have high resale potential. The furnishings of the house in State A were not moved to Virginia. Instead, separate furnishings were purchased for the Virginia house. While the Taxpayers were developing franchise restaurants in other states, they would stay in those states and periodically returned to the Virginia house. On occasions when the wife did not accompany the husband to other states to develop franchises, she would either spend time in the house in Virginia or in State A. She, however, did not stay in Virginia for more than 183 days of taxable years 1994, 1995, or through September 1, 1996. The Virginia house was also used, on occasion, by their son, who was attending college.
On September 1, 1996, the Taxpayers decided to abandon State A as their domiciliary residence and establish their domiciliary residence in Virginia. In the same month, they sold their first house in Virginia and purchased another house in Virginia. They indicated that as a result of their daughter attending a Virginia school, they preferred living in Virginia. They kept their house in State A and continued to use it for personal and business visits. The Taxpayers did not lease or rent the house in State A.
The Taxpayers' daughter obtained an undergraduate degree from a college in State A. According to her college records, her degree was awarded in December 1995. She moved to Virginia, worked in Virginia, and filed a 1996 Virginia resident return. In September 1996, she was admitted into graduate school at a Virginia college where she paid instate tuition based on her own Virginia residency.
It appears from the documentation provided that the Taxpayers were not actual residents of Virginia for the taxable years 1994, 1995, and through September 1, 1996. During those years, they traveled to other states where they developed franchise restaurants and were in Virginia for less than 183 days for each respective year. They filed a 1993 Virginia part-year return, however, indicate that they should have filed a nonresident return. Nevertheless, for the taxable years 1994 and 1995, they filed Virginia nonresident tax returns, reported income from Virginia sources, and paid the Virginia tax. They also filed a 1996 Virginia nonresident return, but changed that return by filing an amended 1996 Virginia part-year resident return showing that they moved their domiciliary residence to Virginia. There was no Virginia liability on the 1996 returns.
The Taxpayers also performed other actions that support being domiciliary residents State A while living in Virginia. Intangible tax returns, which are required to be filed by ``legal residents' or ``domiciliaries' of State A, were filed for the taxable years 1994, 1995, and 1996. They were registered to vote in State A until they established domiciliary residence in Virginia. Significant donations were made to political candidates in State A. The Taxpayers had cars registered in both State A and in Virginia. The cars in Virginia were used for business purposes while establishing franchises in Virginia and other states. They maintained their membership with a church in State A through the taxable year 1995. Bank accounts were maintained in the State A, although they also had Virginia bank accounts.
The department concedes that in some instances, it is difficult to know whether a taxpayer intends to establish Virginia as the domiciliary residency. If a taxpayer comes to Virginia from another state, the burden of proving that he or she has not abandoned his or her domicile in that state rests with the taxpayer. If the information is inadequate to meet this burden, the Commissioner must conclude that the taxpayer intended to establish Virginia as the domiciliary residence when he or she moved to Virginia.
It is my opinion that the Taxpayers have met their burden of proving that they intended to remain domiciliary residents of State A when coming to Virginia. The weight of the evidence demonstrates that their circumstances and the acts they performed were consistent with retaining their domicile in State A. The business franchise, which started in State A, was expanded to include Virginia and other states. The intention of the Taxpayers was to develop the franchise in Virginia and sell the franchise at a later date. Actions demonstrating that they retained their domiciliary residence in State A, include keeping and maintaining in State A house, voter registration, the drivers license of the husband, car registrations, and various social organizations in which they were members. Purchasing A house in Virginia is A strong indication of Virginia residency. Under these circumstances, however, it appears legitimate to conclude that the limited time spent living in the Virginia house, while engaging in business activities outside of Virginia would support the Taxpayers' intention of not abandoning their domiciliary residence in State A. Concerning the in-state tuition paid by the Taxpayers' daughter in graduate school in Virginia, the tuition was based on the daughter's residency in Virginia, instead of her parents. In this instance, had the Taxpayers maintained their domiciliary residency in State A, the daughter would still have been eligible for in-state tuition rate at the Virginia school.
Based on the information presented, I find basis to abate the tax and interest assessed against the Taxpayer for the taxable years 1994 through 1996. If you have any questions about this determination, you may contact ***** with the Office of Tax ***** Policy at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/13130N
Rulings of the Tax Commissioner