Tax Type
Individual Income Tax
Description
Residency
Topic
Taxpayers
Date Issued
07-09-1999
July 9, 1999
Re: Sec. 58.1-1821 Application: Individual Income Tax
Dear***
This will reply to your letter in which you protest the assessment made against your clients, ***** (the "Taxpayers') for the 1991 through 1997 taxable years. I apologize for the delay in responding.
FACTS
The Taxpayers (a husband and wife) moved back to Virginia in 1997. The husband is employed as a foreign service officer by the United States (U.S.) government. Due to the nature of the husband's employment, the Taxpayers have lived in numerous locations within and without the U.S. during his service with the U.S. Department of State. The Taxpayers have maintained that they are and have always been domiciled in another state ("State A'). The Taxpayers are registered to vote and vote regularly in State A and hold drivers' licenses from State A. The husband's employment records indicate a State A address as the required destination for home leave after every long-term overseas assignment. State A also allows them to maintain their domiciliary status while they are out-of-state but exempts them from filing income tax returns as long as they meet certain requirements.
From May 1988 to July 1990, the Taxpayers lived in Virginia. The Taxpayers purchased a home in Virginia during this period. In addition, the Taxpayers had purchased rental property in Virginia in the 1970's. The Taxpayers filed Virginia individual income tax returns for 1988 and 1989 as actual residents and a part-year resident return for 1990. In July 1990, the husband's employer transferred the Taxpayers overseas. In 1997, the Taxpayers were transferred back to Virginia. During the interim period, the Taxpayers maintained ownership of the properties in Virginia which were rented to other parties. The Taxpayers did not file individual income tax returns with Virginia for 1991 through 1996 because the rental properties operated at a loss. They did file a part-year resident return in 1997.
Under audit, the department determined that the Taxpayers were domiciliary residents and assessed additional income tax for the 1991 through 1997 taxable years. The Taxpayers contest the adjustment and request that it be abated.
DETERMINATION
For purposes of income taxation there are two classes of residents in Virginia, (1) domiciliary residents and (2) actual residents. Domiciliary residents are those whose legal domicile is Virginia. Any person who is a domiciliary resident, who has not moved from Virginia with the intention of permanently residing outside of Virginia, is still a domiciliary resident even though he may be actually living somewhere else.
An actual resident is any individual who is not domiciled in this State, but who actually maintains a place of abode in Virginia for more than 183 days during the taxable year. An individual may remain an actual resident of Virginia until such time that he demonstrates the intent and actions necessary to establish his domicile in Virginia. A person's true intention must be determined with reference to all of the facts and circumstances of the particular case.
In Public Document (P.D.) 87-161, 6/2/87, copy enclosed, the department ruled on a set of circumstances very similar to the Taxpayers' case. In that ruling, the taxpayer was domiciled in California and employed as a foreign service officer. The taxpayer was contemplating purchasing a home in Virginia to use during the time in which the taxpayer was given an assignment in the Washington, D.C. area. The department ruled that the purchase of a house in Virginia was not enough to establish a domicile in Virginia if the taxpayer maintained her California domicile and took no overt steps to establish a domicile in Virginia. In addition, the department stipulated that the taxpayer would be subject to Virginia individual income tax as an actual resident if she resided in Virginia for more than 183 days in any calendar year. Further, the ruling states the taxpayer would become subject to Virginia income tax as a nonresident if she received income from the rental of the house in Virginia while she was not residing in Virginia.
Pursuant to P.D. 87-161, the Taxpayers never established a domicile in Virginia. In 1988 and 1989, the Taxpayers were actual residents of Virginia. They properly filed individual income tax returns for those years because of their actual resident status. In 1990 and 1997, they filed part-year resident returns as they were not actual residents, but earned income while living in Virginia.
Based on the facts provided, it is clear that the Taxpayers did not take any overt steps to establish a domicile in Virginia, except to purchase two houses. The purchases are not enough on their own to establish a domicile in Virginia. During the years in question, the Taxpayers properly complied with their duty to file income taxes. Because they had no Virginia source income from 1991 through 1996 and were not domiciled in Virginia, the Taxpayers were not required to file an income tax return with Virginia. The filing of a part-year resident income tax return in 1997 was also proper. The Taxpayers should note that if they ever leave Virginia and earn positive income from the renting of either house, they will be required to file a non-resident income tax return since they will have Virginia source income.
Accordingly, the assessments have been abated. The department's records indicate that the Taxpayers' personal property tax refund for 1998 was withheld and applied to the assessments. The refund in the amount of ***** plus an appropriate amount of interest will be returned to you. If you have any questions regarding this determination, you may call ***** at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/20160G
Re: Sec. 58.1-1821 Application: Individual Income Tax
Dear***
This will reply to your letter in which you protest the assessment made against your clients, ***** (the "Taxpayers') for the 1991 through 1997 taxable years. I apologize for the delay in responding.
FACTS
The Taxpayers (a husband and wife) moved back to Virginia in 1997. The husband is employed as a foreign service officer by the United States (U.S.) government. Due to the nature of the husband's employment, the Taxpayers have lived in numerous locations within and without the U.S. during his service with the U.S. Department of State. The Taxpayers have maintained that they are and have always been domiciled in another state ("State A'). The Taxpayers are registered to vote and vote regularly in State A and hold drivers' licenses from State A. The husband's employment records indicate a State A address as the required destination for home leave after every long-term overseas assignment. State A also allows them to maintain their domiciliary status while they are out-of-state but exempts them from filing income tax returns as long as they meet certain requirements.
From May 1988 to July 1990, the Taxpayers lived in Virginia. The Taxpayers purchased a home in Virginia during this period. In addition, the Taxpayers had purchased rental property in Virginia in the 1970's. The Taxpayers filed Virginia individual income tax returns for 1988 and 1989 as actual residents and a part-year resident return for 1990. In July 1990, the husband's employer transferred the Taxpayers overseas. In 1997, the Taxpayers were transferred back to Virginia. During the interim period, the Taxpayers maintained ownership of the properties in Virginia which were rented to other parties. The Taxpayers did not file individual income tax returns with Virginia for 1991 through 1996 because the rental properties operated at a loss. They did file a part-year resident return in 1997.
Under audit, the department determined that the Taxpayers were domiciliary residents and assessed additional income tax for the 1991 through 1997 taxable years. The Taxpayers contest the adjustment and request that it be abated.
DETERMINATION
For purposes of income taxation there are two classes of residents in Virginia, (1) domiciliary residents and (2) actual residents. Domiciliary residents are those whose legal domicile is Virginia. Any person who is a domiciliary resident, who has not moved from Virginia with the intention of permanently residing outside of Virginia, is still a domiciliary resident even though he may be actually living somewhere else.
An actual resident is any individual who is not domiciled in this State, but who actually maintains a place of abode in Virginia for more than 183 days during the taxable year. An individual may remain an actual resident of Virginia until such time that he demonstrates the intent and actions necessary to establish his domicile in Virginia. A person's true intention must be determined with reference to all of the facts and circumstances of the particular case.
In Public Document (P.D.) 87-161, 6/2/87, copy enclosed, the department ruled on a set of circumstances very similar to the Taxpayers' case. In that ruling, the taxpayer was domiciled in California and employed as a foreign service officer. The taxpayer was contemplating purchasing a home in Virginia to use during the time in which the taxpayer was given an assignment in the Washington, D.C. area. The department ruled that the purchase of a house in Virginia was not enough to establish a domicile in Virginia if the taxpayer maintained her California domicile and took no overt steps to establish a domicile in Virginia. In addition, the department stipulated that the taxpayer would be subject to Virginia individual income tax as an actual resident if she resided in Virginia for more than 183 days in any calendar year. Further, the ruling states the taxpayer would become subject to Virginia income tax as a nonresident if she received income from the rental of the house in Virginia while she was not residing in Virginia.
Pursuant to P.D. 87-161, the Taxpayers never established a domicile in Virginia. In 1988 and 1989, the Taxpayers were actual residents of Virginia. They properly filed individual income tax returns for those years because of their actual resident status. In 1990 and 1997, they filed part-year resident returns as they were not actual residents, but earned income while living in Virginia.
Based on the facts provided, it is clear that the Taxpayers did not take any overt steps to establish a domicile in Virginia, except to purchase two houses. The purchases are not enough on their own to establish a domicile in Virginia. During the years in question, the Taxpayers properly complied with their duty to file income taxes. Because they had no Virginia source income from 1991 through 1996 and were not domiciled in Virginia, the Taxpayers were not required to file an income tax return with Virginia. The filing of a part-year resident income tax return in 1997 was also proper. The Taxpayers should note that if they ever leave Virginia and earn positive income from the renting of either house, they will be required to file a non-resident income tax return since they will have Virginia source income.
Accordingly, the assessments have been abated. The department's records indicate that the Taxpayers' personal property tax refund for 1998 was withheld and applied to the assessments. The refund in the amount of ***** plus an appropriate amount of interest will be returned to you. If you have any questions regarding this determination, you may call ***** at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/20160G
Rulings of the Tax Commissioner