Did owning a Virginia house for his parents and obtaining a Virginia license make a long-term overseas worker a Virginia resident?

Subject

The evidence shows that the Taxpayer spent very little time in Virginia

Plain-English summary

Virginia found that the taxpayer was neither a domiciliary nor an actual resident in 2004. He had lived and worked abroad since 1995 with his wife and children and spent very little time in Virginia.

His Virginia house, tax mail, and driver's license pointed the other way. But his parents occupied the house without rent, he did not use it as a personal residence, and the mail arrangement was for convenience. He later redirected the mail abroad and surrendered the Virginia license.

Although obtaining the license was a strong domicile indicator, the preponderance of all evidence favored foreign residence. The assessment was abated.

What this means for you

• Property ownership alone does not establish domicile when the taxpayer does not live there.
• A Virginia driver's license is strong but not conclusive evidence.
• Family residence, employment, days present, and actual use of property matter.
• Reducing inconsistent ties can help document intent, though all facts are weighed.

Common questions

Q: Did the Virginia house make him a resident?
A: No. His parents occupied it, and the evidence showed he did not use it as his own residence.

Q: Why did the license not control?
A: It was outweighed by long-term foreign family residence, employment, and minimal Virginia presence.

Citations and references

• Va. Code §§ 58.1-302 and 46.2-323.1.
• P.D. 02-149 (Dec. 9, 2002).

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 08-125

Original ruling text

June 26, 2008

Re: § 58.1-1821 Application: Individual Income Tax

Dear *:

This will reply 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, 2004.

FACTS

The Taxpayer has resided in * (Country A) and several other foreign countries since 1995 pursuant to his job requirements. In January 2003, the Taxpayer purchased residential property in Virginia. The Taxpayer's federal tax information returns were sent to this address. In July 2004, the Taxpayer acquired a Virginia driver's license.

Under audit for the 2004 taxable year, the Department determined that the Taxpayer was a resident of Virginia and assessed additional tax and interest. The Taxpayer contests the assessment, asserting that he was not a resident of Virginia.

DETERMINATION

Two classes of residents, a domiciliary resident and an actual resident, are set forth in Va. Code § 58.1-302. The domiciliary residence of a person means the permanent place of residence of a taxpayer and the place to which he intends to return even though he may actually reside elsewhere. 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.

In order to change from one legal domicile to another legal 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. The burden of proving that the domicile has been changed lies with the person alleging the change.

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 Department determines a taxpayer's intent through the information provided. The taxpayer has the burden of proving that he or she has abandoned his or her original domicile. If the information is inadequate to meet this burden, the Commissioner must conclude that the taxpayer did intend to return to his or her original domicile.

The Taxpayer has performed actions indicative of acquiring a Virginia domicile. The Taxpayer purchased residential property in Virginia and had his federal information sent to it. He also acquired a Virginia driver's license using his Virginia residence as his residential address.

The Taxpayer states that the Virginia property was purchased for investment purposes. It has been the Department's experience that residential investment property is usually leased by an investor in order to offset expenses and receive a return on investment. In this case, however, the evidence shows that the Taxpayer's parents resided in the residence without paying rent. The parents did pay for utilities and maintenance connected with the home. The evidence indicates the Taxpayer did not use the Virginia house as a personal residence.

The Taxpayer did travel into Virginia during the year to visit his parents. Under these circumstances, the Taxpayer found it convenient to have federal tax information to be sent to the Virginia address. The Taxpayer has subsequently arranged to have the federal information returns sent directly to his Country A address.

Regarding the Virginia driver's license, the Taxpayer states that he acquired the Virginia driver's license as a convenience for when he visits the United States. Virginia Code § 46.2-323.1 states, "No driver's license . . . shall be issued to any person who is not a Virginia resident." The Department has ruled that obtaining or renewing a Virginia licenses is a strong indicator of an individual's intent to be a domiciliary resident of Virginia. See Public Document (P.D.) 02-149 (12/09/2002). The Taxpayer argues that he did not intend to establish Virginia domicile by obtaining a driver's license and surrendered it in December 2007 after being contacted by the Department.

The evidence shows that the Taxpayer spent very little time in Virginia, established residency in Country A with his wife and children, and was employed outside of Virginia. The evidence further shows that, upon being contacted by the Department, the Taxpayer has taken further steps to reduce his connections with Virginia. Based on preponderance of evidence, I find that the Taxpayer was neither a domiciliary nor an actual resident of Virginia for the 2004 taxable year. Accordingly, the assessment has been abated.

The Code of Virginia sections and public document cited are available on-line at www.tax.virginia.gov in the Tax Policy Library section of the Department's web site. If you have any questions regarding this determination, you may contact * in the Department's Office of Tax Policy, Appeals and Rulings, at ***.

Sincerely,

Janie E. Bowen

Tax Commissioner

AR/1-2052509212.B