Did keeping a Virginia apartment and driver's license prevent a taxpayer working and living abroad from changing his domicile?

Subject

Taxpayer abandoned his Virginia domicile and established domicile in Country A

Plain-English summary

Virginia found that the taxpayer abandoned his Virginia domicile and established domicile in Country A before 2004. He had permanent-residency status there, bought a home and vehicle, obtained a local driver's license, worked there, and spent no days in Virginia during the tax year. His wife later left her Virginia job and joined him abroad.

The taxpayer still had meaningful Virginia ties. His wife initially remained in a Virginia apartment, his federal information was mailed there, and he kept and renewed a Virginia driver's license. The Commissioner called the license renewal the strongest evidence of continuing Virginia domicile because Virginia law limited licenses to residents.

After weighing all circumstances, the foreign ties and actions were sufficient to prove both abandonment of Virginia domicile and acquisition of the new domicile. The 2004 individual-income-tax assessment was abated.

What this means for you

• Changing domicile requires both leaving the old permanent home without intent to return and establishing a new one with intent to remain.
• Employment, permanent-residency status, housing, vehicles, licenses, spouse location, and days present all matter.
• Retaining or renewing a Virginia driver's license is strong evidence of Virginia domicile, even if kept for convenience.
• No single fact controlled the result; the Department weighed the entire record.

Common questions

Q: Did the Virginia apartment keep the taxpayer domiciled in Virginia?
A: No. The taxpayer explained that his wife stayed there until his work stabilized and that the adult son later occupied it.

Q: Why was the Virginia driver's license important?
A: Virginia law restricted licenses to residents, so renewing one strongly indicated an intent to keep Virginia domicile.

Q: Was the taxpayer an actual Virginia resident in 2004?
A: No. The ruling states that he spent no days in Virginia, far below the more-than-183-day actual-resident test.

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. 08-144

Original ruling text

July 30, 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 and his wife moved to Virginia in January 2002 and leased an apartment. The Taxpayer and his wife obtained Virginia driver's licenses and the Taxpayer registered his cars in Virginia. In September 2002, the Taxpayer obtained employment in, and moved to * (Country A). In January 2003, the Taxpayer acquired Country A permanent residence status valid through 2017. The wife remained at the Virginia address and worked in Virginia. The Taxpayer spent no days in Virginia during 2004.

In April 2003, the Taxpayer purchased a vehicle in County A. Thereafter, he obtained a Country A driver's license. The Taxpayer, however, continued to maintain his Virginia driver's license, which he renewed in 2005.

In June 2004, the Taxpayer purchased a residence in Country A. In April 2005, the wife moved to Country A to reside with the Taxpayer. The Taxpayer's adult son continued to live in the Virginia residence. Upon the wife's move, one of the Virginia vehicles was sold and the other was transferred to the son.

In 2004, the Taxpayer and his wife filed a joint federal tax return and claimed a foreign tax credit. The wife filed a resident Virginia income tax return for the 2004 taxable year and a part-year Virginia income tax return for the 2005 taxable year. All of the Taxpayer's federal information returns for the 2004 taxable year were sent to the Virginia address. In October 2007, the Taxpayer and his wife moved back to their Virginia address.

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 Virginia resident.

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.

In this case, the Taxpayer performed a number actions that are consistent with ending his Virginia domicile and acquiring a domicile outside the Commonwealth. The Taxpayer acquired permanent residency status and purchased a residence in Country A. The Taxpayer purchased and registered a car in Country A and acquired a Country A driver's license. The Taxpayer's wife eventually terminated her employment in Virginia and moved to Country A to reside with the Taxpayer. The Taxpayer sold one vehicle remaining in Virginia and transferred the other into his son's name when his wife moved to Country A. The Taxpayer spent no days in Virginia during the taxable year at issue.

The Taxpayer also performed actions indicative of maintaining a Virginia domicile. The Taxpayer and his wife leased an apartment in Virginia to which they returned when they moved from Country A. The Taxpayer's federal tax information was sent to the Virginia address. The Taxpayer maintained a Virginia driver's license and renewed in 2005.

The Taxpayer indicates that the apartment was maintained in Virginia because the wife remained in Virginia until the Taxpayer's work situation stabilized. They continued to keep the apartment after the wife moved to County A because their adult son continued to live in it. The Taxpayer's federal return information was sent to the Virginia residence, but was forwarded to the Taxpayer in Country A.

Regarding the Virginia driver's license, the Taxpayer states he acquired the Virginia driver's license as a convenience for identification purposes in Country A. Virginia Code § 46.2-323.1 states, "No driver's license . . . shall be issued to any person who is not a Virginia resident." While renewing his driver's license may have been for purposes of convenience for the Taxpayer, doing so is a strong indicator of the Taxpayer's intent to maintain a Virginia domiciliary residence. See Public Document (P.D.) 02-149 (12/09/02).

The evidence clearly shows that the Taxpayer moved to Country A and took sufficient actions to establish a domiciliary residence there. The strongest evidence that would indicate the intent to maintain a Virginia domicile is the renewal of a Virginia driver's license. After carefully weighing all of the evidence, I find that the Taxpayer successfully abandoned his Virginia domicile and established domicile in Country A prior to the 2004 taxable year. Accordingly, the assessment of individual income tax for the 2004 taxable year 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