Did a taxpayer abandon Virginia domicile by taking long-term foreign jobs even though his wife, driver's license, vehicle, and voting ties remained in Virginia?

Subject

Taxpayer performed a number of actions that support a change in domicile

Plain-English summary

Virginia found that the taxpayer abandoned his Virginia domicile in 2002 and abated the 2003-2005 assessments. His long-term foreign employment and life abroad outweighed several continuing Virginia ties.

The taxpayer first accepted an approximately ten-year position in Country A, then moved to indefinite employment in Country B and later continued working in Country C. He established residences abroad, obtained foreign driver's licenses in Countries B and C, purchased and registered a vehicle in Country C, and began a successful Country A citizenship process.

His wife remained in Virginia because of joint-custody restrictions involving her daughter. The taxpayer also retained and renewed a Virginia driver's license, jointly owned a Virginia vehicle used by his wife and during visits, received information returns at the Virginia address, and voted once in a 2006 primary.

The Commissioner considered the license renewal and vote particularly concerning but accepted the taxpayer's explanations in light of the full record. His foreign moves were not temporary assignments followed by a return to Virginia, and the Department found an intent to abandon Virginia domicile beginning with 2002.

What this means for you

• No single domicile fact controls; Virginia weighs the entire pattern of conduct and intent.
• Long-term or indefinite foreign employment and established homes abroad can support a change in domicile.
• A spouse remaining in Virginia is important but may be explained by independent family obligations.
• Renewing a Virginia license or voting after moving can strongly undermine a domicile claim, even though those facts were not decisive here.

Common questions

Did the taxpayer's wife staying in Virginia preserve his domicile? No. The Department accepted that she remained because her daughter was legally required to stay under the custody arrangement.

Did his Virginia vote and renewed license make him a resident? Not on this record. The Commissioner treated them as concerning but insufficient against the broader foreign-life evidence.

What years were abated? The 2003, 2004, and 2005 assessments.

Citations and references

• Va. Code § 58.1-302.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 08-31

Original ruling text

April 2, 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 assessments issued to your client, * (the "Taxpayer"), for the taxable years ended December 31, 2003 through 2005.

FACTS

The Taxpayer and his wife were Virginia residents through the 2001 taxable year. In January 2002, the Taxpayer accepted a position with a corporation located in * (Country A). The contract was for a period of approximately 10 years until the Taxpayer's 60th birthday, which was the age of mandatory retirement. The Taxpayer leased a townhouse in Country A and invested money in furnishing the Country A townhouse. The Taxpayer did not obtain a Country A driver's license.

In 2004, the Taxpayer took a position with a corporation located in * (Country B) after the corporation in Country A was reorganized, and his job responsibilities were diminished. The employment contract with the Country B corporation was for an indefinite time period. The Taxpayer leased a residence for a three-year period. He incurred expenses to refurnish the Country B residence. The Taxpayer did obtain a Country B driver's license.

In June 2006, the Taxpayer's employment with the Country B company was terminated and he was hired by a corporation located in * (Country C). He obtained a Country C driver's license. The Taxpayer purchased and registered a car in Country C. The Taxpayer continues to live and work in Country C.

During the years at issue, the Taxpayer paid Country A income tax even though he resided in Country B and Country C. In January 2005, the Taxpayer commenced proceedings to become a citizen of Country A. In March 2007, the Taxpayer became a citizen of Country A.

During the taxable years at issue, the Taxpayer's wife continued to reside in Virginia. The wife maintained joint custody of her child with her ex-husband, who also resided in Virginia. In August 2003, the Virginia home that the Taxpayer and his wife jointly owned was deeded to a trust in which the Taxpayer and his wife were the trustees. The wife was the sole beneficiary of the trust. Mortgage interest was deducted on the Taxpayer's joint federal income tax return.

The Taxpayer also maintained a Virginia driver's license that was renewed in 2006. The Taxpayer jointly owned a vehicle with his wife that was registered and garaged in Virginia. The Taxpayer's third-party information returns were sent to the Virginia address. The Taxpayer claimed a foreign tax credit on his federal income tax return as a United States citizen. The Taxpayer was registered to vote and did vote in Virginia in June 2006.

The Taxpayer contends that he intended to move to Country A permanently, and only moved to Country B and Country C to pursue job opportunities. The Taxpayer avers that his wife remained in Virginia because she had joint custody of her daughter with her ex-husband. As such, the Taxpayer contends that he successfully terminated his Virginia domicile in 2002 when he accepted employment in Country A that required him to move to Country A.

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 an individual or the place to which he intends to return even though he may actually reside elsewhere. For an individual to change his domiciliary residency to another state, that individual must intend to abandon his Virginia domicile with no intention of returning to Virginia. Concurrently, that individual must acquire a new domicile, where that individual is physically present with the intention to remain there permanently or indefinitely. An actual resident of Virginia means an individual who, for an aggregate of more than 183 days of the taxable year, maintains a place of abode within Virginia, whether domiciled in Virginia or not.

In determining domicile, consideration may be given to an 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 an individual's domicile. An individual'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 domiciliary residency.

A review of the evidence indicates that the Taxpayer performed a number of actions that support a change in domicile. The Taxpayer worked in foreign countries under contracts that either were for an indefinite period or for a period through a mandatory retirement age. When the Taxpayer looked for new employment following a change in responsibilities for his job in Country A, he did not return to Virginia. While in the foreign countries, the Taxpayer established permanent places of abode. While residing in Country C, the Taxpayer acquired an automobile and a Country C driver's license. In addition, the Taxpayer commenced the procedures to become a citizen of Country A, which was granted in March 2007. Also, the Taxpayer continued to pay Country A income tax while he resided in Countries B and C.

The Taxpayer retained a number of contacts with Virginia after he moved to Country A in 2002 to accept employment. However, the evidence provided explains why each one of those contacts remained. The Taxpayer's wife remained in Virginia because she shared custody of her daughter with her ex-husband, who resided in Virginia. The daughter was legally required to remain in Virginia until her 18th birthday, at which time the wife could join the Taxpayer in Country C. The Taxpayer jointly owned a car in Virginia, but that car was clearly for the wife's use or for the Taxpayer's use when he visited Virginia.

Two contacts with Virginia retained by the Taxpayer are of particular concern. The Taxpayer maintained a Virginia driver's license that he renewed in 2006, and he voted in June 2006, after he moved from Virginia. The Taxpayer states that he maintained his Virginia driver's license as a convenience for the times he visited his wife in Virginia. The Taxpayer voted in a primary election at the request of his wife in order to experience a computer-based voting machine. The Taxpayer contends that in light of the other facts and circumstances in this case, these actions are not sufficient to demonstrate that the Taxpayer did not intend to abandon his Virginia domicile. I agree.

After considering all the evidence in this case, I find that the Taxpayer did intend to abandon his Virginia domicile beginning with the taxable year ended December 31, 2002. Accordingly, the assessments issued to the Taxpayer for the taxable years ended December 31, 2003 through 2005 will be abated.

The Code of Virginia sections 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/1-1477191481B