Did five months living and working in another state make a Virginia domiciliary resident a part-year resident for 2005?

Subject

Temporary assignment did not change domicile, but other-state tax credit applied

Plain-English summary

Virginia treated the taxpayer as a full-year resident but allowed a credit for tax paid to the state where she temporarily worked. She lived and worked outside Virginia from January through May 2005 and initially reported only each state's local wages on its return.

She had become a Virginia domiciliary in 2001, described the other-state move as temporary, lived with relatives there, and returned to Virginia after the assignment. She also spent 237 days in Virginia during 2005. Those facts did not show abandonment of Virginia and acquisition of a new permanent domicile.

As a full-year resident, she remained subject to Virginia tax on her income. Her other-state return and W-2 nevertheless documented wages and withholding there, so § 58.1-332(A) allowed a resident credit. Virginia directed an assessment adjustment, with a revised bill or refund depending on the calculation.

What this means for you

• A temporary job assignment usually does not change domicile without intent and conduct showing a permanent move.
• Living with relatives and returning after the assignment supported continued Virginia domicile here.
• Day count can independently support actual residency.
• Full-year residents can still receive a credit for qualifying income tax paid elsewhere.

Common questions

How long was the out-of-state assignment?

January through May 2005.

How many days did the taxpayer spend in Virginia?

237 days.

Was any relief allowed?

Yes. Virginia allowed the other-state tax credit and adjusted the assessment.

Citations and references

• Va. Code §§ 58.1-302 and 58.1-332(A).

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 10-42

Original ruling text

April 8, 2010

Re: § 58.1-1821 Appeal: 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 2005 taxable year. I apologize for the delay in responding to your appeal.

FACTS

The Taxpayer, a Virginia domiciliary resident, lived and worked in * (State A) from January to May 2005. The Taxpayer filed both Virginia and State A individual income tax returns reporting only the income earned respectively in each state.

Based on information provided by the Internal Revenue Service (IRS), the Department adjusted the Taxpayer's 2005 individual income tax return, and issued an assessment. The Taxpayer contends that the Virginia individual income tax return is correct as filed due to part-year residency in Virginia.

DETERMINATION

Residency

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 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 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 became a domiciliary resident of Virginia in 2001. During the course of the review of this case, she indicated that she had moved to State A temporarily for employment purposes and lived with relatives. After the completion of her State A assignment, she returned to Virginia. Also, the Taxpayer spent 237 days in Virginia in 2005. Based on the information provided, the Taxpayer was a full year resident of Virginia for the 2005 taxable year.

Credit for Taxes Paid to Other States

Virginia Code § 58.1-332(A) allows Virginia residents a credit on their Virginia return for income taxes paid to another state provided the income is either earned or business income. The Taxpayer has provided a copy of her 2005 State A return, as well as the 2005 State A Form W-2 evidencing State A wages earned and income tax withheld. Based on this information, the Taxpayer is eligible for an out-of-state tax credit for the 2005 taxable year.

Conclusion

The assessment will be adjusted in accordance with this determination. If any additional tax liability remains, a revised assessment will be issued. If the adjustment results in an overpayment, a refund will be issued.

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 website. If you have any questions concerning this determination, you may contact * in the Office of Tax Policy, Appeals and Rulings, at ***.

Sincerely,

Janie E. Bowen

Tax Commissioner

AR/1-3551334517.C