Did moving to another state and taking a foreign assignment end Virginia domicile when the taxpayer kept his family, home, vehicles, voting, and license there?

Subject

Foreign assignment and rented room did not overcome continuing Virginia domicile

Plain-English summary

Virginia found that the taxpayer did not abandon his Commonwealth domicile during 2006. He moved to another state in June 2005, rented a room, declared that state as his employer home of record, and later took a foreign assignment.

Those facts showed movement toward a new domicile, but substantial Virginia ties remained. His spouse and children lived in the Virginia home, and he retained Virginia-registered vehicles, voter registration, and a Virginia driver's license that he renewed in October 2009.

The taxpayer said he rarely visited because he was separated from his wife and that deployment prevented him from completing the transition. He provided no separation agreement or other proof of legal separation, filed no 2006 income-tax return in the other state, and employer information showed a foreign travel date of December 12, 2006.

On the complete record, Virginia held that he remained a domiciliary resident. He was directed to file a 2006 resident return, and later returns for years in which the domicile continued, within 45 days so the assessment could reflect allowable adjustments.

What this means for you

• A rented room, employer home-of-record statement, and work assignment may not establish a new domicile by themselves.
• A spouse and children in the Virginia home, vehicles, voting, and licensing strongly support continuing domicile.
• Claims of marital separation should be documented.
• Filing and other-state records help show whether a new permanent home was actually established.

Common questions

Did the taxpayer have ties to another state?

Yes. He rented a room there, worked there, and listed it as his employer home of record.

What Virginia ties remained?

His family home, spouse and children, vehicles, voter registration, and driver's license.

What did Virginia require?

A 2006 resident return within 45 days, plus later returns for years of continuing domicile.

Citations and references

• Va. Code §§ 58.1-302 and 46.2-323.1.
• Virginia Public Documents 00-151 and 02-149.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 10-52

Original ruling text

May 7, 2010

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 2006 taxable year. I apologize for the delay in responding to your letter.

FACTS

The Department received information from the Internal Revenue Service (IRS) that the Taxpayer received wages that may be subject to Virginia income tax. The Department requested information from the Taxpayer to determine his Virginia taxable income. When no response was received, the Department issued an assessment for the 2006 taxable year.

The Taxpayer appeals the assessment, stating that he moved to the * (State A) in June 2005. He was then assigned to a foreign country by his employer. The Taxpayer also asserts that he returned to the State A after the completion of his foreign assignment.

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. For a person to change domiciliary residency to another state, that person must intend to abandon his Virginia domicile with no intention of returning to Virginia. Concurrently, that person must acquire a new domicile where that person is physically present with the intention to remain there permanently or indefinitely. 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. A Virginia domiciliary resident, therefore, working in other parts of the country or in another country who has not abandoned his Virginia residency continues to be subject to Virginia taxation. Additionally, a person who is not a domiciliary resident of Virginia, but who stays in Virginia for an aggregate of more than 183 days is also subject to Virginia taxation.

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 a taxpayer has the burden of proving that he or she has abandoned his or her Virginia domicile. If the information is inadequate to meet his or her burden, the Commissioner must conclude that he or she intended to remain indefinitely in Virginia.

The Taxpayer performed several activities indicating a change of domicile to State A. He moved to State A in June 2005, where he rented a room as his place of abode. He declared State A to be his home of record with his employer and spent most of his time in State A, rarely returning to Virginia to visit his family. The Taxpayer states he did not visit his family because he was separated from his wife during this time.

The Taxpayer also performed a number actions consistent with maintaining his Virginia domicile. He maintained a home within Virginia where his spouse and children resided while he was in State A and abroad. The Taxpayer was registered to vote and maintained motor vehicles registered in Virginia. He continued to hold a Virginia driver's license, which he renewed in October 2009.

Virginia Code § 46.2-323.1 states, "No driver's license ...shall be issued to any person who is not a Virginia resident. This section also states that every person applying for a driver's license must execute and furnish to the Commissioner of the Department of Motor Vehicles a statement that certifies that the applicant is a Virginia resident. A person providing a false statement is subject to punishment under the laws of the Commonwealth. The Department has also found that an individual may successfully establish a domicile outside Virginia even if they retain a driver's license. See Public Document (P.D.) 00-151 (8/18/2000). However, obtaining or renewing a Virginia driver's license is considered to be a strong indicator of intent to retain domiciliary residence in Virginia. See P.D. 02-149 (12/09/2002)

The Taxpayer did not file an income tax return in State A for the 2006 taxable year. He states he was not required to file because he moved out of the country. The Taxpayer affirms he did not have sufficient time to finalize his transition from Virginia to State A due to his deployment in October 2005. Information provided by his employer indicates a travel date of December 12, 2006.

The Taxpayer also asserts that he spent little time in Virginia during the taxable year at issue because he was separated from his wife, and he renewed his Virginia driver's license only after the couple reconciled in 2009. The Taxpayer, however, has failed to produce a separation agreement or any other evidence that he was legally separated from his wife during the 2006 taxable year.

After careful consideration of all the evidence, I conclude that the Taxpayer failed to abandon his Virginia domicile during the 2006 taxable year. Accordingly, the Taxpayer is required to file a Virginia individual income tax return for the 2006 taxable year.

Inasmuch as the Department's assessments were based on the information available, the Taxpayer should file a Virginia income tax return in order to reflect any allowable adjustments for the 2006 taxable year. In addition, the Taxpayer should file returns for subsequent taxable years in which he retained his Virginia domicile. The returns should be sent to: Virginia Department of Taxation, Appeals and Rulings, P.O. Box 27203, Richmond, Virginia 23261-7203, Attn: *, within 45 days from the date of this letter. If the 2006 return is not filed within the allotted time, the assessment will be considered correct as issued and collection action will resume.

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

Sincerely,

Janie E. Bowen

Tax Commissioner

AR/1-3752725310.D