Did a federal employee change domicile when his paid education program moved him from Virginia to college and work assignments in two other states?

Subject

Paid education and work assignments established a new domicile outside Virginia

Plain-English summary

Virginia found that a federal employee changed domicile to another state in August 2004 when he entered an employer-sponsored college program. The program paid him full time while he attended college in one state and served his employer in another. Employer records showed that he spent most of his time outside Virginia and very little time in the Commonwealth.

The taxpayer kept a Virginia driver's license, voter registration, and his mother's Virginia address for tax documents. He explained that frequent transitions between the college and work states made the family address convenient and that he surrendered the license and registration after the Department examination began.

He also filed resident income tax returns in the college state and a Virginia part-year return for 2004. Weighing all the evidence, Virginia found the domicile change occurred in August 2004, adjusted the 2004 assessment, and abated the 2005 and 2006 assessments in full.

What this means for you

• Employer-directed education and work assignments can support a domicile change when the full conduct shows a new permanent or indefinite base.
• Physical presence, employer records, state resident returns, and limited Virginia time supported the taxpayer here.
• Retained Virginia licenses, voter registration, and mailing addresses remain strong contrary evidence but are not always decisive.
• The year of the move may require part-year rather than full-year resident treatment.

Common questions

Was the taxpayer merely attending school?

The college program was part of his federal employment compensation, and he also served his employer in another state.

Did the Virginia driver's license prevent the change?

No. It weighed against him, but the complete evidence supported the new domicile.

What was the final tax result?

Virginia processed the 2004 part-year return and adjusted that assessment, then abated the 2005 and 2006 assessments in full.

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. 10-95

Original ruling text

June 4, 2010

Re: § 58.1-1821 Application: Individual Income Tax

Dear *:

This will respond to your letter in which you seek correction of the individual income tax assessment issued to * (the "Taxpayer") for the taxable years ended December 31, 2004 through 2006.

FACTS

The Taxpayer, a Virginia resident, accepted a position with the federal government that was based in * (State A). He was placed in a special education program that allowed him to complete his college studies while receiving full time pay from the government. Under this program, the Taxpayer enrolled at a college in *** (State B) in August 2004. For the remainder of 2004 and all of 2005 and 2006, the Taxpayer lived in State B while pursuing a college degree and lived in State A when working for his employer.

Information obtained from the Internal Revenue Service showed the Taxpayer used a Virginia address to receive third-party information returns for the taxable years at issue. Under investigation, the Department found that the Taxpayer held a Virginia driver's license and was registered to vote in Virginia. The Department concluded that the Taxpayer had not abandoned his Virginia domicile for the 2004 through 2006 taxable years and issued assessments.

The Taxpayer contends that he abandoned his Virginia domicile when he was assigned to State B by his employer. He requests the assessments be abated.

DETERMINATION

Two classes of residents, a domiciliary resident and an actual resident, are set forth in Va. Code § 58.1-302. Domiciliary residence means the permanent place of residence of a taxpayer or the place to which he or she intends to return even though they may actually reside elsewhere. For an individual to change domiciliary residency to another state, that individual must intend to abandon their Virginia domicile with no intention of returning to Virginia. Concurrently, that individual 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 an individual who, for an aggregate of more than 183 days of the taxable year, maintained a place of abode within Virginia. A Virginia domiciliary resident, therefore, working in other parts of the country who has not abandoned his Virginia residency continues to be subject to Virginia taxation. Additionally, an individual 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 as a resident.

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.

The Taxpayer performed several actions that are consistent with retaining a Virginia domicile. He received tax information at a Virginia address, and he maintained a Virginia driver's license and voter registration in Virginia. He renewed the Virginia driver's license while living in State A.

With regard to the Virginia driver's license, Va. Code § 46.2-323.1 states, "No driver's license . . . shall be issued to any person who is not a Virginia resident." In fact, this section 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 found that an individual may successfully establish a domicile outside Virginia even if they retain a Virginia 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 residency in Virginia. See P.D. 02-149 (12/09/2002).

The Taxpayer states he was unaware that he should have surrendered his voter's registration and driver's license but surrendered both items upon notification that he was under examination by the Department. The Taxpayer also argues that he used his mother's address for information returns because he was in transition many times during the year between State A and State B.

The Taxpayer also performed several actions indicative of obtaining domicile in State B. He was employed in State B and spent the majority of his time there after leaving Virginia, according to documents provided by his employer. The Taxpayer spent very little time in Virginia during the taxable years at issue. He filed State B income tax returns as a resident. Once notified by the Department, he filed a part-year income tax return for the time spent in Virginia during the 2004 taxable year.

The Department acknowledges that a chance in domicile occurs as part of a process in which no single factor is determinative. A person's true intention must be determined with reference to all of the facts and circumstances of the particular case. In this case, the Taxpayer left Virginia to pursue an employment opportunity that included a college education in its compensation package. He served in State A and State B at the direction of his employer during the taxable years at issue.

Based on the preponderance of evidence, I find that the Taxpayer successfully changed his domiciliary residence to State B in August 2004. The 2004 part-year return will be processed and the assessment adjusted accordingly. The 2005 and 2006 assessments will be abated in full.

The Code of Virginia sections and public documents cited, along with other reference documents, 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 about this determination, you may contact * in the Office of Tax Policy, Appeals and Rulings, at ***.

Sincerely,

Janie E. Bowen

Tax Commissioner

AR/1-3551178601.D