Did a federal employee remain domiciled in another state after settling with his family and conducting his affairs in Virginia?

Subject

Federal employee's conduct established Virginia domicile

Plain-English summary

Virginia found the federal employee domiciled in Virginia for 2009-2011 because his conduct outweighed his declaration that State A remained his permanent home. He had not lived in State A since 1999 and provided no evidence of continuing domiciliary activity there.

By contrast, he lived with his family in a permanent Virginia home, held and renewed a Virginia driver's license, registered vehicles and to vote in Virginia, and filed Virginia resident income-tax returns. After leaving military service in 2001, he accepted permanent federal employment and continued living in Virginia rather than returning to State A.

The taxpayer's argument that he spent fewer than 183 days in Virginia addressed actual residency, not domiciliary residency. A Virginia domiciliary can remain taxable while working elsewhere unless Virginia domicile is abandoned and a new domicile is established through both presence and intent.

What this means for you

• An old declaration of domicile is weak when later conduct points elsewhere.
• Federal employment outside Virginia does not preserve another domicile automatically.
• The 183-day test is separate from domicile.
• Family residence, licenses, vehicles, voting, returns, and other state ties should be evaluated together.

Citations and references

• Va. Code § 58.1-302.
• Sweeney v. District of Columbia, 113 F.2d 25 (D.C. Cir. 1940), discussed in the ruling.
• District of Columbia v. DeHart, 314 U.S. 441 (1941), discussed in the ruling.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 14-104

Original ruling text

July 3, 2014

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 * (the "Taxpayer"), for the taxable years ended December 31, 2009 through 2011. I apologize for the delay in responding to your appeal.

FACTS

The Taxpayer, an employee of the federal government in *, filed Virginia resident individual income tax returns for 2009 through 2011 taxable years. The Taxpayer claimed a subtraction for pension income. Under review, the Department disallowed the subtractions and issued assessments.

In response, the Taxpayer filed a Virginia Special Nonresident Claim for Individual Income Tax Withheld (Form 763-S), indicating he was a domiciliary resident

of * (State A). In considering this request, the Department found that the

Taxpayer had a number of connections with Virginia and determined he was a domiciliary resident of Virginia. Accordingly, the Taxpayer's request for refund was denied. The Taxpayer filed an appeal, contending he was not an actual or domiciliary resident of Virginia during the taxable years at issue.

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 another country who has not abandoned his Virginia residency continues to be subject to Virginia taxation.

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 domicile. The Department determines a taxpayer's intent through the information provided.

The Taxpayer claims that he made a declaration of domicile in State A in 1985 and has never intended to change his domicile. Information provided by the Taxpayer, however, indicates he has not resided in State A since 1999. Furthermore, the Taxpayer has provided no documentation to show he has conducted any activities in State A indicative of establishing or maintaining domicile there. Other than his declaration, the Taxpayer's actions indicate he intended to abandon his State A domicile sometime shortly after 1999.

The Taxpayer has performed numerous actions indicating an intent to establish domicile in Virginia. The Taxpayer resided at a permanent place of abode in Virginia with his family. The Virginia home is within easy commuting distance of the home office of his employer in State A. The Taxpayer obtained and has renewed a Virginia driver's license and has maintained motor vehicles registered in Virginia. The Taxpayer registered to vote in Virginia and filed Virginia income tax returns as a resident. Such actions, coupled with the lack of connections with any other jurisdiction, generally show an intent to establish domicile in Virginia.

The Taxpayer believes the domiciliary residence of federal government employees cannot be changed by mere compliance with Virginia laws, such as obtaining a Virginia driver's license and maintaining motor vehicle registrations. The Taxpayer further argues that his family's residency status is not germane to his domiciliary status. In addition, the Taxpayer asserts his employer erroneously withheld Virginia income tax in 2009, 2010, and 2011, and he did not reside in Virginia for more than 183 days.

The Court of Appeals for the District of Columbia has ruled that when a taxpayer remains in the District for the purpose of fulfilling service for the federal government, he may retain his domicile until such service terminates, unless he gives clear evidence of his intention to change. See Sweeney v. District of Columbia , 72 App.D.C.30, 113 F2d 25 (1940). In this case, the Taxpayer left military service in 2001 while residing in Virginia. Instead of returning to his domiciliary residence in State A, the Taxpayer accepted permanent employment with the federal government in the District and continued to reside in Virginia.

In District of Columbia v. DeHart and Murphy 314 U.S. 441, 62 S.Ct.303, the United States Supreme Court ruled that a taxpayer's intention must be given full consideration but such intention may lack persuasiveness when compared to other declarations and inconsistent acts. Thus, when considering an individual's intent for the establishment of their permanent domiciliary residence, the Department must consider all the available evidence.

As indicated above, the Taxpayer's declaration of intent is the only evidence connecting him with State A. Other than his employment, the Taxpayer has settled in Virginia and conducted his affairs as a Virginia resident. Based on the evidence provided, the Department finds that the Taxpayer was a domiciliary resident of Virginia for all taxable years at issue. As such, the Department correctly denied the Taxpayer's request for refund, and the assessments for the 2009 through 2011 taxable years are upheld. Updated bills with interest accrued to date will be issued shortly.

The Code of Virginia sections cited are available on-line at www.tax.virginia.gov in the Laws, Rules & Decisions section of the Department's web site. If you have any questions regarding this ruling, you may contact * in the Office of Tax Policy, Appeals and Rulings, at ***.

Sincerely,

Craig M. Burns

Tax Commissioner

AR/1-5307724004.D