Could a taxpayer abate Virginia's 2009 assessment by producing only a State A return showing residence there for the first six months?

Subject

Six-month out-of-state return did not prove abandonment of Virginia domicile

Plain-English summary

Virginia upheld the 2009 assessment because the taxpayer did not provide enough evidence to determine her domicile or correct tax liability. Her State A return showed residence there for the first six months of 2009, but it did not establish that she had abandoned Virginia domicile and acquired a new permanent home.

After receiving IRS information, the Department requested additional records. The taxpayer did not respond fully, including after a March 7, 2014 request focused on domicile. Virginia could therefore estimate the tax from information in its possession, and the assessment remained presumed correct unless the taxpayer disproved it.

The ruling gave her one final 60-day opportunity to provide sufficient domicile evidence. Without it, the assessment would become immediately due and payable. The ruling also warned that willfully withholding necessary information can limit later court relief.

What this means for you

• A part-year return from another state does not alone prove a change of domicile.
• Show both abandonment of Virginia and acquisition of the new domicile through presence and intent.
• Respond completely to Department information requests.
• An estimated assessment remains enforceable until the taxpayer produces evidence showing it is wrong.

Citations and references

• Va. Code §§ 58.1-302, 58.1-111, 58.1-205, and 58.1-1826.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 14-108

Original ruling text

July 16, 2014

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 year ended December 31, 2009. I apologize for the delay in responding to your appeal.

FACTS

The Department received information from the Internal Revenue Service (IRS) indicating that the Taxpayer may have been required to file a Virginia income tax return for the 2009 taxable year. The Department requested additional information from the Taxpayer in order to determine if her income was taxable in Virginia. When no response was received, the Department issued an assessment. The Taxpayer appeals the assessment, contending she was a resident of * (State A) during the 2009 taxable year.

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 provided a copy of her State A income tax return. This return indicates she resided in State A for the first six months of 2009. By letter dated March 7, 2014, the Department requested the Taxpayer to provide additional documentation concerning her domiciliary residence.

When a taxpayer fails or refuses to provide documentation sufficient to calculate an accurate liability, Va. Code § 58.1-111 permits the Department to make an estimate of the amount of taxes due from any information in its possession and issue an assessment to such taxpayer. To date, the Taxpayer has failed to provide sufficient documentation on which the Department could make an informed decision concerning her domiciliary residence or her tax liability.

Further, under the provisions of Va. Code § 58.1-205 any proceeding relating to the interpretation of the tax laws of Virginia, an "assessment of a tax by the Department shall be deemed prima facie correct." As such, the burden of proof is on the Taxpayer to show she was not subject to income tax in Virginia. In addition, Va. Code § 58.1­ - 1826 precludes a court from granting relief to taxpayers seeking correction of erroneous state tax assessments in cases in which the assessment was attributable to a taxpayer's willful failure or refusal to provide the Department with necessary information as required by law.

Based on the applicable law cited above and the information presented, there is no basis to abate the Department's assessment for the 2009 taxable year. Accordingly, the assessment is upheld and remains due and payable.

I will, however, grant the Taxpayer one final opportunity to provide sufficient evidence regarding her domicile for the 2009 taxable year. Such evidence should be provided within 60 days from the date of this letter to: Virginia Department of Taxation, Appeals and Rulings, Attention: *, Post Office Box 27203, Richmond, Virginia 23261-7203. If the requested information is not provided within the allotted time, the assessment will become immediately due and payable.

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

Sincerely,

Craig M. Burns

Tax Commissioner

AR/1-53360459028.B