Did living and working in another state for 2012 end Virginia domicile when the taxpayer kept a Virginia license and voter registration?

Subject

Taxpayer was a Virginia domiciliary resident for the taxable year at issue and is liable for Virginia income tax on all income earned during the taxable year.

Plain-English summary

A Virginia resident stayed with a friend in another state beginning in January 2012, leased a residence there in May, worked for two employers there, and registered her vehicle there. She moved back to Virginia in 2013.

She retained her Virginia driver's license and voter registration throughout the move. Virginia viewed those as significant continuing domicile ties and found that living and working elsewhere for the year did not prove an intent to abandon Virginia permanently and remain in the other state indefinitely.

As a Virginia domiciliary resident whose income exceeded the filing threshold, she owed Virginia tax on all 2012 income even though it was earned outside Virginia. The refund request was denied.

Citations and references

• Va. Code §§ 58.1-302, 58.1-341, and 58.1-321.
• Va. Code § 46.2-323.1.
• Robert H. Talley v. Commonwealth, 127 Va. 516, 103 S.E. 612 (1920).
• State-Planters Bank v. Commonwealth, 174 Va. 289, 6 S.E.2d 629 (1940).
• P.D. 00-151, 02-149, and 14-33.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 16-100

Original ruling text

May 20, 2016

Re: § 58.1-1821 Application: Individual Income Tax

Dear *:

This will reply to your letter in which you seek a refund of the individual income tax paid by * (the “Taxpayer”) for the taxable year ended December 31, 2012.

FACTS

The Taxpayer, a Virginia resident, began staying with a family friend in * ( State A) in January 2012. In May 2012, she leased a residence for the remainder of the year. The Taxpayer registered her motor vehicle in State A, but retained her Virginia Driver's license and voter registration. She worked for two different employers in State A during 2012 and moved back to Virginia in 2013.

The Taxpayer did not file a 2012 Virginia income tax return. Under audit, the Department determined the Taxpayer was a domiciliary resident of Virginia and assessed tax and interest. The Taxpayer appeals, contending she was a resident of State A and had no Virginia source income during the taxable year at issue.

DETERMINATION

Domicile

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 reside elsewhere. For a person to change domiciliary residency to another state or country, 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 an 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 an 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, situs of real or 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 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 abandoned his or her Virginia domicile. If the information is inadequate to meet this burden, the Department must conclude that he or she intended to remain indefinitely in Virginia.

The Taxpayer was a Virginia domiciliary resident prior to her move to State A. When she first moved to State A, she resided with a family friend for five months before leasing a residence for the remainder of 2012. While the Taxpayer lived and worked in State A, she maintained connections with Virginia. She was registered to vote in Virginia and continued to hold a Virginia driver's license.

Virginia 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 (DMV) a statement that certifies that the applicant is a Virginia resident. The Department has found that an individual may successfully establish a domicile outside Virginia even if he retains 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 (12/9/2002).

The Taxpayer states that she resided in State A during the 2012 taxable year. However, other than registering her car in State A, she retained all significant connections with Virginia. In addition, she moved back to Virginia in 2013. In numerous cases, Virginia courts have held that changing domicile is a two-step process. First, a person must intend to permanently move away from one domicile. Second, the person must acquire a new domicile where he intends to remain permanently or indefinitely. See Robert H. Talley v. Commonwealth of Virginia , 127 Va. 516, 103 S.E. 612 (1920) and State-Planters Bank, v. Commonwealth of Virginia , 174 Va. 289, 6 S. E.2d 629 (1940). An individual will be considered to have retained his old domicile until a new domicile is established. The burden of proving a change in domicile lies with the individual alleging the change.

Residents

The Taxpayer contends that she was not liable for Virginia income tax because she did not earn any of her income in Virginia. Virginia Code § 58.1-341 provides that a Virginia resident who is required to file a federal income tax return is also required to file a Virginia income tax return, unless the resident is exempt from filing under Va. Code § 58.1-321. Additionally, even if a resident is not required to file a federal return but has Virginia adjusted gross income that exceeds the filing threshold, the resident is required to file a Virginia individual income tax return.

As a resident of Virginia, the amount of the Taxpayer's income exceeded the applicable filing threshold under Va. Code § 58.1-321. Under such circumstances, a taxpayer would be required to file a Virginia return and pay their liability. See P.D. 14-33 (3/7/2014).

CONCLUSION

Based on the foregoing, I find that the Taxpayer was a Virginia domiciliary resident for the taxable year at issue and is liable for Virginia income tax on all income earned during the 2012 taxable year. As such, the Taxpayer's request for a refund of Virginia income tax paid for the 2012 taxable year cannot be approved.

The Code of Virginia sections, and public documents 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 determination, you may contact * in the Office of Tax Policy, Appeals and Rulings, at ***.

Sincerely,

Craig M. Burns
Tax Commissioner

AR/1-6226956031.B