Was an out-of-state driver's license alone enough to overturn a Virginia residency assessment?

Subject

The burden of proof is on the Taxpayers to show they were not subject to income tax in Virginia.

Plain-English summary

Virginia assessed an individual for 2012 after receiving IRS information, finding no Virginia return, and getting no response to its information request. The taxpayer said she lived in another state and submitted a driver's license from that state issued in January 2010.

The Department explained that a driver's license is evidence of domicile but is only one factor. The taxpayer had previously filed Virginia income-tax returns and did not provide the broader records requested to show that she had abandoned Virginia domicile and established a permanent home elsewhere.

Because the assessment was presumed correct and the taxpayer had not met her burden, Virginia gave her one final 30-day opportunity to provide adequate domicile records or file a 2012 resident return. Without them, the assessment would be considered correct and collection could proceed.

Citations and references

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

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 16-119

Original ruling text

June 13, 2016

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 taxable year ended December 31, 2012.

FACTS

The Department received information from the Internal Revenue Service (IRS) indicating that the Taxpayer may have been required to file a Virginia individual income tax return for the 2012 taxable year. A review of the Department's records showed the Taxpayer had not filed a return. The Department requested additional information from the Taxpayer in order to determine if her income was subject to Virginia income tax. When a response was not received, the Department issued an assessment. The Taxpayer filed an appeal, contending she was a resident of * (State A).

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.

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 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 or domicile.

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 this burden, the Tax Commissioner must conclude that he or she intended to remain indefinitely in Virginia.

In this case, the Taxpayer had previously filed individual income tax returns in Virginia. By letter dated February 2, 2016, the Department requested documentation required to determine if the Taxpayer's income was subject to Virginia income tax. To date, the Taxpayer has not responded to the Department's request. The Taxpayer submitted a copy of her State A driver's license issued in January 2010. While a driver's license is an indication of domicile, it is only one of many factors considered.

Virginia Code § 58.1-205 provides that in 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 Taxpayers to show they were not subject to income tax in Virginia. Furthermore, 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 erroneous assessment is attributable to the taxpayer's willful failure or refusal to provide the Department with necessary information as required by law.

The assessment at issue was made based on the best information available to the Department pursuant to Va. Code § 58.1-111. The Taxpayer may have information that better represents her Virginia income tax liability for the year at issue. Therefore, the Taxpayer will be granted one last opportunity to provide adequate documentation with regard to her domiciliary status in State A or file a 2012 Virginia resident individual income tax return. The documentation or income tax return should be submitted within 30 days from the date of this letter to: Virginia Department of Taxation, Office of Tax Policy, Appeals and Rulings, P.O. Box 27203, Richmond, Virginia 23161-7203, Attention: *. Upon receipt, the documentation will be reviewed and the assessment will be adjusted, as appropriate. If the documentation is not received within the allotted time, the assessment will be considered to be correct as issued and collection actions may result.

The Code of Virginia sections, cited are available on-line 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/1-6212675354.D