Did renting a District of Columbia apartment establish a new domicile outside Virginia for 2012?

Subject

The Department finds the Taxpayer remained domiciled in Virginia in 2012 and was required to file a Virginia income tax return.

Plain-English summary

An individual established Virginia domicile in 2010, then rented a District of Columbia apartment in July 2011. She moved overseas in July 2012 and returned to Virginia in December 2013 while continuing to work for the same Virginia employer.

Her D.C. apartment showed physical presence, and she registered and voted there in November 2012 while living overseas. But Virginia found little evidence of an intent to make D.C. her permanent home. She also did not provide requested proof that she filed and paid D.C. income tax for 2012.

Considering the full sequence—including the overseas transfer and later return to Virginia—the Department found that she had not established a new D.C. domicile before or during 2012. She remained a Virginia domiciliary and had to file a 2012 Virginia resident return.

The return was due within 30 days so the best-information assessment could be adjusted. The ruling also advised her to review whether she needed a 2013 return and an amended 2014 return.

Citations and references

• Va. Code §§ 58.1-302 and 58.1-111.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 16-127

Original ruling text

June 22, 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 the District of Columbia (D.C.) for the taxable year 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 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 Taxpayer established domicile in Virginia in 2010 when she moved into Virginia after accepting employment from a Virginia business. The Taxpayer obtained a Virginia driver's license in February 2011 and registered to vote in March 2011.

In July 2011, the Taxpayer moved into a residence in D.C., transferred to the * (Country A) in July 2012, and then returned to Virginia in December 2013, while continuing to work for her Virginia employer.

The Taxpayer claims she moved to D.C. in 2011. However, other than renting an apartment, her activities show little intent to abandon her Virginia domicile in 2011. In 2012, she moved to Country A. In November 2012, while she was living in Country A, the Taxpayer registered to vote in D.C. and voted in the November election. While this action is indicative of an individual's expressed intent to change domicile, the fact that she later moved to Country A and then back to Virginia raise doubts as to whether she intended to permanently leave Virginia in 2011.

In addition, the Department requested the Taxpayer provide evidence she filed and paid D.C. income tax for 2012. It has been the Department's experience that individuals residing in D.C. retain a Virginia driver's license in order to avoid D.C. income tax. The fact that the Taxpayer has failed to verify she filed and paid D.C. tax in 2012 also raises doubts as to her residency status in D.C.

The Department acknowledges that a change in domicile occurs as part of a process in which no single factor is dispositive. After carefully weighing all of the evidence, I find that, even if the Taxpayer took steps to abandon her Virginia domicile in 2011, she did not establish a new domicile in D.C. either before or during the 2012 taxable year. Accordingly, the Department finds the Taxpayer remained domiciled in Virginia in 2012 and was required to file a Virginia income tax return.

The 2012 assessment 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 2012 taxable year. Accordingly, the Taxpayer should file a 2012 Virginia return as a resident. The 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 return will be reviewed and the assessment will be adjusted, as appropriate. If the return is not received within the allotted time, the assessment will be considered to be correct as issued and collection actions may result.

Further, the Taxpayer should review her residency status for the subsequent taxable years. Based on the information, the Taxpayer was likely a Virginia resident in 2013 and at least part of 2014. Accordingly, she may be required to file a 2013 return and amend her 2014 return.

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/1-6195381241.D