Was a researcher a Virginia domiciliary despite claiming fewer than 90 Virginia days and residence elsewhere?

Subject

Absent objective evidence that the Taxpayer was domiciled in State A, the Department finds the Taxpayer was a domiciliary resident of Virginia for the taxable year.

Plain-English summary

A postdoctoral researcher claimed he lived in another state and spent fewer than 90 days in Virginia during 2011 while visiting a nearby federal laboratory. He rented a Virginia apartment, kept his vehicle there, held a Virginia driver's license through December 2013, and used the Virginia address on his 2011 federal return.

The documents offered for the other state were a driver's license and voter registration obtained in 2014 and an unsigned residential lease. Virginia found those materials insufficient to prove that he was domiciled there in 2011.

His Virginia residence, vehicle, license, federal-return address, and apparent business expenses connected with the vehicle supported Virginia domicile. The Department therefore treated him as a 2011 domiciliary resident despite his claimed limited physical presence.

The existing assessment was an estimate. Virginia allowed 30 days to file a 2011 resident return so the liability could be adjusted and advised him to review possible filing duties for 2010, 2012, and 2013.

Citations and references

• Va. Code §§ 58.1-302, 46.2-323.1, 46.2-348, 58.1-111, and 58.1-312 A.
• P.D. 00-151 and 02-149.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 16-60

Original ruling text

April 20, 2016

Re: § 58.1-1821 Application: Individual Income Tax

Dear *:

This will reply to your letter in which you request correction of the individual income tax assessment issued to * (the "Taxpayer") for the taxable year ended December 31, 2011. I apologize for the delay in responding to your appeal.

FACTS

The Department received information from the Internal Revenue Service (IRS), that the Taxpayer may have income subject to Virginia income tax for the 2011 taxable year. The Department requested additional information from the Taxpayer. When no response was received, the Department issued an assessment. The Taxpayer appeals the assessment, contending he resided in Virginia less than 90 days during the 2011 taxable year, he received no income from Virginia sources, and he is a resident of * (State A) with no Virginia source income.

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

The Taxpayer contends he moved to * in 2005 to pursue a graduate degree and resided in *** since that time. The Taxpayer asserts he visited Virginia during the 2011 taxable year in order to fulfill the requirements of a research grant he obtained from the federal government. He contends the visit was less than 90 days. The Taxpayer provided copies of his State A driver's license and voter's registration cards obtained in 2014. The Taxpayer also provided a copy of an unexecuted residential lease contract for property located in State A.

The Taxpayer performed several actions consistent with establishing domicile in Virginia. The Taxpayer established a permanent place of abode and registered a motor vehicle in Virginia. In addition, the Taxpayer filed a 2011 federal income tax return with a Virginia address and obtained a Virginia driver's license. The driver's license was held until December 2013, when it was exchanged for a State A 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, 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. Further, any applicant who knowingly makes a false statement to DMV is subject to penalties under Va. Code § 46.2-348. The Department has found that an individual may successfully establish a domicile outside Virginia even if the Virginia driver's license is retained. See 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 he returned to Virginia periodically during the 2010 through 2013 taxable years to fulfill the requirements of a federal research grant in the * (State B). According to information obtained by the Department, from 2010 through 2013, the Taxpayer was awarded a postdoctoral research fellowship from a federal research laboratory in State B, which is adjacent to Virginia. The Taxpayer indicates he rented the apartment in Virginia because it was less expensive than staying in a hotel during his visits to the State B laboratory and he could store his motor vehicle there when he returned to State A.

The Taxpayer also claims no research was conducted in Virginia and he did not have any Virginia source income. State A does not impose an income tax, and no State B income tax return was filed. In addition, the Taxpayer reported significant unreimbursed employee expenses (mostly vehicle expenses) on his federal income tax return. Because his only motor vehicle of record at the time was located in Virginia, it appears the Taxpayer incurred business expenses while residing in Virginia, thus raising doubts to his claim that he earned no income from Virginia sources. Absent objective evidence that the Taxpayer was domiciled in State A, coupled with the sufficient steps taken to establish domicile in 2010 and maintain a domiciliary presence in Virginia from 2010 through 2013, the Department finds the Taxpayer was a domiciliary resident of Virginia for the 2011 taxable year.

The Department's assessment was based on the information available as permitted under Va. Code § 58.1-111. The Taxpayer may have additional information to more accurately reflect his Virginia income tax liability. As such, the Taxpayer may file a 2011 Virginia individual income tax return.

The 2011 return should be mailed to: Virginia Department of Taxation, Office of Tax Policy, Appeals and Rulings, Attn: *, Post Office Box 27203, Richmond, Virginia, 23261-7203, within 30 days from the date of this letter. Once the return is received, it will be processed and the assessment adjusted accordingly. If the return is not filed within the time allotted, the assessment will be upheld and collection actions will resume.

Further, in light of this determination, the Taxpayer should reevaluate his residency status for the 2010, 2012, and 2013 taxable years to determine if he had a Virginia filing requirement and, if necessary, file the appropriate returns. Under Va. Code § 58.1-312 A, the Department may assess underreported tax at any time when a taxpayer fails to file a return or files a false or fraudulent return with the intent to evade tax.

The Code of Virginia sections, and public documents cited are available on-line at www.tax.virginia.gov in the Laws, Rules, and Decisions section of the Department's website. 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/1-5970894561.D