Did a husband's move to another state make the couple eligible to file a joint Virginia nonresident return for 2012?

Subject

Taxpayers erroneously filed a joint Virginia nonresident income tax return.

Plain-English summary

A husband and wife filed a joint Virginia nonresident return for 2012 and allocated 19% of their income to Virginia. The wife remained a Virginia resident, while the husband had moved to another state for work, obtained housing and employment there, and registered a vehicle there.

Virginia found that the husband had not abandoned his Virginia domicile. He retained his Virginia residence, driver's license, vehicle registrations, and voter registration, used a Virginia address on the couple's joint federal return, and returned to Virginia in 2013. His income therefore remained subject to Virginia tax as resident income.

The couple's joint nonresident filing was also inconsistent with Va. Code § 58.1-326. When one spouse is a resident and the other is a nonresident, separate Virginia taxable incomes are determined unless both elect to compute joint income as if both were residents. The assessment and accrued interest were upheld.

What this means for you

A spouse's out-of-state job and home do not establish a domicile change when significant Virginia connections remain and the move is not shown to be permanent. Mixed-residency spouses also need to use the filing method prescribed by Virginia rather than a joint nonresident return.

Citations and references

• Va. Code §§ 58.1-326 and 58.1-302.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 17-5

Original ruling text

February 2, 2017

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, 2012.

FACTS

The Taxpayers, a husband and wife, filed a 2012 Virginia nonresident individual income tax return and apportioned 19% of their income to Virginia. Under audit, the Department held the Taxpayers as domiciliary residents of Virginia and treated all of their income as income subject to Virginia tax. The Department issued an assessment for additional tax and interest. The Taxpayers filed an appeal, contending the husband was a resident of * (State A) during the taxable year at issue.

DETERMINATION

Joint Returns

The Taxpayers filed a joint nonresident individual income tax return. However, they contend that the husband was not a resident of Virginia in 2012. The information provided indicates the wife was a resident of Virginia.

Virginia Code § 58.1-326 provides, “If husband or wife is a resident and the other is a nonresident, separate taxes shall be determined on their separate Virginia taxable incomes on such single or separate forms as may be required by the Department, unless both elect to determine their joint Virginia taxable income as if both were residents .” (Emphasis added.)

Residency

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 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.

Information provided by the Taxpayers indicates the husband relocated to State A in April 2011 while the wife remained in Virginia. The husband accepted employment, established a place of abode, and registered a motor vehicle in State A. In addition, the husband continued to maintain connections in Virginia. Such connections include maintaining his Virginia residence, motor vehicle registrations, voter registration, and Virginia driver's license. Moreover, the husband returned to Virginia in March 2013.

The Taxpayers filed a joint federal income tax return using a Virginia address. Absent of the Taxpayers' joint filing status, the wife did not meet Virginia's filing threshold because she received no income during the taxable year at issue. In Public Document (P.D.) 14-46 (4/2/2014), the Department found in instances where a Taxpayer relocates to another state but maintains a domiciliary presence in the previous state, no change of domicile has occurred. Absent a change of domicile, the husband's income remained subject to Virginia income tax.

CONCLUSION

Based on the evidence, the Taxpayers erroneously filed a joint Virginia nonresident income tax return. Further, the Taxpayers have failed to show the husband changed his residency to State A. Accordingly, the Department properly held the husband was a domiciliary resident of Virginia for the 2012 taxable year and the assessment is upheld.

An updated bill, with interest accrued to date, will be sent to the Taxpayers. The outstanding balance should be paid within 30 days of the bill to avoid additional interest charges.

The Code of Virginia sections, and public document 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