Did a temporary move and job in another state end a taxpayer's Virginia domicile?

Plain-English summary

Virginia found that the taxpayer remained a domiciliary resident for 2014. She had obtained a job and leased housing in State A, had State A tax withheld, and filed a State A resident return. But she kept a Virginia driver's license and voter registration, used a Virginia family address, and expressly described State A as temporary and the Virginia residence as her permanent home.

Because changing domicile requires both abandonment of the old home and acquisition of a new permanent or indefinite home, the Department concluded she had not abandoned Virginia. The nonfiler assessment therefore remained, subject to adjustment after she filed an accurate 2014 Virginia return.

The ruling noted that she might qualify for a credit for income tax paid to State A, within Va. Code § 58.1-332 A's limits.

Common questions

Did filing a resident return in State A establish a domicile change? No. Virginia considered it with all the other facts, including the taxpayer's own statement that the move was temporary.

Was the original assessment necessarily the final amount? No. Virginia directed the taxpayer to file a return so the assessment could be adjusted to better reflect her liability.

Citations and references

• Va. Code §§ 58.1-302, 58.1-111, and 58.1-332 A
• Va. Code § 46.2-323.1
• P.D. 00-151 and P.D. 02-149

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 18-118

Original ruling text

June 8, 2018

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, 2014.

FACTS

The Department received information from the Internal Revenue Service (IRS) indicating that the Taxpayer may have been required to file a Virginia income tax return for the 2014 taxable year. A review of the Department's records showed that the Taxpayer had not filed a return. The Department requested additional information from the Taxpayer in order to determine if her income was taxable in Virginia. When a response was not received, the Department issued an assessment. The Taxpayer appeals, contending she was a resident of * (State A).

DETERMINATION

Two classes of residents, a domiciliary resident and an actual resident, are set forth in Virginia 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 has 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 took several steps indicating a possible change of residency to State A. In September 2013, the Taxpayer obtained employment in State A and began living there. The Taxpayer initially resided with a family member who lived in State A. She then leased a personal residence in State A from April 2014 through January 2015. She also had State A income tax withheld from her wages, and she filed a State A resident income tax return for the 2014 taxable year.

The Taxpayer also retained some connections with Virginia. A member of the Taxpayer's family resided in Virginia, and some third party information returns such as W-2s and 1099s were mailed to that address. The Taxpayer also filed her 2014 State A income tax return using the same address. In addition, the Taxpayer retained both her Virginia voter's registration and 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 fact that the Taxpayer filed her 2014 State A income tax return using a Virginia address is less significant in this case because it appears the Taxpayer no longer resided in State A as of January 2015, before the return was due. The Taxpayer, however, stated in her appeal letter that her residency in State A was temporary and she considered her family member's residence in Virginia to be her permanent home. As a matter of intent, the Taxpayer clearly considered Virginia to be her domicile. Accordingly, I find that the Taxpayer remained taxable as a domiciliary resident of Virginia for the 2014 taxable year.

The assessment at issue was made based on the best information available to the Department pursuant to Virginia Code § 58.1-111. The Taxpayer, however, may have information that better represents her Virginia income tax liability for the taxable year at issue. Therefore, she should file a 2014 Virginia income tax return. The Taxpayer should be aware that she may be eligible to claim a credit for income tax paid to State A, subject.to the limitations set forth in Virginia Code § 58.1-332 A. 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: *. The return will be reviewed and processed, and the assessment will be adjusted as warranted. If the return is not received within the allotted time, the assessment will be adjusted based on the best information available.

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/1564.M