Did a three-year foreign work assignment change a taxpayer's Virginia domicile for the 2014 income-tax year?

Plain-English summary

The taxpayer remained a Virginia domiciliary resident for 2014 even though he and his family lived in another country during a three-year employment assignment.

Changing domicile required both abandoning Virginia with no intent to return and acquiring a new domicile through physical presence plus an intent to remain permanently or indefinitely. The taxpayer did not prove either side of that test:

• his foreign employment commitment ran only from June 2013 to June 2016;
• his immigration classification there was temporary, as was his family's dependent status;
• he retained two Virginia residences;
• he and his spouse kept Virginia driver's licenses and voter registrations; and
• the family returned to a Virginia residence when the assignment ended.

The Department treated those facts as inconsistent with abandoning Virginia and establishing a permanent or indefinite foreign domicile. The taxpayer therefore remained taxable as a Virginia resident for 2014.

Because the assessment had been estimated from the best information available, the taxpayer received 30 days to file a 2014 resident return. The Department would review it and adjust the assessment as appropriate; without a timely return, the assessment would be treated as correct.

What this means for you

Virginians taking an overseas assignment

Living abroad is not enough by itself. A fixed-duration job and temporary immigration status can point away from a new domicile, especially when substantial Virginia ties remain.

Taxpayers retaining Virginia documents and property

Driver's licenses, voter registrations, residences, and an eventual return are evidence of intent. The full record must prove both abandonment of the old domicile and acquisition of the new one.

Nonfilers assessed from federal information

Filing an accurate return may allow an estimated assessment to be recalculated, but any opportunity and deadline in an appeal letter is specific to that taxpayer.

Common questions

Q: Did three years abroad automatically end Virginia domicile?
A: No.

Q: Was keeping a Virginia driver's license conclusive by itself?
A: No, but the Department treated obtaining or renewing one as a strong indicator of intent to retain Virginia domicile.

Q: What was the outcome?
A: The taxpayer remained a Virginia domiciliary resident for 2014 and was directed to file a resident return within 30 days.

Citations and references

• Va. Code § 58.1-302 — domiciliary and actual residents
• Va. Code § 46.2-323.1 — driver's-license residency certification
• Va. Code § 58.1-111 — estimated assessment based on available information
• P.D. 00-151, P.D. 02-149, and the temporary-employment domicile rulings listed in the determination

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 18-194

Original ruling text

November 30, 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 his income was taxable in Virginia. When a response was not received, the Department issued an assessment. The Taxpayer appeals, contending he was a resident of * (Country 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 contends he was not subject to Virginia income tax because he was a resident of Country A during the taxable year at issue. The Taxpayer committed to working for his employer for three years in Country A from June 2013 to June 2016. During that time, the Taxpayer leased a personal residence in Country A in which he and his family lived. The Taxpayer was classified for immigration purposes as a temporary resident legally present in Country A for employment. His family was also granted temporary resident status as dependents.

The Taxpayer also retained connections with Virginia. He owned two personal residences in Virginia, one of which he and the family returned to when they returned to Virginia in 2016. He and his spouse also both retained Virginia driver’s licenses and voter’s registrations.

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).

As stated above, a change of domicile requires (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. Further, the Department has repeatedly ruled that individuals generally lack the intent to abandon their Virginia domicile when they engage in temporary employment outside the Commonwealth. See P.D. 86-219 (11/3/1986), P.D. 94-353 (8/26/1996), P.D. 02-33 (3/13/2002), P.D. 05-8 (2/1/2005), P.D. 10-134 (7/12/2010), and P.D. 16-39 (3/31/2016).

The Taxpayer committed to employment in Country A only for a certain length of time and did not have more than a temporary resident immigration status there. These facts tend to indicate he did not form the requisite intent to establish domicile in Country A by remaining there permanently or indefinitely. Even if the Taxpayer established domicile in Country A, he must also show he intended to abandon his Virginia domicile. The Taxpayer, however, retained his Virginia residence and his Virginia driver’s license, and he returned to the Virginia residence once the three year employment period was over. All of these facts indicate the Taxpayer did not intend to abandon his Virginia domicile. After carefully considering all of the evidence presented, I find that the Taxpayer failed to change his domicile from Virginia to Country A, and thus he 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 may have information that better represents his Virginia income tax liability for the year at issue. Therefore, the Taxpayer should file a 2014 Virginia resident income tax return. 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.

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/1770.M