Did moving to another state before an overseas assignment end the taxpayer's Virginia domicile?

Plain-English summary

The taxpayer moved from Virginia to another state for employment and then moved abroad. He rented an apartment, joined a fitness club, stored goods, and took other steps in the intervening state, but some documentation was dated after the 2014 and 2015 years at issue.

Virginia found that he had not established an intent to remain permanently or indefinitely in the other state because he knew he would relocate abroad. He also retained two Virginia properties, a Virginia driver's license, registrations for seven vehicles, and Virginia addresses on federal records. The Department therefore treated him as a Virginia domiciliary resident for both years and allowed him to file resident returns to more accurately state his liability.

Citations and references

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

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 18-57

Original ruling text

April 19, 2018

Re: § 1821 Application: Individual Income Tax

Dear *:

This will respond to your letter in which you seek correction of the individual income tax assessments issued to * (the “Taxpayer”) for the taxable years ended December 31, 2014, and 2015.

FACTS

The Taxpayer, a resident of Virginia, accepted employment in * (Country A) with a *** (State A) company in 2013. The Taxpayer moved to State A in 2013 before moving to Country A in 2014. The Taxpayer filed a Virginia part-year resident income tax return for the 2013 taxable year, but he did not file Virginia income tax returns for the 2014 and 2015 taxable years. Upon termination of his employment, the Taxpayer moved back to Virginia in 2016.

The Department, having not received Virginia income tax returns for the 2014 and 2015 taxable years from the Taxpayer, requested that the Taxpayer provide additional information to determine if his income was subject to Virginia individual income taxation. When the Taxpayer did not respond to the information request, the Department issued assessments. The Taxpayer appeals, contending he was not a resident of Virginia.

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 e ven 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 and tangible property, motor vehicle registration and licensing, voter registration, 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 of the facts and circumstances of the particular case. A simple declaration is not sufficient to establish residency or domicile.

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 Tax Commissioner must conclude that he or she intended to remain indefinitely in Virginia.

Upon accepting an offer for employment, the Taxpayer asserts that he took a number of actions to establish domicile in State A. He rented an apartment in State A, he joined a fitness club in State A, and he stored household goods in State A. The Taxpayer also obtained a State A voter's registration card, and he applied for registration of an LLC in State A. Additionally, the Taxpayer filed a Virginia part-year resident income tax return in 2013, which he contends would show an intent to abandon Virginia domicile. The Taxpayer insists that his relocation to State A was intended to be permanent, but the termination of his employment necessitated his return to Virginia.

The Department notes that the Taxpayer's State A voter's registration card was dated after the taxable years at issue and was in a “suspense,” or not active, status. The Taxpayer was unable to provide information regarding when the State A voter's registration was first obtained. The Taxpayer's State A LLC registration was dated after the 2014 and 2015 taxable years and was for a foreign LLC, which was registered in Virginia.

The Department's records show that the Taxpayer retained numerous connections to Virginia that are consistent with an intent to remain a domiciliary resident of Virginia. The Taxpayer maintained: (1) ownership of two parcels of real property in Virginia, (2) a Virginia driver's license, and (3) a Virginia vehicle registration on seven vehicles. In addition, the Taxpayer used a Virginia delivery address on a majority of Internal Revenue Service (IRS) information returns and filed Federal 1040 as a Virginia resident.

In regard to the 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).

Although it appears that the Taxpayer established an abode in State A, and was working outside of Virginia during the 2014 and 2015 taxable years, the Taxpayer does not appear to have intended to permanently or indefinitely reside in State A because he knew he would relocate to Country A. After carefully considering the information provided, the Department concludes that the Taxpayer has failed to prove that he changed his domicile to State A prior to or during the 2014 or 2015 taxable years. As such, the Taxpayer remained taxable as a domiciliary resident of Virginia for the 2014 and 2015 taxable years.

The assessment at issue was made based on the best information available to the Department pursuant to Virginia Code § 58.1-111. Because the Taxpayer was required to file a Virginia income tax return, the Department was correct in issuing the assessment. The Taxpayer, however, may have information that better represents his Virginia income tax liability for the taxable years at issue. Therefore, he should file Virginia resident income tax returns for the 2014 and 2015 taxable years to reflect more accurately his Virginia tax liability.

The returns 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 returns will be reviewed and the assessments will be adjusted, as appropriate. If the returns are not received within the allotted time, a consolidated bill, with interest accrued to date, will be mailed to the Taxpayer. No further interest will accrue provided the outstanding assessment is paid within 30 days from the date of the consolidated bill.

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 concerning payment of the assessment, you may contact * at . Questions regarding this response should be directed to at ***.

Sincerely,

Craig M. Burns

Tax Commissioner

AR/1535.C