Did a temporary overseas assignment establish a new domicile outside Virginia for 2014?

Plain-English summary

Virginia found that the taxpayer remained a domiciliary resident during a 2014 foreign-country assignment. She stayed on a Virginia lease, continued receiving financial documents here, and retained a Virginia driver's license and vehicle registration.

The Department viewed the work outside Virginia as temporary. Her move to a different state in October 2015 also conflicted with an intent to remain permanently or indefinitely in the foreign country.

Virginia voter registration did not by itself establish domicile because federal law lets overseas citizens vote using their last domicile without changing tax residence. But the other Virginia connections and temporary nature of the assignment were enough to uphold resident taxation and deny the refund.

Common questions

Did overseas voting preserve Virginia domicile? The ruling says federal overseas voting alone does not affect tax domicile.

Why did the later move matter? Moving to another state showed the taxpayer had not intended to remain indefinitely in the foreign country.

Citations and references

• Va. Code § 58.1-302
• Va. Code §§ 46.2-323.1, 46.2-307, and 46.2-100
• 52 U.S.C. §§ 20309 and 20310
• P.D. 14-141, P.D. 16-39, P.D. 00-151, and P.D. 02-149

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 18-77

Original ruling text

May 2, 2018

Re: § 58.1-1821 Application: Individual Income Tax

Dear *:

This will reply to your letter in which you seek a refund of individual income tax paid by * (the “Taxpayer”) for the taxable year ended December 31, 2014.

FACTS

The Taxpayer filed a Virginia nonresident individual income return claiming no Virginia source income for the 2014 taxable year. Under audit, the Department determined the Taxpayer was a domiciliary resident of Virginia and issued an assessment. The Taxpayer paid a portion of the assessment and filed an appeal, contending she was a resident of the * (Country A) during 2014.

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 and 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 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.

The Taxpayer engaged in several actions consistent with residing in Virginia during the 2014 taxable year. She was the co-lessee of a Virginia residence and continued to receive financial documents at this address. The Taxpayer asserts that she did not remove her name from the lease because her roommate continued to reside in the Virginia residence. She states that she continued to receive her financial documents at this residence to ensure timely delivery.

In addition, the Taxpayer maintained her Virginia driver's license and vehicle registration. 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 an individual has a Virginia driver's license is one factor to consider, among other possible factors, in any given domicile case. Nonresidents are not permitted to hold a Virginia driver's license. See Virginia Code § 46.2-323.1. They are, however, permitted to continue to use their licenses from their home states or countries. See Virginia Code § 46.2-307. For the purposes of Title 46.2 of the Code of Virginia , “nonresident” is generally defined as every person who is not domiciled in the Commonwealth. See Virginia Code § 46.2-100. Thus, in general, an individual must be a domiciliary resident of Virginia in order to hold a Virginia driver's license. Individuals who have resided in Virginia more than six months, however, are deemed to be residents for purposes of applying most of the provisions of Title 46.2 of the Code of Virginia , including the driver's licensing provisions of Title 46.2, Chapter 3 ( Virginia Code § 46.2-300 et seq .).

In addition, the Taxpayer was registered to vote in Virginia. The Department has observed that federal law generally allows United States citizens living abroad to vote in federal elections using a voter's registration from the state of the individual's last domicile. See 52 U.S.C. § 20310. See also P.D. 14-141 (8/13/2014). In addition, the exercise of such federal voting rights by an overseas citizen shall not affect the domicile or residence of such citizen for purposes of any federal, state or local tax. See 52 U.S.C. § 20309.

The Taxpayer states she accepted a temporary assignment in the * (State A) prior to moving to Country A. 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 (11/23/1994), P.D. 96-207 (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 Department acknowledges that a change of domicile occurs as part of a process in which no single factor is dispositive. A taxpayer must show that she abandoned her own domicile and acquired a new one in order to show a change. In this case, the Taxpayer maintained her connections with Virginia after she moved to Country A. In addition, the Taxpayer moved to * (State B) in October 2015. Such a move is inconsistent with remaining permanently or indefinitely in Country A.

After carefully considering all of the information and arguments presented, the Department finds that the Taxpayer was taxable as a domiciliary resident of Virginia for the 2014 taxable year. As such, the Taxpayer's request for a refund of Virginia income tax paid for the taxable year at issue cannot be granted. Because a balance of interest remains, the Taxpayer will receive an updated bill. The Taxpayer should remit the balance due within 30 days of the bill date to avoid possible collections actions.

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/1425.B