Did a taxpayer who kept Virginia ties and never answered the Department's domicile questionnaire remain taxable as a Virginia domiciliary resident?

Plain-English summary

The IRS told Virginia that the taxpayer may have been required to file a 2014 Virginia return, and none was on file. The Department asked for information to decide whether his income was taxable in Virginia. He said he was a resident of another state; the Department concluded he remained a Virginia domiciliary resident and assessed the tax. He appealed.

The Department upheld the assessment.

• What it takes to change domicile. Under Va. Code § 58.1-302, a domiciliary resident is taxed by Virginia until he both abandons his Virginia domicile with no intent to return and acquires a new domicile elsewhere through physical presence plus intent to remain permanently or indefinitely. The person claiming the change bears the burden of proof; a bare declaration is not enough.
• His Virginia ties pointed to Virginia. He kept a Virginia driver's license, current Virginia vehicle registrations, owned Virginia property, and received financial documents at a Virginia address -- so even if he was living in the other state in 2014, the Department found he had not abandoned Virginia.
• He didn't answer the questionnaire. The Department sent a domicile questionnaire; he did not respond. Under Va. Code § 58.1-205 an assessment is prima facie correct, and Va. Code § 58.1-1826 bars relief when an erroneous assessment results from a taxpayer's willful failure or refusal to provide information required by law. The assessment was made on the best information available under Va. Code § 58.1-111.

He was given one final chance -- 30 days to file a 2014 Virginia resident return or return the questionnaire -- before the assessment is treated as correct and collection may proceed.

What this means for you

Moving your body isn't enough -- you must abandon Virginia and settle elsewhere. Keeping a Virginia license, car registration, property, or mailing address undercuts a claim that you left, because domicile continues until you both give up the old state and establish a new one.

Silence loses. When the Department asks for residency information, not answering doesn't make the issue go away -- it makes the assessment prima facie correct and can bar relief entirely under § 58.1-1826. Answer the questionnaire or file the return.

Use the 30-day window. A final determination like this still offers a short window to file the resident return or provide documentation. Missing it makes the assessment final.

Common questions

Q: I lived in another state that year -- why does Virginia still tax me?

A: Because domicile continues until you prove you abandoned Virginia and established a new domicile. Retaining a Virginia license, registrations, property, and mailing address showed he had not done so.

Q: What happens if I ignore the domicile questionnaire?

A: The assessment stands as prima facie correct under § 58.1-205, and § 58.1-1826 can bar any relief because the error stems from your own willful failure to provide information.

Q: Is there any way to fix it after this letter?

A: Yes -- file a 2014 Virginia resident return or provide the requested information within 30 days, and the Department will review and adjust the assessment as appropriate.

Citations and references

• Va. Code § 58.1-302 -- defines domiciliary and actual residents; a domiciliary resident remains taxable until domicile changes
• Va. Code § 58.1-205 -- an assessment by the Department is deemed prima facie correct
• Va. Code § 58.1-1826 -- bars relief where the erroneous assessment results from a willful failure or refusal to provide required information
• Va. Code § 58.1-111 -- authorizes assessment on the best information available

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 19-103

Original ruling text

September 18, 2019

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. The Department considered the information the Taxpayer provided in an attempt to show he was a resident of * (State A), but the Department determined that the Taxpayer remained taxable as a domiciliary resident of Virginia. The Taxpayer appeals, contending he 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 Department determined that the Taxpayer remained taxable as a domiciliary resident of Virginia, even if he was actually residing in State A in 2014, because he retained a Virginia driver’s license, he had current Virginia vehicle registrations, owned property in Virginia, and financial documents were sent to the Taxpayer at a Virginia address.

The Department sent a domicile questionnaire in an attempt to gain additional information from the Taxpayer, but the Taxpayer has failed to respond with the requested information. Virginia Code § 58.1-205 provides that in any proceeding relating to the interpretation of the tax laws of Virginia, an “assessment of a tax by the Department shall be deemed prima facie correct.” As such, the burden of proof is on the Taxpayer to show he was not subject to income tax in Virginia. Furthermore, Virginia Code § 58.1-1826 precludes a court from granting relief to taxpayers seeking correction of erroneous state tax assessments in cases in which the erroneous assessment is attributable to the taxpayers’ willful failure or refusal to provide the Department with necessary information as required by law.

The assessment at issue was made based on the best information available to the Department pursuant to Virginia Code § 58.1-111. Therefore, he should either complete and return the questionnaire as requested or file a 2014 Virginia resident income tax return to reflect more accurately his Virginia tax liability.

The Taxpayer will be given one final opportunity to provide the additional information or file a return. The return or additional information 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 information or return will be reviewed and the assessment will be adjusted, as appropriate. If the information or return is not received within the allotted time, the assessment will be considered correct and collection actions may result.

The Code of Virginia sections 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/2033.M