Could Virginia tax an individual as a domiciliary resident for 2016 after a prior ruling had already concluded she did not re-establish Virginia domicile until 2017?

Plain-English summary

Virginia assessed an individual as a domiciliary resident for 2016 after receiving IRS information showing she may have had a filing obligation. The taxpayer said she lived in a foreign country.

The issue had effectively already been decided. In P.D. 19-83, addressing her 2015 assessment, the Department concluded she could not have re-established Virginia domicile until she returned to the United States and began living in Virginia again in 2017. That earlier ruling did not formally cover 2016, but its conclusion necessarily meant she was not a Virginia resident during 2016 either.

The Tax Commissioner therefore returned the assessment to audit staff for abatement.

What this means for you

A prior domicile determination can control a neighboring tax year when its factual conclusion necessarily covers that period. Here the Department did not redo the entire domicile analysis; it applied its already-established 2017 return date.

Common questions

Why was the 2016 assessment issued? IRS information suggested a possible Virginia filing requirement, and the taxpayer had not filed.

Why was it abated? The prior ruling established that Virginia domicile was not re-established until 2017.

Did P.D. 19-83 expressly decide 2016? No, but the Department said its reasoning clearly established nonresidency for 2016.

Citations and references

• Va. Code § 58.1-1821 -- administrative appeal authority.
• P.D. 19-83 -- prior domicile ruling applied to the 2016 assessment.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 20-42

Original ruling text

March 18, 2020

Re: § 58.1-1821 Application: Individual Income Tax

Dear *:

This will reply to your letter in which you seek correction of the assessment of individual income tax issued to * (the “Taxpayer”) for the taxable year ended December 31, 2016.

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 2016 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. Based on the information provided by the Taxpayer and other information available, the Department determined that the Taxpayer was taxable as a domiciliary resident of Virginia, and an assessment was issued. The Taxpayer appealed, contending she was a resident of * (Country A).

DETERMINATION

The Taxpayer was also assessed Virginia income tax on the basis that she was a domiciliary resident of Virginia for the 2015 taxable year. The Taxpayer appealed to the Department. In Public Document (P.D.) 19-83 (8/2/2019), the Department concluded that the Taxpayer could not have re-established domicile in Virginia until she returned to the United States and began residing in Virginia again in 2017. As a result, the assessment was abated.

Shortly before P.D. 19-83 was issued, the Department issued an assessment to the Taxpayer for the 2016 taxable year as well. Although P.D. 19-83 did not specifically address the 2016 taxable year because an appeal had not yet been filed for that year, the Department’s determination clearly indicates that the Taxpayer was not a resident of Virginia in 2016. Accordingly, the assessment will be returned to the audit staff for abatement.

The Code of Virginia section and public document 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 response, you may contact * in the Office of Tax Policy, Appeals and Rulings, at ***.

Sincerely,

Craig M. Burns

Tax Commissioner

AR/2154.M

Related Documents

19-83