I'm appealing a Virginia tax assessment and claiming I was a resident of another state, but I never actually filled out Virginia's domicile questionnaire -- what happens now?

Plain-English summary

This ruling looks a lot like other Virginia domicile appeals decided the same week (compare P.D. 21-153, where a taxpayer WON by actually documenting his ties to another state) -- but with a very different outcome, because of what the taxpayer did (or didn't) provide.

Virginia received information from the IRS suggesting a taxpayer may have needed to file a 2017 Virginia income tax return. He hadn't filed. The Department requested more information to determine whether his income was taxable in Virginia; when he didn't respond, it issued an assessment based on the best information available. On appeal, he simply asserted he was a resident of another state ("State A") -- but he did NOT respond to a follow-up domicile questionnaire Virginia sent seeking the specific facts needed to evaluate that claim.

Virginia Code § 58.1-302 requires proof that a taxpayer both actually abandoned his old (Virginia) domicile with no intent to return AND established a new one elsewhere with intent to remain -- looking at expressed intent, conduct, financial independence, employment, property, vehicle registration, voting, and other circumstances. A bare declaration of residency isn't enough; the burden of proving a domicile change falls entirely on the taxpayer. Compounding the problem, Va. Code § 58.1-205 makes a Department assessment "prima facie correct," and Va. Code § 58.1-1826 specifically bars a court from granting relief where an erroneous assessment results from the taxpayer's own willful failure or refusal to provide required information. Since the taxpayer never answered the domicile questionnaire, the Department had nothing to weigh against the standing assessment -- an unsupported assertion of out-of-state residency, without more, cannot overcome the presumption that the assessment is correct.

Rather than simply denying the appeal outright, though, the Department gave the taxpayer one final opportunity: 30 days from the date of the ruling to submit the requested information or file an actual return. If he does, the assessment will be reviewed and adjusted as appropriate; if he doesn't respond within that window, the assessment will be treated as correct and collection action may follow.

What this means for you

Anyone appealing a Virginia assessment based on a residency/domicile claim

A bare assertion that you lived somewhere else isn't enough. You have the burden of proving you abandoned your Virginia domicile and established a new one -- with documentation (driver's license, vehicle registration, voter registration, financial ties, property, employment records, and so on). If Virginia sends a domicile questionnaire, answer it; failing to respond can be treated as a failure to meet your burden, regardless of what you claim in your appeal letter.

Taxpayers who ignored an earlier Department information request before appealing

Ignoring a request doesn't just risk the initial assessment -- Va. Code § 58.1-1826 specifically prevents courts from granting relief where the erroneous assessment stems from your own willful failure to provide required information. Responding promptly, even late, is far better than continuing to withhold information through the appeal stage.

Anyone who receives a "final opportunity" letter like this one

Treat the stated deadline (30 days here) as a real, hard cutoff. If you don't submit the requested information or an actual return within that window, the assessment becomes final and collection action can follow -- there's no indication a further extension will be offered.

Common questions

Q: Is it enough to just say I lived in another state to overturn a Virginia assessment based on residency?
A: No. You bear the burden of proving both that you abandoned your Virginia domicile and established a new one, using specific facts and documentation -- a bare declaration isn't sufficient.

Q: What happens if I don't respond to the Department's domicile questionnaire?
A: The Department has nothing to weigh against the presumption that its assessment is correct, and Virginia law bars courts from granting relief where the error stems from your own failure to provide required information.

Q: Did this taxpayer lose for good?
A: Not yet -- he was given one final 30-day window to provide the requested information or file a return. If he does, the assessment will be adjusted as warranted; if not, it becomes final.

Citations and references

• Va. Code § 58.1-302 (defines domiciliary resident and actual resident; the 183-day actual-residency threshold)
• Va. Code § 58.1-205 (a Department assessment of tax is prima facie correct)
• Va. Code § 58.1-1826 (courts cannot grant relief where an erroneous assessment is attributable to the taxpayer's own willful failure or refusal to provide required information)
• Va. Code § 58.1-111 (Department may assess tax based on the best information available)

Subject

Residency : Domicile Administration : Audit - Taxpayer Records

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 21-142

Original ruling text

November 9, 2021

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, 2017.

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 2017 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 the Taxpayer did not respond to the information request, the Department issued an assessment. 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 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.

Because the assessment at issue was made based on the best information available to the Department pursuant to Virginia Code § 58.1-111, the Taxpayer will be given one final opportunity to provide the additional information or file a return. The additional information or 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 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/3706.B