What does Virginia Ruling of the Tax Commissioner P.D. 21-30 conclude about Administration : Appeal - Reconsideration; Residency : Domicile - Different States, Decree of Divorce?

Plain-English summary

This letter resolves two separate disputes for the same taxpayer.

2014 tax year -- reconsideration request denied as untimely. The Department had already ruled against the taxpayer once, in P.D. 19-79 (August 2, 2019), finding she remained a Virginia domiciliary resident for 2014. Virginia regulations give a taxpayer only 45 days to ask the Department to reconsider a final determination. Her reconsideration request did not arrive until August 15, 2020 -- more than a year late. Because the deadline was missed, the Department never reached the merits: P.D. 19-79 stands as the final word on 2014, and that assessment remains due and payable.

2017 tax year -- appeal of a new assessment, also decided against the taxpayer. For 2017, the Department again concluded she was a Virginia domiciliary resident. Virginia law recognizes two kinds of residents: a "domiciliary resident" (someone whose permanent home is Virginia, the place they intend to return to) and an "actual resident" (someone physically present in Virginia more than 183 days a year, regardless of domicile). To shed Virginia domicile, a person must both abandon Virginia for good and establish a new permanent home elsewhere -- and the burden of proving that change falls on the taxpayer.

The same Virginia connections the Department relied on in P.D. 19-79 -- her Virginia vehicle registration, driver's license, and voter registration -- were still in place in 2017. Against that, she offered new evidence: D.C. tax withholding and a D.C. resident return for 2017, a D.C. residential lease starting February 2017, and a D.C. driver's license and voter registration -- but she didn't get the D.C. license and registration until October 2018, after 2017 had already ended, so they couldn't establish domicile during the year at issue.

The decisive piece of evidence cut against her: a Virginia Circuit Court Decree of Divorce, finalized in November 2017. Under Virginia law, a divorce suit can only be filed if a party has been an actual bona fide Virginia resident and domiciliary resident for at least six months beforehand. The divorce decree itself stated -- independent of what either party argued -- that she was domiciled in and had been a bona fide Virginia resident for at least six months before the suit began. The Department treats that kind of court finding as strong evidence of domiciliary intent. Since the divorce was finalized in November 2017, that finding meant she still had not abandoned her Virginia domicile that late in the year. Combined with her ongoing Virginia vehicle, license, and voter connections, the Department held she remained a Virginia domiciliary resident for the full 2017 tax year.

The 2017 assessment was built on the Department's best available information. The taxpayer could still submit an actual 2017 Virginia resident return within 60 days to recalculate her precise liability, and she might qualify for a credit for tax she actually paid to D.C. -- but only for income that wasn't Virginia-source income.

What this means for you

People who moved states around a divorce

A divorce decree can work against you in a later residency dispute. If your divorce required you to affirm (or the court to find) that you were domiciled in a state for a set period before filing, that finding can be used by tax authorities as strong, independent evidence that you hadn't abandoned that state's domicile as of the divorce date -- even if you'd already signed a lease elsewhere. Coordinate the timing and framing of a divorce filing with your tax residency planning, and be aware that a court's factual findings about your residency can outlive the divorce itself.

Multistate and remote workers changing domicile

Signing a lease and getting a new state's tax withheld are a good start, but they're not the whole test. Virginia (and states with similar domicile rules) will also weigh vehicle registration, driver's license, and voter registration. If you keep any of those tied to your old state, that alone can keep you a domiciliary resident there. And steps taken after the tax year in question -- like a driver's license obtained the following year -- don't retroactively prove you'd already changed domicile during the year being assessed.

Accountants and tax professionals handling appeals and deadlines

Procedural deadlines are enforced strictly and independently of the merits: a reconsideration request filed even a year late under 23 VAC 10-20-165 F means the Department won't revisit the underlying facts at all, no matter how strong the client's domicile argument might otherwise be. Track the 45-day reconsideration window from the date of any determination letter. Separately, when a client contests a best-information-available assessment under Va. Code § 58.1-111, remind them that filing an actual return (here, within 60 days) is the path to a more accurate number, and that a credit for tax paid to another state under Va. Code § 58.1-332 A is available only for non-Virginia-source income.

Common questions

Q: If I miss the deadline to ask for reconsideration, is there any way to still win on the merits?
A: Not through that reconsideration request. As this ruling shows, a late request (here, filed about a year past the 45-day window in 23 VAC 10-20-165 F) means the Department treats the prior determination as final and the assessment stands, regardless of how strong the underlying domicile argument might be.

Q: I moved out of Virginia, got a new lease, and pay taxes in my new state. Am I automatically no longer a Virginia domiciliary resident?
A: Not automatically. You must both abandon your old domicile with no intent to return and establish a new one through physical presence plus intent to remain permanently. Retained connections like a Virginia vehicle registration, driver's license, or voter registration can outweigh new-state withholding and a new lease, and the burden is on you to prove the change.

Q: Can steps I take in a later year (like getting a new driver's license) prove I changed domicile in an earlier tax year?
A: No. In this ruling, the taxpayer's D.C. driver's license and voter registration weren't obtained until October 2018 -- after the 2017 tax year had ended -- so the Department found they could not establish a 2017 domicile change.

Q: How can a divorce decree affect my state tax residency?
A: If the decree includes a court finding (independent of the parties' own claims) that you were domiciled in or a bona fide resident of a state for a required period before filing, tax authorities can treat that finding as strong evidence you hadn't abandoned that state's domicile as of the divorce date -- as happened here with a Virginia divorce finalized in November 2017.

Q: If my assessment is based on the state's best-available information rather than my own return, can I still fix the number?
A: Yes, typically within a set window. Here, the taxpayer had 60 days from the letter to submit an actual 2017 Virginia resident return so the Department could recalculate her liability more precisely, including a possible credit for tax she actually paid to D.C. on non-Virginia-source income.

Citations and references

Statutes and regulations:

• Va. Code § 58.1-302 (domiciliary resident vs. actual resident, and the domicile-change standard)
• Va. Code § 58.1-111 (assessment based on best information available)
• Va. Code § 58.1-332 A (credit for tax paid to another state, non-Virginia-source income)
• Va. Code § 20-97 (six-month bona fide residency and domicile requirement to file for divorce in Virginia)
• 23 VAC 10-20-165 F (45-day deadline to request reconsideration of a final determination)

Related Department guidance referenced in the ruling: P.D. 19-79 (8/2/2019, the earlier 2014 determination that was the subject of the reconsideration request); P.D. 15-125 (6/24/2015, on court findings as strong evidence of domiciliary intent); P.D. 18-156 (8/8/2018, instructions for claiming a credit for tax paid to another state).

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 21-30

Original ruling text

March 9, 2021

Re: § 58.1-1821 Application: Individual Income Tax

Dear *:

This will reply to your letter in which you seek reconsideration of the Department’s determination letter, issued as Public Document (P.D.) 19-79 (8/2/2019). You also appeal the individual income tax assessment issued to * (the “Taxpayer”) for the taxable year ended December 31, 2017.

FACTS

In P.D. 19-79, the Department found that the Taxpayer remained taxable as a domiciliary resident of Virginia for the 2014 taxable year. Subsequently, an assessment was issued to the Taxpayer for the 2017 taxable year. The Taxpayer requests that the Department reconsider its determination, contending she was a resident of the District of Columbia (D.C).

DETERMINATION

Reconsideration – Taxable Year 2014

Under Title 23 of the Virginia Administrative Code (VAC) 10-20-165 F, a taxpayer who disagrees with the Tax Commissioner’s final determination may request a reconsideration of the determination within 45 days. The Taxpayer’s request for reconsideration was received by the Department on August 15, 2020, well after the 45-day period expired. Therefore, P.D. 19-79 is the Department’s final determination for the 2014 taxable year, and the assessment remains due and payable.

Appeal- Taxable Year 2017

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.

In P.D. 19-79, the Department found that the Taxpayer remained taxable as a domiciliary resident of Virginia for the 2014 taxable year because she failed to abandon her Virginia domicile. The Department cited factors such as the Taxpayer’s Virginia vehicle registration, Virginia driver’s license, and Virginia voter’s registration. Those factors continued to exist for the 2017 taxable year as well

The Taxpayer provided additional evidence with her appeal, showing that she continued to have D.C. taxes withheld from her wages and she filed a D. C. resident income tax return for the 2017 taxable year. The Taxpayer entered into a lease for a personal residence located in D.C., effective February 2017. She also obtained a D.C. driver’s license and voter’s registration in October 2018.

As additional evidence, the Taxpayer also provided a Decree of Divorce filed with a Virginia Circuit Court. Under Virginia law, a suit for divorce may be brought only if one of the parties is and has been an actual bona fide resident and domiciliary resident off Virginia for at least six months preceding commencement of them suit. See Virginia Code § 20-97. In the divorce decree, the court stated that it appeared, independently of the pleadings of the parties or otherwise, the Taxpayer was domiciled in and had been a bona fide resident of Virginia for at least six months preceding the commencement of the suit. The Department has found such statements in court documents to be strong indicators of domiciliary intent. See P.D. 15-125 (6/24/2015). The Taxpayer’s divorce was finalized in November 2017. The implications of the court’s statement is that the Taxpayer still had not abandoned her Virginia domicile as of that time. In light of this, in addition to the other connections the Taxpayer retained with Virginia, I find that the Taxpayer remained taxable as a domiciliary resident of Virginia for the 2017 taxable year.

CONCLUSION

Based on the evidence, the Taxpayer remained taxable as a domiciliary resident of Virginia for the 2017 taxable year. The assessment at issue were made based on the best information available pursuant to Virginia Code § 58.1-111. The Taxpayer, however, may have information that better represents her Virginia income tax liability for the taxable year at issue. Therefore, she should submit a 2017 Virginia resident individual income tax return to more accurately reflect her Virginia tax liability. The Taxpayer should be aware that she may be able to claim a credit on her Virginia return for tax paid to another state pursuant to Virginia Code § 58.1-332 A, so long as the income was not Virginia source income. Additional instructions for claiming the credit can be found in P.D. 18-156 (8/8/2018).

The return should be submitted within 60 days of the date of this letter to: Virginia Department of Taxation, Office of Tax Policy, Appeals and Rulings, P.O. Box 27203, Richmond, Virginia 213261-7203, Attention: *. Upon receipt, the returns will be reviewed, and the assessment will be adjusted, as appropriate. If the return are not received within the allotted time, the assessment will be adjusted based on the information available.

With regard to the 2014 assessment, the Taxpayer failed to timely file a request for reconsideration and declined to follow the instructions for filing a return in the August 15, 2019 determination. Accordingly, this assessment is considered to be correct and remains due and payable. A bill including interest to date will be issued shortly.

The Code of Virginia sections, regulations, 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/3511.A

Related Documents

15-125

18-156

19-28

19-79