I moved to another state for a new job and lived there all year, but I kept my Virginia driver's license and car registration -- am I still a Virginia resident for income tax purposes?

Plain-English summary

A taxpayer took a new position with his employer that required relocating to another state ("State A"), leasing a personal residence there starting in December 2016. He filed a Virginia resident income tax return for 2017 anyway, but the Department later learned (from IRS data) that he'd underreported his federal adjusted gross income and issued an assessment. When the taxpayer said he'd actually become a resident of State A during 2017, the auditor reviewed additional information but still concluded he remained a Virginia resident and upheld the assessment. The taxpayer appealed, insisting he was a State A resident all year.

Virginia recognizes two kinds of residents, and domicile is about more than where you live. An "actual resident" is anyone who maintains a Virginia home for more than 183 days in a year, regardless of intent. A "domiciliary resident," by contrast, is about your PERMANENT home -- the place you intend to return to, even if you're currently living elsewhere. To change your domicile away from Virginia, you must do TWO things at the same time: (1) actually abandon Virginia with no intention of returning, AND (2) establish a new domicile elsewhere by being physically present there with the intent to stay permanently or indefinitely. The person claiming the change bears the burden of proving it, looking at intent, conduct, and circumstances like financial independence, employment, income sources, a spouse's residence, marital status, where real/personal property is located, and vehicle registration/licensing.

The taxpayer's State A evidence was substantial -- but not decisive. He provided HR records, health insurance information, bank statements, a State A highway pass, and vehicle service records, all supporting that he was actually LIVING in State A during 2017. The Tax Commissioner acknowledged this documentation showed residency in State A, but explained it wasn't enough by itself to prove he had formed the necessary INTENT to make State A his new permanent domicile, or that he intended to abandon Virginia.

The Virginia connections he kept were the deciding factor. His parents still lived in Virginia. He kept a Virginia driver's license and vehicle registration. And he continued filing a Virginia resident return. While Virginia law technically allows someone to establish an out-of-state domicile even while keeping a Virginia driver's license, renewing or keeping that license is treated as a STRONG indicator of intent to remain a Virginia domiciliary. Here, the taxpayer himself explained he kept the license and registration specifically to make it easier to move BACK to Virginia if the new position in State A didn't work out -- language the Tax Commissioner read as showing he hadn't yet fully formed the intent to abandon Virginia. Because domicile change requires BOTH abandonment and new establishment to happen together, and the "hedge to come back" explanation undercut the abandonment half, the taxpayer remained a taxable Virginia domiciliary resident for 2017.

The assessment itself had been built on the best information available to the Department (IRS data), and the taxpayer was invited to file an amended 2017 Virginia return within 60 days with more accurate figures, which the Department would then review and use to adjust the assessment if warranted.

What this means for you

Anyone relocating for work who wants to change their tax domicile away from Virginia

Physically living in the new state isn't enough -- you need to affirmatively demonstrate you intend to abandon Virginia PERMANENTLY, not just temporarily for a job. Keeping strong Virginia ties (family, driver's license, vehicle registration) especially if explained as a way to make returning easier, actively undercuts your claim of abandonment.

Individuals keeping a Virginia driver's license or vehicle registration "just in case" after moving

Understand that renewing or retaining a Virginia license/registration is treated as a strong indicator you intend to remain a Virginia domiciliary -- it's not disqualifying on its own, but combined with other hedge-like behavior, it can be the deciding factor against you.

Taxpayers who receive a best-information-available assessment based on IRS data

You're not stuck with the Department's estimate -- this ruling shows the Department will accept and review an amended return with more accurate figures within a set window, and adjust the assessment accordingly if warranted.

Common questions

Q: If I live in another state more than half the year, does that automatically make me a resident there instead of Virginia?
A: Not by itself -- Virginia's domicile test requires proof of INTENT to permanently abandon Virginia and establish a new permanent home elsewhere; simply living somewhere else, even for most or all of the year, doesn't automatically satisfy that intent requirement.

Q: Can I keep my Virginia driver's license and still successfully claim I've changed my domicile to another state?
A: It's possible in theory (the Department has found this before in other cases), but keeping a Virginia license is treated as a STRONG indicator of intent to retain Virginia domicile, and explaining that you kept it as a hedge to move back makes it even harder to prove abandonment.

Q: What happens to a domicile-dispute assessment based on IRS best-information-available data if I think the numbers are wrong?
A: You can file an amended Virginia return with more accurate information within the timeframe given in the ruling; the Department will review it and adjust the assessment as appropriate, but if you don't submit it in time, the original assessment stands and collection may proceed.

Citations and references

• Public Document 00-151 (8/18/2000) -- found that an individual may successfully establish domicile outside Virginia even while retaining a Virginia driver's license
• Public Document 02-149 (12/9/2002) -- found that obtaining or renewing a Virginia driver's license is a strong indicator of intent to retain Virginia domiciliary residency

Subject

Residency : Domicile - Failure to Abandon Virginia Domicile

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 21-69

Original ruling text

May 25, 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 Taxpayer filed a Virginia resident income tax return for the 2017 taxable year. Based on information from the Internal Revenue Service (IRS), the Department determined that he underreported his federal adjusted gross income (FAGI) on the Virginia return. As a result, the Department issued an assessment for additional tax and interest. The Taxpayer contacted the Department and indicated that he was a resident of * (State A) during 2017. Based on additional information the Taxpayer provided, the auditor concluded that the Taxpayer was a resident of Virginia during the 2017 taxable year and upheld the assessment. The Taxpayer appealed, contending he was a resident of State A during the 2017 taxable year.

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 Taxpayer explains that he obtained a new position with his employer that required him to relocate to State A. The information provided indicates he began leasing a personal residence in State A in December 2016. He also provided further documentation to establish that he resided in State A in 2017, including human resources records from his employer, health insurance information, bank statements, a letter confirming that he obtained a State A highway pass, and vehicle service records. While such documentation tends to show that the Taxpayer was residing in State A, it is not determinative as to whether he formed the requisite intent to remain there permanently or indefinitely, nor does it demonstrate whether he had the intent to abandon his Virginia domicile.

The Taxpayer retained connections to Virginia as well. His parents lived in Virginia. He also held a Virginia driver’s license and a Virginia motor vehicle registration. In addition, he filed a Virginia resident income tax return for the 2017 taxable year.

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 Department acknowledges that a change of domicile occurs as part of a process in which no single factor is dispositive. Even if the Taxpayer had the requisite intent to establish domicile in State A, the connections he retained with Virginia tend to indicate that he did not intend to abandon his Virginia domicile. In particular, the Taxpayer explained that he retained his Virginia driver’s license and motor vehicle registration to make it easier for him to move back to Virginia should he not remain in the new position in State A. Such a statement implies that the Taxpayer had not yet fully formed the intent to change his domiciliary residence from Virginia to State A. As stated above, a change of domicile requires both the establishment of a new domicile and the abandonment of the old, and these requirements must be met concurrently. Therefore, I find that the Taxpayer remained taxable as a domiciliary resident of Virginia for the 2017 taxable year.

The assessment at issue was made based on the best information available to the Department pursuant to Virginia Code § 58.1-111. The Taxpayer, however, may have information that better represents his Virginia income tax liability for the taxable year at issue. Therefore, the Taxpayer should file an amended 2017 Virginia resident income tax return to more accurately reflect his Virginia tax liability. The return should be submitted within 60 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 return will be reviewed and the assessment will be adjusted, as appropriate. If the return is not received within the allotted time, the assessment will be considered correct and collection actions may result.

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/3540.B

Related Documents

00-151

02-149