Did a taxpayer who moved abroad in 2018 successfully change his domicile away from Virginia, entitling him to a refund of Virginia income tax withheld from a 2019 retirement distribution?

Subject

Residency : Domicile - Foreign Country

Plain-English summary

A taxpayer filed a Virginia Special Nonresident Claim for Individual Income Tax Withheld (Form 763-S) seeking a refund of Virginia income tax withheld from a 2019 distribution from a retirement account, claiming he had become a domiciliary resident of a foreign country ("Country A"). The Department initially denied the refund, finding that because the Taxpayer had kept his United States citizenship, he remained a Virginia domiciliary resident. The Taxpayer appealed, arguing he had abandoned his Virginia domicile and established a new one in Country A back in November 2018.

The Tax Commissioner agreed with the Taxpayer and granted the appeal. Virginia recognizes two categories of resident under Va. Code § 58.1-302: a "domiciliary resident" (someone whose permanent home, and the place they intend to return to, is Virginia) and an "actual resident" (someone who maintains a place of abode in Virginia for more than 183 days in the year, regardless of domicile). Changing domicile requires both actually abandoning the old domicile with no intent to return, and establishing a new one through physical presence plus intent to remain permanently or indefinitely -- and the taxpayer bears the burden of proving the change. Here, the Taxpayer had accepted employment in Country A for an indefinite period, bought a home there, obtained a Country A driver's license, vehicle registration, and residence card, and sold his Virginia home and vehicle and surrendered his Virginia driver's license. His only remaining Virginia ties were a P.O. box mailing address and a voter registration he had not used since 2018. The Commissioner noted federal law lets overseas U.S. citizens vote using their last state of domicile without that affecting their domicile for tax purposes, and that retaining U.S. citizenship does not by itself prevent someone from establishing a foreign domicile. Based on the totality of the evidence, the Commissioner found the Taxpayer had changed his domicile to Country A in November 2018 and ordered the Form 763-S refund claim processed as filed.

What this means for you

Individuals moving abroad

Retaining U.S. citizenship, a mailing address, or an unused voter registration in Virginia will not, by itself, keep you a Virginia domiciliary resident. What matters is the full package of facts showing you actually abandoned Virginia with no intent to return and established a genuine new home elsewhere -- employment, housing, a driver's license and vehicle registration in the new location, and disposing of your Virginia home, vehicle, and license are the kinds of concrete steps the Department looks for.

Burden of proof on refund claims

A taxpayer claiming a change of domicile carries the burden of proving it. If the information provided is inadequate, the Department must presume the person intended to remain in Virginia indefinitely. Taxpayers filing a Form 763-S nonresident withholding refund claim after moving abroad should be prepared to document the specific steps taken to abandon Virginia domicile and establish the new one.

Overseas voting does not undermine a domicile change

Casting an absentee ballot from Virginia while living abroad -- something federal law specifically permits U.S. citizens overseas to do using their last state of domicile -- does not, by itself, show an intent to remain a Virginia domiciliary resident, since federal law provides that exercising this voting right does not affect domicile for tax purposes.

Common questions

Q: Did the Taxpayer get the refund he requested?
A: Yes. The Tax Commissioner found he had changed his domicile to Country A in November 2018 and directed that his Form 763-S claim be processed as filed and the refund issued.

Q: Does giving up U.S. citizenship matter for establishing a foreign domicile?
A: No. The ruling notes the Department has previously held that an individual can abandon a Virginia domicile and establish domicile in a foreign country while remaining a United States citizen.

Q: What two kinds of Virginia "resident" status exist under this ruling?
A: A "domiciliary resident" (whose permanent home and intended place of return is Virginia) and an "actual resident" (anyone, regardless of domicile, who maintains a place of abode in Virginia for more than 183 days in the taxable year). Either status can trigger Virginia taxation.

Q: What facts persuaded the Commissioner that domicile had actually changed?
A: The Taxpayer accepted indefinite employment in Country A, bought a home there, obtained a Country A driver's license, vehicle registration, and residence card, and severed Virginia ties by selling his home and vehicle and surrendering his Virginia driver's license.

Q: Did keeping a Virginia voter registration or mailing address hurt the Taxpayer's case?
A: Not decisively. He had not voted since 2018 and only kept a P.O. box as a mailing address, and the ruling explains that federal law allows overseas citizens to vote using their last domicile's registration without that affecting their domicile for tax purposes.

Q: Is any single factor (like citizenship or voter registration) enough to decide domicile on its own?
A: No. The Commissioner emphasized that a change of domicile is determined from the totality of the taxpayer's expressed intent, conduct, and all attendant circumstances, with no single factor being dispositive.

Citations and references

Statutes:

• Va. Code § 58.1-302 (definitions of domiciliary and actual resident)
• Va. Code § 58.1-1821 (application for correction of assessment)
• 52 U.S.C. § 20310, formerly 42 U.S.C. § 1973ff-6 (overseas voting using last-domicile state registration)
• 52 U.S.C. § 20309, formerly 42 U.S.C. § 1973ff-5 (overseas voting does not affect domicile for tax purposes)

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 21-8

Original ruling text

February 2, 2021

Re: § 58.1-1821 Application: Individual Income Tax

Dear *:

This will reply to your letter in which you seek a refund of the individual income tax withheld from a distribution paid to * (the “Taxpayer”) for the taxable year ended December 31, 2019.

FACTS

The Taxpayer filed a Virginia Special Nonresident Claim for Individual Income Tax Withheld (Form 763-S) for the 2019 taxable year for taxes withheld on a distribution from a retirement account, and indicated he was a domiciliary resident of * (Country A). In considering this request, the Department found that the Taxpayer maintained his United States citizenship and determined he was a domiciliary resident of Virginia. As a result, the Taxpayer’s request for refund was denied. The Taxpayer filed an appeal, contending that he was not a domiciliary resident of Virginia because he had changed his domicile to Country A in November 2018.

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.

In this case, the Taxpayer has performed actions indicating an intent to establish domicile in Country A. The Taxpayer accepted employment in Country A. The information provided indicates the position was offered for an indefinite amount of time. He also purchased a personal residence in February 2019. The Taxpayer obtained a Country A driver’s license and vehicle registration in early 2019. In addition, the Taxpayer has also obtained a Country A residence card.

The Taxpayer maintained very few connections to Virginia. He sold his personal residence and vehicle in November 2018 and surrendered his Virginia driver’s license in March 2019. He did not, however, surrender his United States citizenship or his United States passport. While the Taxpayer does maintain a mailing address in Virginia, it is merely a post office box. In addition, although the Taxpayer indicates that he was registered to vote in Virginia, he has not voted since 2018.

The Department has observed that federal law general allows United States citizens living abroad to vote in federal elections using a voter’s registration from the state of the individual’s last domicile. See 52 U.S.C. § 20310 (formerly 42 U.S.C. § 1973ff-6). See also P.D. 10-203 (9/1/2010). In addition, the exercise of such federal voting rights by an overseas citizen shall not affect the domicile or residence of such citizen for purposes of any federal, state or local tax. See 52 U.S.C. § 20309 (formerly 42 U.S.C. § 1973ff-5).

The Department acknowledges that a change of domicile occurs as part of a process in which no single factor is dispositive. The Department has, however, previously ruled that an individual can abandon a Virginia domicile and establish domicile in a foreign country and continue to be a United States citizen. See P.D. 00-6 (2/28/2000).

After carefully considering all of the evidence presented, I find that the Taxpayer changed his domicile to Country A when he moved there in November 2018. Accordingly, the Taxpayer’s Virginia Special Nonresident Claim for Individual Income Tax Withheld (Form 763-S) should be processed as filed and a refund issued accordingly.

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/3494.A

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