My spouse took a fixed two-year federal government posting abroad, and we moved our bank accounts, phones, and health insurance there -- but we'd always planned to move to a different U.S. state once the assignment ended. Did we successfully abandon our Virginia domicile?

Plain-English summary

This ruling is a taxpayer loss and a valuable companion to this corpus's domestic domicile rulings -- it shows the same abandonment-plus-new-domicile test applied to a move ABROAD, and highlights a fact pattern that specifically defeats a foreign domicile claim: planning your NEXT move before you've even settled into the current one.

A couple filed a Virginia nonresident return, arguing they had abandoned their Virginia domicile and established a new one in a foreign country in August 2017, after the husband accepted a position with a U.S. government agency posted there for a two-year term. The Department instead found them still Virginia domiciliary residents and issued an assessment.

The couple took real, substantive steps abroad: they leased a residence, sold some furnishings and moved the rest to a different U.S. state (their intended eventual home), leased furnishings for the foreign residence, moved their bank accounts, cell phone service, and health insurance to local providers, and obtained the foreign country's version of social security cards. They also kept some Virginia ties -- a personal residence (which they rented out to others) and Virginia driver's licenses and vehicle registrations, though a retained license alone doesn't automatically defeat a domicile change.

The fact that undid their claim was the nature of the assignment itself: the husband could have requested a one- or two-year extension of the foreign posting but instead chose to end it as scheduled and request reassignment to a THIRD state, consistent with a plan the couple said they'd had since 2016 -- before the husband even accepted the foreign post -- to eventually relocate there. The Department has repeatedly held that people generally lack the intent to abandon Virginia domicile when their time outside Virginia is fixed-term, temporary employment (citing eight prior rulings spanning 1986 to 2019). Because the couple's own account showed the foreign posting was always meant to be a temporary bridge to their real intended destination rather than a permanent home in its own right, the Department found they never actually formed the intent to make the foreign country their new domicile. Since a domicile change requires physically settling somewhere with intent to stay permanently or indefinitely -- not just intending to leave Virginia -- no change of domicile occurred, and the couple remained Virginia domiciliary residents for the year at issue.

What this means for you

Federal employees or contractors on fixed-term overseas postings

Real, substantive steps abroad (leasing housing, moving bank accounts and insurance, obtaining local documentation) aren't enough on their own if the assignment itself is fixed-term and you plan to move on to somewhere else once it ends. The Department looks at whether you intended the foreign location itself to be your new permanent home -- not just whether you left Virginia.

Anyone with a multi-step relocation plan (e.g., a temporary posting followed by a planned final move)

Be careful how you frame and time each step. If your own documented plan shows you intended a temporary assignment as a bridge to a THIRD location rather than your actual new domicile, that can defeat a domicile-change claim for the interim location entirely -- even if you never intended to return to Virginia either.

Accountants and tax professionals with clients on overseas government or corporate assignments

This ruling adds an eighth citation (alongside seven prior rulings from 1986-2019) to the Department's consistent line that fixed-term temporary employment outside Virginia, by itself, doesn't establish the intent needed to change domicile -- a good starting point for evaluating any client's overseas-assignment domicile question.

Common questions

Q: If I take a fixed-term overseas job assignment and move my whole household there, have I changed my domicile?
A: Not necessarily. The Department has repeatedly held that people generally lack the intent to abandon Virginia domicile during temporary, fixed-term employment outside Virginia, regardless of how substantial the steps taken abroad are.

Q: What if I always planned to move somewhere else after the overseas assignment ends?
A: That can specifically defeat a domicile claim for the assignment location -- if your own plan shows the overseas posting was just a bridge to your real intended destination, the Department may find you never intended the overseas location as your actual new domicile.

Q: Does retaining a Virginia driver's license automatically mean I didn't abandon Virginia domicile?
A: Not by itself -- a taxpayer can successfully establish domicile elsewhere while still holding a Virginia license, though renewing one is treated as a strong indicator of retained Virginia domicile.

Citations and references

• Va. Code § 58.1-302 (domiciliary resident and actual resident defined; domicile change requires abandonment plus new physical presence with intent to remain)
• Va. Code § 46.2-323.1 (a Virginia driver's license may issue only to a Virginia resident)
• Va. Code § 58.1-205 (the taxpayer bears the burden of proving domicile was abandoned)
• P.D. 00-151 (8/18/2000) (a taxpayer can establish domicile elsewhere even while retaining a Virginia driver's license); P.D. 02-149 (12/9/2002) (renewing a Virginia license is a strong indicator of retained domicile)
• P.D. 86-219 (11/3/1986), P.D. 94-353 (11/23/1994), P.D. 96-207 (8/26/1996), P.D. 02-33 (3/13/2002), P.D. 05-8 (2/1/2005), P.D. 10-134 (7/12/2010), P.D. 15-142 (6/30/2015), P.D. 19-88 (8/15/2019) (consistent Department position that temporary, fixed-term employment outside Virginia generally doesn't establish intent to abandon Virginia domicile)

Subject

Residency : Domicile - Foreign Country

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 22-25

Original ruling text

February 08, 2022

Re: § 58.1-1821 Appeal: Individual Income Tax

Dear *:

This will respond to your letter in which you seek correction of the individual income tax assessment issued to * (the “Taxpayers”) for the taxable year ended December 31, 2018. I apologize for the delay in responding to your appeal.

FACTS

The Taxpayers filed a Virginia nonresident individual income tax return for the 2018 taxable year. Under review, the Department determined that the Taxpayers were domiciliary residents of Virginia and issued an assessment for additional tax due. As a result, the Department issued an assessment. The Taxpayers appealed, contending that they abandoned their Virginia domicile and established a new domicile in * (Country A) in August 2017.

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. See Virginia Code § 58.1-205. 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 Taxpayers performed some actions that may have indicated an intent to establish domicile in Country A. The husband accepted employment in Country A, and the Taxpayers leased a residence in Country A. The Taxpayers explain that they sold some of their furnishings and moved most of the rest to Florida (State A). They also state that they leased furnishings for their residence in Country A. They moved their bank accounts, cell phone service, and health insurance to Country A providers, and obtained Country A social security cards.

The Taxpayers also maintained some connections to Virginia. They continued to own a personal residence in Virginia which they leased to other occupants. They also continued to hold Virginia driver’s licenses and vehicle registrations.

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 Taxpayers claim that the husband accepted a position in Country A for an indefinite period of time. The information provided indicates that the husband was employed by an agency of the United States government and that he was to be assigned to a post in Country A for a two year term. The documentation indicates that he could have requested a one or two year extension but requested to be reassigned to a duty station in State A at the end of the term. This course of action appears to be consistent with a plan the husband says he and his spouse had beginning in 2016 to return to State A, where they were originally from. Thus, the husband’s employment arrangement appears to have been of a fixed, and ultimately temporary, duration. The Department has repeatedly ruled that individuals generally lack the intent to abandon their Virginia domicile when they engage in temporary employment outside of the Commonwealth. See P.D. 86-219 (11/3/1986), P.D. 94-353 (11/23/1994), P.D. 96-207 (8/26/1996), P.D. 02-33 (3/13/2002), P.D. 05-8 (2/1/2005), P.D. 10-134 (7/12/2010), P.D. 15-142 (6/30/2015) and P.D. 19-88 (8/15/2019). Further, the fact that the Taxpayers planned to move on to State A before the husband even accepted the post in Country A indicates that they did not formulate the intent to establish Country A as their domicile. Taking the post was merely a necessary step that would allow them to return to State A.

As stated above, a change of domicile requires the establishment of a new domicile where the person is physically present with the intent to remain there permanently or indefinitely. Even if the Taxpayers intended to abandon their Virginia domicile, the weight of the evidence indicates the Taxpayers did not intend to establish domicile in Country A. Therefore, a change of domicile did not occur and the Taxpayers remained domiciliary residents of Virginia during the taxable year at issue.

Accordingly, the assessment is upheld. The Taxpayers will receive an updated bill with accrued interest to date. The Taxpayers should remit the balance due within 30 days of the bill date to avoid the accrual of additional interest and possible collections actions.

The Code of Virginia sections and public documents cited are available online at www.tax.virginia.gov in the Laws, Rules, & Decisions section of the Department’s website. 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/3527-C

Related Documents

86-219

94-353

96-207

02-33

05-8

10-134

15-142

19-88