I already established that I'd moved away from Virginia, but I later got a new Virginia driver's license just for a work benefit -- does that mean I re-established Virginia domicile even though I never actually moved back?

Plain-English summary

This ruling is the mirror image of most Virginia domicile disputes: instead of asking whether someone left Virginia, it asks whether a taxpayer who'd already left could be found to have come back -- based on nothing more than a new driver's license.

Background: The taxpayer filed a 2015 part-year Virginia return showing he'd moved out to "State A" that June. The Department itself, on audit, found he wasn't required to file a Virginia resident return for 2016 -- effectively confirming his domicile had genuinely shifted to State A. He then moved again, to "State B," in late 2016: he got a State B driver's license (February 2017) and voter registration (March 2017), continuously leased residences there, registered three vehicles in State B, and used a State B address on his federal returns from 2016 through 2019.

Then, in January 2018, he obtained a new Virginia driver's license, using his parents' Virginia address. When the IRS flagged a possible unfiled 2018 Virginia return, the Department concluded -- based partly on that new license -- that he'd become a Virginia domiciliary resident again, and assessed him for both 2018 and 2019. He paid the assessments and then appealed.

Why the license alone didn't work. Virginia's domicile test genuinely requires two things together: abandoning the old domicile with no intent to return, and physically acquiring a new one by actually being present there with intent to stay permanently or indefinitely. The Department cited a century-old Virginia Supreme Court case, Coopers Adm'r v. Commonwealth, 121 Va. 338 (1917), for the principle that neither physical presence alone nor expressed intention alone is enough to create a legal domicile -- both have to combine. Obtaining a Virginia driver's license is normally treated as a strong indicator of intent to be domiciled in Virginia, but the taxpayer explained he'd gotten this one purely to qualify for a larger housing allowance from his employer -- and there was no evidence he'd actually moved back to Virginia or lived there. Since he'd already conclusively abandoned Virginia domicile as of 2016 and hadn't had the physical presence required to reacquire it since, the Department found he simply couldn't have re-established Virginia domicile in 2018 based on a license alone. Both the 2018 and 2019 assessments were abated, and because he'd already paid them in full, refunds were issued.

A parting caution. Even though the taxpayer won, the Department flagged that continued Virginia connections -- holding the license, and having Virginia income tax withheld from his wages -- would likely keep drawing the Department's attention in future years if the facts changed.

What this means for you

Anyone who's already established domicile elsewhere but later gets a Virginia driver's license for an unrelated reason (like an employer benefit)

A Virginia license alone -- without actually moving back and living in Virginia with intent to stay -- isn't enough to re-establish Virginia domicile. But be prepared to explain the discrepancy if the Department flags it, since the license is still a real factor that will draw scrutiny.

Anyone whose domicile status has already been confirmed for an earlier year

This ruling shows that an earlier finding (here, the Department's own conclusion that no 2016 Virginia return was required) can be strong supporting evidence later if a subsequent year's residency is questioned -- it wasn't treated as irrelevant just because a new tax year was at issue.

Employers offering housing-allowance or relocation benefits tied to state residency documentation

If an employee obtains a Virginia driver's license purely to access a benefit, without actually relocating, that mismatch between paperwork and physical reality is exactly the kind of fact pattern the Department scrutinizes -- document the real reason clearly in case of a later inquiry.

Common questions

Q: If I already live in another state but get a Virginia driver's license for an unrelated reason, does that make me a Virginia domiciliary resident again?
A: Not by itself, according to this ruling. Virginia domicile requires both intent and actual physical presence in Virginia with intent to remain -- a license obtained without an actual move isn't enough.

Q: Does an earlier Department determination that I wasn't a Virginia resident for one year help me if a later year is questioned?
A: It can. In this ruling, the Department's own prior conclusion that the taxpayer wasn't required to file a 2016 Virginia return supported the finding that his domicile had already shifted away from Virginia before the disputed 2018-2019 years.

Q: Is there a legal basis for requiring both physical presence and intent to establish domicile, not just one or the other?
A: Yes -- this ruling cites Coopers Adm'r v. Commonwealth, 121 Va. 338 (1917), a Virginia Supreme Court case holding that neither physical presence alone nor expressed intent alone is sufficient to create a legal domicile.

Citations and references

Statutes and regulations:

• Va. Code § 58.1-302 -- defines domiciliary resident and actual resident for Virginia income tax purposes
• Va. Code § 46.2-323.1 -- Virginia driver's license applicants must certify Virginia residency
• Va. Code § 46.2-348 -- penalty for a false residency statement to the DMV
• Coopers Adm'r v. Commonwealth, 121 Va. 338 (1917) -- neither physical presence alone nor expressed intent alone creates a legal domicile

Prior rulings referenced (described here, not linked): P.D. 00-151 (8/18/2000) -- a person can establish domicile outside Virginia even while retaining a Virginia driver's license; P.D. 02-149 (12/9/2002) -- obtaining or renewing a Virginia driver's license is a strong indicator of intent to retain Virginia domicile; P.D. 13-97 (6/11/2013) and P.D. 15-4 (1/8/2015) -- an individual cannot establish domicile in a new location merely by having some connections there without the requisite intent to remain permanently or indefinitely.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 23-110

Original ruling text

October 19, 2023

Re: § 58.1-1821 Application: Individual Income Tax

Dear *:

This will respond to your letter in which you seek correction of the individual income tax assessments issued to * (the “Taxpayer”) for the taxable years ended December 31, 2018, and December 31, 2019.

FACTS

The Taxpayer filed a 2015 part year Virginia resident income tax return indicating that he moved out of Virginia in June 2015 to reside in * (State A). Under audit for 2016, the Department concluded the Taxpayer was not required to file a Virginia resident return for that taxable year. The Taxpayer filed a Virginia nonresident return for the 2017 taxable year.

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 2018 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 a response was not received, an assessment was issued. Subsequently, the Taxpayer submitted information attempting to show he was a resident of * (State B) in 2018. Based on the information provided, however, the auditor concluded that the Taxpayer remained taxable as a domiciliary resident of Virginia. The Taxpayer appeals, contending he was a resident of State B.

While the appeal was pending, the Department issued an assessment for the 2019 taxable year based on its determination that he remained a Virginia resident. The Taxpayer has requested that his appeal include the 2019 assessment.

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 they intend to return even though they may reside elsewhere. For a person to change domiciliary residency to another state or country, that person must intend to abandon their 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 their 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 their 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 they have abandoned their Virginia domicile. If the information is inadequate to meet this burden, the Department must conclude that the taxpayer intended to remain indefinitely in Virginia.

The Taxpayer was a domiciliary resident of Virginia before relocating to State A in 2015. In connection with its examination regarding the Taxpayer’s residency for the 2016 taxable year, the Department observed that he had obtained a State A driver’s license, surrendered his Virginia driver’s license, leased a residence in State A, and filed a State A resident income tax return.

In late 2016, the Taxpayer moved again. This time, he moved from State A to State B where he obtained a State B driver’s license in February 2017 and a State B voter’s registration in March 2017. The Taxpayer has continuously leased residences in State B, has registered three vehicles in State B, and continues to reside there. The Taxpayer also filed his 2016 through 2019 federal income tax returns using a State B address.

The Taxpayer also retained some connections with Virginia. He obtained a Virginia driver’s license in January 2018, using his parents’ address, and continued to have Virginia income tax withheld from his wages.

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 that individual 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).

As stated above, a change of domicile requires that a taxpayer prove two elements concurrently: 1) that they abandoned the old domicile and had no intent to return to it; and 2) that they established a new domicile, which must have been formed by physical presence coupled with the intent to remain permanently or indefinitely. In this case, the Taxpayer appears to have acquired a State A domicile in 2015. The Department effectively acknowledged this change in domicile when it concluded that he was not required to file a 2016 Virginia resident return.

In contrast, the Taxpayer did acquire a Virginia driver’s license in 2018 which would be indicative of an intent toward establishing domicile in Virginia. The Taxpayer explains that he obtained a Virginia driver’s license in 2018 because it enabled him to earn a larger income by receiving a housing allowance from his employer.

Having connections, such as personal residences, driver’s licenses, motor vehicle registrations, and voter’s registrations, indicates that an individual had the intent to establish domicile in the state or country where such connections were established. Acquiring domicile, however, in a new location requires both intent and personal presence. See Coopers Adm’r v. Commonwealth , 121 Va. 338 (1917), in which the Virginia Supreme Court observed that neither physical presence alone, nor expressed intention alone are sufficient to create a legal domicile for taxation purposes. The Department has determined that individuals cannot establish a domicile despite having some or all of the above connections if they have not yet resided in the jurisdiction with the intention to remain permanently or indefinitely. See P.D. 13-97 (6/11/2013) and P.D. 15-4 (1/8/2015).

After carefully considering all of the evidence presented, I find that the Taxpayer abandoned his Virginia domicile as of the 2016 taxable year. Because he has not had the requisite physical presence in Virginia since that time, he could not have reacquired a Virginia domicile in 2018. The assessments for the 2018 and 2019 taxable years will, therefore, be abated. The Department’s records indicate that the Taxpayer paid the assessments in full. As such, refunds for the amounts paid on the assessments will be issued shortly.

While the Department concedes that the Taxpayer was not a resident of Virginia for the taxable years at issue, he should be aware that continuing connections with Virginia, such as possession of a Virginia driver’s license and having Virginia income tax withheld from his earnings, will likely result in future contacts by the Department with respect to the situs of the Taxpayer’s domicile. As in any determination, a change in the facts and circumstances could result in a change in the Department’s determination in subsequent taxable years.

In addition, the Taxpayer should be aware that Virginia law does not permit nonresidents to obtain Virginia driver’s licenses, and persons providing a false statement to an agency of the Commonwealth may be subject to penalty under Virginia law. Any applicant who knowingly makes a false statement to the DMV may be subject to penalties under Virginia Code § 46.2-348.

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/4503.X

Related Documents

00-151

02-149

13-97

15-4