I moved for a new job in another state, but I still own a Virginia vacation home and briefly got a Virginia driver's license during the move -- does that make me a Virginia resident for tax purposes?

Plain-English summary

The IRS told the Department that a taxpayer may have owed Virginia income tax for 2018; the Department found no Virginia return on file, determined he was a Virginia domiciliary resident, and assessed tax. The taxpayer's representative sought correction, contending he was actually a resident of another state ("State A").

The two-part domicile test. Under Va. Code § 58.1-302, Virginia recognizes domiciliary residents (the state that is your permanent home and the place you intend to return to) and actual residents (anyone who keeps a Virginia abode more than 183 days a year). Changing domicile AWAY from Virginia requires (1) actually abandoning Virginia with no intent to return, AND (2) establishing a new domicile through physical presence plus intent to stay permanently or indefinitely -- both at once. The taxpayer bears the burden of proving the change, based on the totality of expressed intent, conduct, and circumstances: employment, income sources, spouse's residence, property, vehicle registration and licensing, and more.

The facts on each side. The taxpayer had lived and worked in another state ("State B") from 1996 through 2017, then accepted new employment in State A starting January 2018. He initially leased a home in State A and, in May 2019, purchased one there; he also got a State A driver's license and registered to vote there in September 2019. Against that, he owned a Virginia home (purchased in 2014, used mainly as a vacation property for visiting family), kept a vehicle registered and garaged at the Virginia address, and -- during the transition -- obtained a Virginia driver's license in May 2018 using the Virginia address (explaining that his old State B license had expired and he hadn't yet finished the move). A federal W-2 for deferred compensation tied to his prior State B employment was sent to that Virginia address, and Virginia tax was withheld from it.

Why the Virginia license didn't decide the case. Virginia law requires anyone applying for a driver's license to certify Virginia residency (Va. Code § 46.2-323.1), and the Department has held that obtaining or renewing a Virginia license is a strong indicator of intent to keep Virginia as domicile. But the Department has also recognized that an individual can still establish domicile elsewhere even while holding a Virginia license -- it's one factor among several, not an automatic answer. Here, the taxpayer held the Virginia license for only about 15 months before switching to a State A license, and the Department found he was clearly living and working in State A throughout 2018, returning to Virginia only for visits. Considering the whole picture, his 2018-2019 efforts to establish a genuine permanent home were aimed at State A -- not Virginia.

Outcome. The Department found the taxpayer was not a domiciliary resident of Virginia for the 2018 taxable year, abated the assessment, and ordered the Virginia tax that had been withheld refunded with interest.

What this means for you

Anyone moving out of Virginia for a new job who briefly keeps (or gets) a Virginia driver's license during the transition

A Virginia license is a real factor against you, but it isn't automatically fatal to your claimed move -- especially if you hold it only briefly and every other fact (new job, new home, new license and voter registration in your new state) points the same direction. Move quickly to swap out Virginia credentials for your new state's once you're settled.

Anyone who still owns Virginia property after moving away

A vacation or family property alone doesn't establish domicile if you aren't otherwise living there and your genuine center of life has moved elsewhere -- but combined with other lingering Virginia ties (license, vehicle registration), it adds to the Department's doubt about whether you really left.

Anyone who receives Virginia withholding on income unrelated to a current move

Here, a W-2 for deferred pay from a PRIOR job triggered Virginia withholding simply because it was mailed to the Virginia address on file -- that withholding doesn't by itself establish Virginia domicile, and can be refunded once residency is correctly resolved.

Common questions

Q: I got a Virginia driver's license while sorting out a move to another state -- does that automatically make me a Virginia resident?
A: Not automatically. It's a strong factor, but the Department will weigh it against everything else -- how long you held it, and whether your job, home, and other credentials all point to your new state instead.

Q: I still own a house in Virginia that I use as a vacation property -- am I still a Virginia domiciliary resident?
A: Not by itself. Owning property in Virginia is one factor, but it doesn't establish domicile if you aren't living there and the rest of your life (work, primary home, other state credentials) is elsewhere.

Q: How long do I need to have moved before a lingering Virginia driver's license stops mattering?
A: There's no fixed rule, but here holding it for only about 15 months, promptly followed by switching to the new state's license, weighed in the taxpayer's favor along with the rest of the facts.

Citations and references

Statutes:

• Va. Code § 58.1-302 -- domiciliary resident and actual resident defined
• Va. Code § 46.2-323.1 -- a Virginia driver's license requires certifying Virginia residency

Prior rulings the Department relied on (described here, not linked): P.D. 00-151 (8/18/2000) -- an individual may successfully establish a 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.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 24-51

Original ruling text

May 22, 2024

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 assessment issued to your client, * (the “Taxpayer”), for the taxable year ended December 31, 2018.

FACTS

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. Based on the information received, the Department determined that the Taxpayer was a domiciliary resident of Virginia and issued an assessment. The Taxpayer filed an application for correction, contending he was a resident of * (State A).

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 that person and the place to which that person intends to return even though they 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 person’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. The taxpayer has the burden of proving that their Virginia domicile has been abandoned. If the information is inadequate to meet this burden, the Department must conclude that the taxpayer intended to remain indefinitely in Virginia.

The Taxpayer lived and worked in * (State B) from 1996 through 2017. The Taxpayer then accepted employment in State A in January 2018. He initially leased a residence in State A and, in May 2019, he and his spouse purchased a home. He also acquired a State A driver’s license and registered to vote in State A in September 2019.

The Taxpayer also had some connections with Virginia. He had previously purchased a residence in Virginia in May 2014, which was used primarily as a vacation home for visiting family. He registered and garaged a vehicle at the Virginia residence. In May 2018, the Taxpayer obtained a Virginia driver’s license using the Virginia residence as the address on the license. A federal Form W-2 was also sent to the Taxpayer at this address, and Virginia income tax was withheld. The W-2 was for certain deferred compensation that the Taxpayer received in 2018 related to his prior employment in State B.

The Taxpayer explains that he obtained a Virginia license because his State B license had expired and he and his wife had not yet completed their move to State A. He indicates that he did not understand the implications of obtaining a Virginia driver’s license and that it was done out of convenience. 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).

The fact that an individual has a Virginia driver’s license is one factor to consider, among other possible factors, in any given domicile case. Nonresidents are not permitted to hold Virginia driver’s licenses. See Virginia Code § 46.2-323.1. They are, however, permitted to continue to use their licenses from their home states or countries. See Virginia Code § 46.2-307. For the purposes of Title 46.2 of the Code of Virginia , “nonresident” is generally defined as every person who is not domiciled in the Commonwealth. See Virginia Code § 46.2-100. Thus, in general, an individual must be a domiciliary resident of Virginia in order to hold a Virginia driver’s license. While the Taxpayer may have acted out of ignorance, attesting to being a domiciliary resident of Virginia when one is a resident of another state could be considered to be a false statement subject to penalties under Virginia Code § 46.2-348.

The documentation provided by the Taxpayer shows that he was a domiciliary and actual resident of State B until he accepted employment in State A in January 2018. The Taxpayer owned a residence in Virginia that appeared to be used strictly as a vacation property. The Taxpayer owned a vehicle that was registered in Virginia and kept at the Virginia property. The Taxpayer kept a vehicle at the Virginia residence because he was normally traveling by air rather than driving between Virginia and State A or State B.

As stated above, to change from one domicile to another requires both abandoning the previous domicile and establishing a new domicile. Establishing a new domicile requires that the individual be physically present in a new state or country with the intent to establish a permanent residence there at that time. The Taxpayer was clearly living and working in State A in 2018 and only returning to Virginia for visits. Further, while he did obtain a Virginia driver’s license in May 2018, the Taxpayer only held it for 15 months when he received his State A driver’s license. After considering the totality of the circumstances, the efforts that the Taxpayer undertook in 2018 and 2019 to establish a permanent residency somewhere were done with respect to State A, not Virginia. As such, I find that the Taxpayer was not taxable as a domiciliary resident of Virginia for the 2018 taxable year. Accordingly, the assessment issued for the taxable year ended December 31, 2018, will be abated and the Virginia income tax that was withheld will be refunded with interest.

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 * in the Office of Tax Policy, Appeals and Rulings, at ***.

Sincerely,

James J. Alex

Tax Commissioner

Commonwealth of Virginia

AR/4663.B

Related Documents

00-151

02-149