I came to Virginia on a student visa, worked here for a few years, then moved back to my home country before returning later on a work visa -- was I still a Virginia resident, and did a 1099 issued to my old Virginia address make me taxable here, for the year I was living abroad?

Plain-English summary

The IRS told the Department that a taxpayer may have owed Virginia income tax for 2019. No Virginia return was on file, and after he did not fully respond to the Department's request for information, an assessment was issued. He sought correction, contending he had lived in his home country for all of 2019 and earned no Virginia income.

A visa holder's Virginia history. The taxpayer arrived in the U.S. in 2013 on an F-1 student visa to attend a university, graduated in 2015, and stayed on to work full-time as an engineer in Virginia under the F-1 visa's optional practical training (OPT) provisions. He obtained a Virginia driver's license in 2015 -- notable because Virginia generally requires license applicants to certify Virginia residency (Va. Code § 46.2-323.1), but F-1 and H-1B visa holders are specifically made eligible for a Virginia license despite that (Va. Code § 46.2-328.1). He filed a part-year Virginia resident return for 2015 and full resident returns for 2016 through 2018.

Why 2019 was different. The taxpayer returned to his home country in September 2018 and remained there through 2019 (aside from a two-week visit), not returning to live and work in Virginia again until November 2021, this time on an H-1B specialty-occupation visa. Applying the same two-part domicile test used throughout this corpus (abandonment of the old domicile with no intent to return, plus physical presence and intent to remain permanently in the new one), the Department weighed his years of Virginia residence, employment, and driver's license against the fact that his visa status was always temporary and he left the country entirely once it lapsed. The temporary, expiring nature of an F-1/OPT visa, combined with actually leaving for his home country rather than settling anywhere else, made his intent to remain in Virginia "permanently or indefinitely" doubtful. The Department found he was not a Virginia domiciliary resident for 2019 -- even though he plainly had been an ACTUAL resident (taxable simply by living and working there) in the earlier years.

The 1099 didn't create Virginia-source income either. A nonresident with no Virginia domicile is still taxable on Virginia-source income -- income from Virginia property or from carrying on a business, trade, profession, or occupation in Virginia (Va. Code §§ 58.1-302, 58.1-325; nonresidents file Form 763 under § 58.1-341, computing Virginia tax by the Virginia-source ratio under 23 VAC 10-110-180 A, unless a filing exception under § 58.1-321 applies). Here, his former employer issued a 2019 Form 1099 under his Social Security number, in the name of a business listed with a Virginia address -- suggesting he was operating as a sole proprietorship connected to Virginia. But the actual services he was paid for were performed entirely in India. Because the work itself, not just the business's nominal address, determines where income is sourced, this 1099 income was not Virginia-source income for 2019.

Outcome. With no Virginia domicile and no Virginia-source income for 2019, the Department abated the assessment.

What this means for you

Employers and HR teams managing visa-holder employees who relocate or return home

An employee's Virginia residency can end when they leave the country after their visa's temporary status runs out, even if they held a Virginia license and filed resident returns in prior years -- the temporary nature of the visa and an actual departure both cut against continued Virginia domicile. Reassess residency and withholding each year rather than assuming continuity from prior filings.

Anyone issued a 1099 under a business name tied to a Virginia address, for work actually performed elsewhere

Where the services were actually rendered controls sourcing, not the address on file for the payer or the business name. If the work was performed entirely outside Virginia, that income generally isn't Virginia-source income taxable to a nonresident.

F-1/OPT and H-1B visa holders who previously held a Virginia driver's license

Visa holders in these categories are specifically allowed to get a Virginia license despite the general residency-certification rule -- so holding one doesn't carry quite the same automatic weight it might for someone who wasn't otherwise eligible for one.

Common questions

Q: I worked and lived in Virginia for several years on a visa, then returned to my home country when it expired -- am I still a Virginia resident for the year I left?
A: Not necessarily. If your visa was inherently temporary and you actually left the country rather than settling permanently anywhere, the Department may find you lacked the intent to remain in Virginia indefinitely -- ending your domiciliary residency.

Q: I got a 1099 for work tied to a Virginia business address, but I performed all the actual services from abroad -- is that Virginia-source income?
A: Not based on this ruling. Where you performed the work is what matters for sourcing, not the business's listed address.

Q: Can F-1 or H-1B visa holders even get a Virginia driver's license, since Virginia generally requires residency to get one?
A: Yes -- Va. Code § 46.2-328.1 specifically makes F-1 and H-1B visa holders eligible for a Virginia license despite the general rule.

Citations and references

Statutes:

• Va. Code § 58.1-302 -- domiciliary resident and actual resident defined; Virginia-source income and deductions defined
• Va. Code § 58.1-325 -- nonresidents with Virginia-source income are taxed as nonresidents
• Va. Code § 58.1-341 -- Virginia Nonresident Individual Income Tax Return (Form 763) filing requirement
• Va. Code § 58.1-321 -- filing exception threshold
• Va. Code § 46.2-323.1 -- a Virginia driver's license requires certifying Virginia residency
• Va. Code § 46.2-328.1 -- F-1 and H-1B visa holders are eligible for Virginia driver's licenses despite § 46.2-323.1
• 23 VAC 10-110-180 A -- computing a nonresident's Virginia taxable income by the Virginia-source ratio

Prior rulings the Department relied on (described here, not linked): P.D. 07-148 (9/12/2007) -- the nonresident filing requirement for business income earned in Virginia.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 24-56

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 * (the “Taxpayer”) for the taxable year ended December 31, 2019.

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 2019 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. The Taxpayer provided some information, but when he did not fully respond to the Department’s request, an assessment was issued. The Taxpayer submitted an application for correction, contending that he was living in * (Country A) for the entirety of 2019 and did not earn any income in Virginia.

DETERMINATION

Residency

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 residing 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 came to the United States in 2013 in order to attend a university located in * (State A) on an F-1 student visa. He graduated in 2015 and obtained full-time employment as an engineer in Virginia and was able to extend his visa pursuant to the optional practical training (OPT) provisions of the F-1 visa program. The Taxpayer also obtained a Virginia driver’s license in 2015. He filed a part-year Virginia resident return for the 2015 taxable year and resident Virginia returns for the 2016 though 2018 taxable years.

The Taxpayer returned to Country A in September 2018 where he remained, except for a two week visit in 2019, until he returned to Virginia in November 2021. From that time on, the Taxpayer lived and worked in Virginia under an H-1B special occupations visa.

As for obtaining the driver’s license, 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. Pursuant to Virginia Code § 46.2-328.1, however, individuals from foreign countries who are in Virginia on an F-1 student visa or an H-1B special occupations visa are eligible to get Virginia driver’s licenses.

Generally, individuals who are citizens of foreign countries and wish to enter the United States must first obtain a visa. There are many different types of visas. In order to study at a university or college, the individual must get an F type visa. Individuals with this type of visa must depart the United States within 60 days of their educational program ending. However, individuals with an F-1 visa may obtain up to 12 months of OPT full-time employment after their course of study ends provided their employment is related to their education. If an individual earns a degree in certain science, technology, engineering, and math (STEM) fields, they can get a 24-month extension to work in the United States in a STEM field.

The H-1B classification is a visa for foreign individuals who perform services in certain specialty occupations. An H-1B specialty worker may be admitted in the United States for a period of up to three years, but may be extended to six years.

As stated above, the key to determining whether an individual established a Virginia domicile is to look at that individual’s intent. The Department looks at multiple factors such as motor vehicle registration and licensing, location of profession or employment, the establishment of a residence, and length of residence time. Numerous other factors may be reviewed depending on a particular individual’s situation. In this case, the Taxpayer met a number of factors that were conducive to establishing a Virginia domicile during the 2019 taxable year. He lived in and was employed in Virginia for a number of years, including the year at issue. He also held a Virginia driver’s license. Accordingly, he was certainly an actual Virginia resident during the years he was living and working in Virginia.

The establishment of domicile in Virginia requires the intent to reside in Virginia permanently or indefinitely. As of 2019, the Taxpayer had only ever been in Virginia on a temporary visa. When this visa expired, the Taxpayer returned to Country A, and was not present again in Virginia in 2019 except for several weeks on a personal visit. The temporary nature of the visa and the fact that the Taxpayer returned to his home country after it expired makes the Taxpayer’s intent to remain permanently or indefinitely doubtful. As such, I find that the Taxpayer was not a domiciliary resident of Virginia during the 2019 taxable year.

Nonresident Individuals

Under Virginia Code § 58.1-325, individuals who are neither domiciliary nor actual residents of Virginia and have income from Virginia sources are taxed as nonresidents. Virginia Code § 58.1-302 limits the term income and deductions from Virginia sources to the items of income, gain, loss, and deductions attributable to the ownership of property in Virginia or the conduct of a business, trade, profession, or occupation in Virginia.

In accordance with Title 23 of the Virginia Administrative Code (VAC) 10-110-180 A, the Virginia taxable income of a nonresident is computed by multiplying his Virginia taxable income (computed as if he were a resident) by the ratio of his net income, gain, loss, and deductions from Virginia sources to his net income, gain, loss, and deduction from all sources. Thus, a nonresident individual who has income from carrying on a business, trade, profession, or occupation within Virginia is required to file a Virginia Nonresident Individual Income Tax Return, currently Form 763, pursuant to Virginia Code § 58.1-341, unless the individual meets the filing exception described in Virginia Code § 58.1-321. See P.D. 07-148 (9/12/2007).

In this case, the company that the Taxpayer previously worked for issued a Form 1099 for the 2019 taxable year for payments made in connection to services that the Taxpayer rendered for the company. The Form 1099 was issued under the Taxpayer’s social security number and in the name of a business listed with a Virginia address. As such, it appears that the Taxpayer was conducting business under that business’s name as a sole proprietorship. The actual services for which the Taxpayer was paid, however, appear to have been entirely conducted by him in India. Therefore, at least as to the taxable year at issue, it does not appear that the Taxpayer had income from carrying on a business, trade, profession, or occupation with Virginia.

CONCLUSION

After considering all of the evidence presented, I find that the Taxpayer was not a resident of Virginia, nor did he have any Virginia source income during the 2019 taxable year. Accordingly, the assessment issued to the Taxpayer for the taxable year ended December 31, 2019, will be abated.

The Code of Virginia sections, regulation, 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,

James J. Alex

Tax Commissioner

Commonwealth of Virginia

AR/4631.B

Related Documents

07-148