Did buying a Virginia townhouse and obtaining a Virginia driver's license establish domicile when the taxpayer kept his spouse, home, vote, car, and license in another state?

Subject

Virginia employment, townhouse, and license did not overcome retained State A domicile

Plain-English summary

Virginia found that the taxpayer remained domiciled in State A for 2004 through 2006. His work required substantial time at a Virginia corporate office, leading him to buy a Virginia townhouse and obtain a Virginia driver's license in 2002.

But he kept his State A home, where his spouse lived and where he returned on weekends when possible. He also maintained a State A license, vehicle registration, and voter registration. The Virginia townhouse was one of several homes outside State A, and he traveled internationally enough to spend fewer than 183 days in Virginia each year.

The Virginia license was strong contrary evidence, but he did not renew it and retained the State A license. Because he never abandoned State A domicile, the Virginia resident assessments were abated.

What this means for you

• Working and owning a home in Virginia do not automatically establish Virginia domicile.
• A spouse and primary home elsewhere, repeated returns, and retained licensing and voting ties can show continued domicile.
• Obtaining a Virginia license is strong evidence and should not be treated casually.
• Domicile and the 183-day actual-resident test are separate.

Common questions

Did the taxpayer own a Virginia residence?

Yes, but he explained it as an alternative to rent during Virginia work periods.

Why did State A remain his domicile?

He kept his spouse, home, license, vehicle registration, voting registration, and return pattern there.

What happened to the assessments?

Virginia abated the 2004-2006 resident assessments.

Citations and references

• Va. Code §§ 58.1-302 and 46.2-323.1.
• Virginia Public Documents 00-151 and 02-149.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 09-131

Original ruling text

September 8, 2009

Re: § 58.1-1821 Application: Individual Income Tax

Dear *:

This will reply to your letter in which you seek correction of the assessment of individual income tax to * (the "Taxpayers") for the taxable years ended December 31, 2004 through 2006. I apologize for the delay in this response.

FACTS

The Taxpayer filed Virginia nonresident individual income tax returns for the 2004 through 2006 taxable years to report income earned while working for his employer in Virginia. The Taxpayer maintained a home in * ("State A") where his spouse lived, a State A driver's license, and an automobile registered in State A. He was also registered to vote in State A.

The Department obtained information from the Internal Revenue Service (IRS) indicating that the Taxpayer received third-party annual information returns at an address in Virginia. In addition, the Taxpayer had purchased a town home in Virginia and obtained a Virginia driver's license in 2002. Because the Taxpayer spent more time in Virginia than State A for the taxable years at issue, the Department's auditor concluded that the Taxpayer was a domiciliary resident of Virginia, and assessments were issued.

The Taxpayer appeals the assessments, contending that, although he performed work for his employer in Virginia, he remained a domiciliary resident of State A.

DETERMINATION

Two classes of residents, a domiciliary resident and an actual resident, are set forth in Va. 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 actually reside elsewhere. 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 person who is not a domiciliary resident of Virginia, but who stays in Virginia for an aggregate of more than 183 days is subject to Virginia taxation.

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, sites of real and 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 of the facts and circumstances of the particular case. A simple declaration is not sufficient to establish domicile.

The Department concedes that it is difficult to know whether a taxpayer intends to return to his or her original domicile. The Department determines a taxpayer's intent through the information provided. In this case, the Taxpayer has the burden of proving that he maintained his domicile in State A and did not change his domicile to Virginia. If the evidence is inadequate to meet this burden, the Department must conclude that the Taxpayer intended to obtain a Virginia domicile.

The Taxpayer performed a number of actions consistent with maintaining his State A domicile. He continued to maintain a home in State A, where his spouse continued to reside and to which he returned on weekends when possible. He also maintained an automobile registration, voting registration, and a driver's license in State A.

The Taxpayer also took a number of actions considered in establishing domicile in Virginia. His job function required him to spend more time at his employer's corporate headquarters in Virginia. As a result, he purchased a home in Virginia and obtained a Virginia driver's license in 2002.

While the Taxpayer was transferred to a corporate office in Virginia, he traveled extensively outside of the United States, spending less than 183 days of each of the taxable years at issue in Virginia. The Virginia home was one of several homes owned by the Taxpayer outside of State A. The Taxpayer indicates that purchasing the town home in Virginia was a better investment than paying rent for the time he was in Virginia.

With regard to the Virginia 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 a statement that certifies that the applicant is a Virginia resident. A person providing a false statement is subject to punishment under the laws of the Commonwealth. 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 (12/09/2002).

The Taxpayer claims that obtaining a Virginia driver's license was not intended as evidence of establishing a domicile in Virginia. The Virginia driver's license was not renewed and has expired. The Taxpayer also retained his State A driver's license during the period in which he was also licensed in Virginia.

Although the Taxpayer took a number of steps consistent with establishing domicile in Virginia, the facts presented clearly show that he did not concurrently abandon his domicile in State A. Accordingly, the Taxpayer did not establish domicile in Virginia in 2002 and remained a domiciliary resident of State A during the taxable years at issue. Accordingly, the assessments at issue will be abated.

The Code of Virginia section cited, along with other reference documents, are available on-line at www.tax.virginia.gov in the Tax Policy Library section of the Department's web site. If you have any questions about this determination, you may contact * in the Department's Office of Tax Policy, Appeals and Rulings, at ***.

Sincerely,

Janie E. Bowen

Tax Commissioner

AR/1-2163754493.E