Did a professional athlete abandon Virginia domicile by obtaining another state's license and voter registration while training and playing elsewhere?

Subject

Professional athlete did not prove abandonment of Virginia domicile

Plain-English summary

Virginia found that a professional athlete and his spouse remained Virginia domiciliaries for 2004-2006. They had established Virginia domicile before 2004 through their home, vehicles, driver's licenses, and resident returns. The husband's playing schedule kept him away much of the year, but he regularly returned during off-seasons and holidays.

The husband obtained another state's driver's license and voter registration and spent substantial time there training. But plans for the couple to move were delayed when he accepted overseas work, his wife returned to Virginia, and his asserted abode in the other state was only a four-month space in another athlete's home. Virginia found that these facts did not prove abandonment of the established Virginia domicile and acquisition of a permanent or indefinite new one.

The couple had to file amended full-year resident returns for 2004-2006 within 30 days. Because the original assessments used the best information available, amended returns could more accurately compute income, and the couple might qualify for an out-of-state tax credit for tax paid to another state on the husband's 2004 team income.

What this means for you

• Changing domicile requires both abandoning Virginia with no intent to return and establishing a new domicile elsewhere.
• The person claiming a domicile change bears the burden of proof.
• A new license and voter registration help but do not control when stronger ties remain in Virginia.
• Temporary or overseas employment generally does not by itself establish abandonment.
• Spouse location, housing, vehicle records, return filings, and the permanence of the new abode all matter.

Common questions

Did time spent training outside Virginia establish a new domicile?

No. Virginia considered it alongside all other facts and found the established Virginia ties more persuasive.

Why was the four-month lease insufficient?

The Department said a lease for less than 12 months in another person's abode did not establish a permanent place of abode in the other state.

Were the original assessments automatically final?

The couple was directed to file full-year amended returns. Those returns could refine the income calculation and claim any supported out-of-state tax credit.

Citations and references

• Va. Code § 58.1-302.
• Virginia Public Documents 86-219, 96-207, and 02-33.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 10-134

Original ruling text

July 12, 2010

Re: § 58.1-1821 Application: Individual Income Tax

Dear *:

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

FACTS

The Taxpayers, a husband and wife, were Virginia residents and filed joint Virginia resident income tax returns through the 2003 taxable year. For 2004, the Taxpayers filed a part-year return showing the wife was a resident during the second half of the year and the husband was a nonresident. For the 2005 and 2006 taxable years, the wife filed separately as a resident and the husband separately as a nonresident.

The Taxpayers were married and purchased a home in Virginia in 2002. They owned several motor vehicles registered in Virginia and each held a Virginia driver's license prior to 2004. The husband obtained a driver's license and registered to vote in * (State A) in 2004. The husband also owned a motor vehicle registered in State A.

The husband is a professional athlete who started his professional career in State A in 1998. During 2004, the husband played for professional sports teams both within and without the United States. He played outside the United States in 2005 and 2006. The husband returned to the United States when he was not playing, spending the majority of his time in training in State A.

Under audit, the Department determined that the Taxpayers were both full-year residents of Virginia in 2004, and the husband was a domiciliary resident for the 2005 and 2006 taxable years. As a result, assessments for additional tax and interest were issued. The Taxpayers filed an appeal, contending that they intended to establish a domicile in State A in 2004, but the wife moved back to Virginia when the husband contracted to play overseas.

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. For a person to change domiciliary residency to another state, 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, 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 residency.

In the case of individuals who engage in temporary work assignments overseas, the Department has ruled that such individuals generally lack the intent to abandon their Virginia domicile based on the temporary nature of the activity. See Public Document (P.D.) 86-219 (11/3/1986), P.D. 96-207 (8/26/1996), and P.D. 02-33 (3/13/2002).

In this case, the Taxpayers performed sufficient actions to establish domiciliary residency in Virginia prior to 2004. They purchased a home, registered automobiles and obtained driver's licenses in Virginia. They also filed income tax returns as residents of Virginia for 2002 and 2003. The husband's employment schedule kept him out of Virginia most of the year, but he annually returned during the off-season and for holidays. Although he began his professional career and owned a motor vehicle registered in State A, the evidence presented suggests that the husband abandoned his domicile outside Virginia prior to moving to Virginia.

The husband performed few actions that are indicative of establishing domicile in State A in 2004. The Taxpayers state that they intended to establish a permanent home in State A in 2004. To that end, the husband obtained a driver's license and registered to vote in State A. Plans for them to move to State A were delayed, however, after he accepted another employment contract to play overseas. The wife returned to Virginia, resulting in the part-year return for 2004 taxable year.

The Taxpayers argue that the husband spent more time in State A during 2004 through 2006 in order to take advantage of better training and potential employment opportunities. However, his professional schedule has not changed significantly since 2002 when he established domicile in Virginia.

The husband also asserts that he has established a permanent place of abode in State A. As evidence, he has provided a copy of a lease agreement. The agreement provides space for him in the abode of another professional athlete for approximately 4 months per year. Because the lease covers a period of less than 12 months, the Department cannot conclude that the husband established a permanent place of abode in State A.

After considering all of the facts and circumstances of this case, I find the preponderance of evidence shows that the Taxpayers were domiciliary residents of Virginia for the 2004 through 2006 taxable years. The assessments at issue, however, were made based on the best information available to the Department. The Taxpayers may have additional information that more accurately reflects their taxable income. In addition, because the husband played for a team in * (State B) during 2004, the Taxpayers may be entitled to an out-of-state tax credit for taxes paid in State B. The Taxpayers are, therefore, requested to file amended individual income tax returns as full-year residents for the 2004 through 2006 taxable years.

The returns should be filed, along with the appropriate payments, within 30 days from the date of this letter. The returns and payments should be submitted to: Virginia Department of Taxation, Office of Tax Policy, Appeals and Rulings, P.O. Box 27203, Richmond, Virginia 23261-7203, Attention: *. If the requested returns are not filed within the allotted time, the assessments as issued will become immediately due and payable, and collection action will resume.

The Code of Virginia sections cited are available on-line at www.tax.virginia.gov in the Tax Policy Library section of the Department's web site. Forms are also available on the website. If you have any questions about this determination, please contact * at ***.

Sincerely,

Linda Foster

Deputy Tax Commissioner

AR/1-2271492883.E