Did a taxpayer establish foreign domicile by 2006 despite retaining an unrenewed Virginia driver's license and automobile?

Subject

Taxpayer was not a domiciliary resident of Virginia

Plain-English summary

A taxpayer had established domicile abroad by 2006 and was entitled to amend her Virginia resident return to claim nonresident treatment. She moved in 2002 for further education, leased housing and a vehicle, and used university enrollment as part of obtaining permanent immigration status.

By late 2003 she had permanent employment, purchased a local automobile, and sold her Virginia rental property. In 2006 she remained employed abroad, maintained a permanent home there, did not return to Virginia, and had no Virginia-source income.

She retained an automobile in Virginia for infrequent visits and had renewed her Virginia driver's license in 2003 to obtain an international license and drive during U.S. visits. She did not renew it while abroad and later surrendered it after moving to another state in 2008.

Virginia concluded that those remaining ties did not outweigh the foreign domicile evidence. The 2006 amended return was ordered processed and the refund issued with applicable interest.

What this means for you

• Permanent work, housing, property changes, and immigration steps strongly support foreign domicile.
• An unrenewed Virginia license and infrequently used car do not always prevent a domicile change.
• The analysis focuses on the facts during the tax year at issue.
• A successful amended-return residency claim can produce refund interest.

Common questions

Why did she originally file as a Virginia resident?

The ruling states that she filed resident returns for 2003 through 2006, then amended the 2006 return in 2008.

Did she visit Virginia during 2006?

No. The ruling says she did not return that year.

What relief did Virginia grant?

Processing of the amended return and a refund with applicable interest.

Citations and references

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

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 10-170

Original ruling text

August 10, 2010

Re: § 58.1-1821 Application: Individual Income Tax

Dear *:

This is in response to your letter in which you appeal the denial of the refund claimed on the amended individual income tax return filed by * (the "Taxpayer") for the taxable year ended December 31, 2006. I apologize for the delay in this responding to your appeal.

FACTS

The Taxpayer moved from Virginia to * ("Country A") in 2002 in order to pursue additional education. She leased an apartment and a motor vehicle while taking classes. In 2003, she obtained full-time employment and purchased an automobile in Country A. She continued to hold a Virginia driver's license and owned an automobile registered in the Commonwealth during the taxable year at issue.

For the 2003 through 2006 taxable years, the Taxpayer filed Virginia income tax returns as a resident. In 2008, the Taxpayer filed an amended 2006 Virginia income tax return as a nonresident. Under review, the Department determined that the Taxpayer remained a domiciliary resident of Virginia during the 2006 taxable year and denied the refund claimed on the amended return. The Taxpayer appeals the refund denial, contending she was a domiciliary resident of Country A and, therefore, is entitled to the refund claimed on the amended return filed for the 2006 taxable year.

DETERMINATION

Residency

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 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 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.

The Department determines a taxpayer's intent through the information provided a taxpayer has the burden of province that he or she has abandoned his or her Virginia domicile. If the information is inadequate to meet his or her burden, the Commissioner must conclude that he or she intended to remain indefinitely in Virginia.

In this case, the Taxpayer performed a number of actions consistent with abandoning her Virginia domicile and acquiring a domicile in Country A. The Taxpayer was a domiciliary resident of Virginia prior to moving to Country A in 2002. As part of the process of moving to Country A, she rented out her house and stored a motor vehicle at her mother's home in Virginia. As part of the process of obtaining a permanent visa in Country A, the Taxpayer enrolled in a university there, where she pursued an advanced degree. She leased an apartment and an automobile in Country A. In late 2003, she was hired for permanent employment in Country A. Around this time, she purchased an automobile in Country A and sold the rental property in Virginia.

During 2006, the Taxpayer remained employed, leased a permanent place of abode and owned an automobile in County A. She did not return to Virginia and had no income from Virginia sources during the 2006 taxable year.

The Taxpayer also performed actions consistent with maintaining a Virginia domicile. She retained her automobile in Virginia after moving to Country A. The automobile was used very infrequently during the few visits the Taxpayer made to Virginia after moving to Country A. Ownership of the automobile was eventually transferred to the Taxpayer's mother. The Taxpayer also renewed her Virginia driver's license in January 2003 so that she would be able to obtain an international driver's license in Country A and have a license to drive in the United States when she returned to visit.

In May 2008, the Taxpayer moved to * (State A), where she obtained

employment and a permanent place of abode. She also obtained a State A driver's license and surrendered her Virginia driver's license.

Regarding the Virginia driver's license, Va. 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 ruled that obtaining or renewing a Virginia license is a strong indicator of an individual's intent to be a domiciliary resident of Virginia. See Public Document (P,D.) 02-149 (12/09/2002). The Department has also found that an individual may successfully establish a domicile outside Virginia even if a Virginia driver's license is retained. See P.D. 00-151 (8/18/2000). In this case, although the Taxpayer retained her Virginia driver's license while she lived in Country A, she did not renew it.

Based on the evidence, it is my determination that the Taxpayer was not a domiciliary resident of Virginia for the 2006 taxable year. Accordingly, the Taxpayer's amended individual income tax return for taxable year 2006 will be processed. A refund will be issued with applicable interest.

If you have any questions regarding this determination, you may contact * in the Office of Tax Policy, Appeals and Rulings, at ***.

Sincerely,

Linda Foster

Deputy Tax Commissioner

AR/1-4204382581.E