Did spouses establish domicile outside Virginia for 2005 despite keeping Virginia licenses, vehicle registrations, and withholding?

Subject

Taxpayers were domiciliary residents of State A

Plain-English summary

A married couple established domicile outside Virginia for 2005 after bankruptcy and loss of their Virginia home. They moved in August 2004, rented a home in another state with intent to buy it when employment stabilized, and received IRS financial documents there.

The husband sought work in the new state and accepted a temporary position in a neighboring state. The job never became permanent, and the couple returned to Virginia in 2006 only after that plan failed.

They retained Virginia vehicle registrations and driver's licenses, and the husband's employer withheld Virginia tax. Those facts suggested Virginia ties, but the couple did not renew the licenses while living away. Virginia found that the move, new permanent abode, job search, and loss of the former Virginia home showed a genuine domicile change rather than a temporary absence.

The Department abated the 2005 assessment.

What this means for you

• Domicile changes through a pattern of actions; no single fact controls.
• Losing or relinquishing the former home and establishing a new permanent abode are significant.
• Driver's licenses, vehicle registrations, and withholding are important contrary evidence but not always decisive.
• A later return to Virginia does not necessarily undo an earlier domicile change when circumstances explain it.

Common questions

Why did the couple leave Virginia?

Their employer went out of business, they filed bankruptcy, and they lost their home.

Did keeping Virginia driver's licenses prevent the change?

No. The couple did not renew them while away, and the full circumstances supported the new domicile.

What happened to the assessment?

It was abated.

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. 10-180

Original ruling text

August 16, 2010

Re: § 58.1-1821 Application: Individual Income

Dear *:

This will reply to your letter in which you contest the individual income tax assessment issued to * (the "Taxpayers") for the 2005 taxable year. I apologize for the delay in responding to your letter.

FACTS

The Taxpayers, a husband and wife, were domiciliary residents of Virginia. In 2003, the company that employed the Taxpayers went out of business. Soon thereafter, the Taxpayers filed bankruptcy and eventually lost their home.

In August 2004, the Taxpayers moved to * (State A) and rented a home with the intent to purchase it once the husband obtained employment. The husband accepted employment with a temporary agency in *** (State B) for the 2005 taxable year. The position failed to become permanent, and in 2006 the Taxpayers moved back to Virginia.

The Department obtained information from the Internal Revenue Service (IRS) indicating that the Taxpayers received taxable income in 2005 and requested information to verify whether the Taxpayers were subject to Virginia income tax. When the Taxpayers failed to respond, an assessment was issued based on the available information. The Taxpayers appeal the assessment, contending they were not required to file Virginia income tax returns for 2005 because they did not live in Virginia.

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 that 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 the world 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 or domicile.

The Department concedes that it may be difficult to ascertain whether a taxpayer intends to return to Virginia. The Department determines a taxpayer's intent through the information provided. The Taxpayer has the burden of proving 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 Taxpayers performed a number of actions consistent with establishing their domicile in State A. They relinquished their Virginia home and established a permanent place of abode in State A. The Taxpayers received financial documents from the IRS at their State A residence. The husband sought employment in State A and worked in State B.

At the same time, the Taxpayers performed several actions consistent to maintaining their domicile within Virginia. They maintained their motor vehicle registrations in Virginia, they maintained their Virginia driver's licenses, and the husband's employer withheld Virginia income taxes from his pay for the 2005 taxable year.

With regard to the 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 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). In this case, the Taxpayers did not renew their driver's licenses while in State A.

The Department acknowledges that a change in domicile occurs as part of a process in which no single factor is dispositive. The circumstances of this case show that the move to State A resulted from Taxpayers' Virginia employer going out of business. As a result of losing their jobs, the Taxpayers filed bankruptcy and lost their Virginia home. They moved to State A with the assistance of the husband's parents, believing job prospects in the husband's profession would be more plentiful. The Taxpayers returned to Virginia only after the husband's job failed to become permanent in State B.

After carefully weighing all of the evidence, I find that the Taxpayers were domiciliary residents of State A for the 2005 taxable year. As such, the assessment will be abated.

The Code of Virginia section and public documents cited are available on-line at www.tax.virginia.gov in the Tax Policy Library section of the Department's website. If you have any questions, you may contact * in the Department's Office of Tax Policy, Appeals and Rulings, at ***.

Sincerely,

Linda Foster

Deputy Tax Commissioner

AR/1-4097961040.D