Was a husband working and living overseas a Virginia domiciliary resident in 2006 because his family, home, and driver's license were in Virginia?

Subject

Husband was not a Virginia domiciliary resident for 2006; assessment abated

Plain-English summary

The husband was not a Virginia domiciliary resident for 2006. His Virginia driver's license, family home, and other connections pointed toward Virginia, but the overall evidence showed that he had established domicile in the foreign country and had not abandoned it.

The Department treated the Virginia driver's license as a strong residency indicator, not a conclusive fact. The husband remained employed and maintained his home abroad and spent 61 days in Virginia. His remaining voter registration in the former state was also consistent with federal overseas-voting rules.

The wife was a Virginia resident, but her income was below Virginia's filing threshold. The 2006 assessment was therefore abated.

What this means for you

• Domicile turns on the full pattern of presence, intent, property, family, licensing, voting, and work connections.
• A Virginia driver's license can weigh heavily toward Virginia domicile even when it does not decide the case.
• Overseas taxpayers should expect continuing Virginia contacts to trigger future residency questions if their facts change.
• The result applied only to the 2006 facts presented.

Common questions

Did owning a Virginia home make the husband a Virginia domiciliary?

No. The home was significant, but the Department found he retained his foreign domicile.

Why was the entire assessment abated if the wife was a resident?

Her 2006 income was insufficient to require a Virginia return under the cited filing-threshold statute.

Citations and references

• Va. Code §§ 58.1-302, 58.1-321, and 46.2-323.1.
• 42 U.S.C. §§ 1973ff-1 and 1973ff-6(5), as cited in the ruling.
• P.D. 02-149, cited for driver's-license evidence.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 10-265

Original ruling text

December 15, 2010

Re: § 58.1-1821 Appeal: Individual Income Tax

Dear *:

This will reply to your letter in which you seek correction of the individual income tax assessment issued to * (the "Taxpayers") for the taxable year ended December 31, 2006.

FACTS

In 1991, the Taxpayers, a husband and wife, moved from Virginia to * (State A) and established their domiciliary residence. In 1996, the Taxpayers sold their State A home when the husband was transferred to *** (Country A). While in Country A, the Taxpayers acquired Country A driver's licenses. In 2000, the Taxpayers surrendered their State A driver's licenses and acquired Virginia driver's licenses. In 2003, the wife moved into a Virginia residence purchased by the Taxpayers.

During 2006, three vehicles were registered in Virginia in the wife's name. The Taxpayers' daughter attended a Virginia university, and paid out-of-state tuition, and the Taxpayers' son attended a private secondary school. A federal tax return was filed using the husband's employer's post office box located in State A. The wife registered to vote and has voted in Virginia. The husband has maintained his State A voter registration and votes in State A via absentee ballot. The Taxpayers have continued to renew their Virginia driver's licenses and they remain current.

The Department obtained information from, the Internal Revenue Service (IRS) indicating the Taxpayers received taxable income in 2006 and requested information to verify whether the Taxpayers were subject to Virginia income tax. The Department requested additional information from the Taxpayers in order to determine their residence for the taxable year in question. Based on the information provided, the Department concluded that the Taxpayers were a domiciliary residents of Virginia and issued an assessment for the 2006 taxable year. The Taxpayers concede that the wife was a Virginia resident during 2006, but contend that the husband 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 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.

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 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.

The husband established domicile in State A in 1991. However, by 2006, the only connection he retained with State A was his voter registration that enabled him to vote by absentee ballet in national and state elections. Federal law requires states to establish procedures in order to permit absentee voting in federal elections for certain overseas voters. See 42 U.S.C. § 1973ff-1. Under 42 U.S.C. § 1973ff-6(5), an overseas voter must be permitted to vote in the last place in which such individual was domiciled before leaving the United States.

The husband was transferred to Country A in 1996, where he continued to be employed in 2006. The husband established a permanent place of abode and obtained a driver's license in Country A. His family moved with him to Country A where they remained until moving to Virginia. The evidence provided is sufficient to show that the husband changed his domiciliary residence to Country A. During 2006, the husband spent 61 days in Virginia while remaining in Country A the rest of the year.

The husband established a number of connections with Virginia that would indicate an intent to establish domicile in Virginia. The Taxpayers purchased a home in Virginia where the wife lived in order to be close to the Taxpayers' children. In addition, the husband obtained and renewed a Virginia driver's license.

The Taxpayer states that he obtained a Virginia driver's license as a matter of convenience for driving when he was in the United States. Virginia Code § 46.2-323.1 states, "No driver's license . . . shall be issued to any person who is not a Virginia resident." 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 the applicant is a Virginia resident. 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 goes on to state that every person applying for a driver's license must execute and furnish to the Department of Motor Vehicles (DMV) a statement which certifies that the applicant is a Virginia resident. Further, the Department has found that 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).

After reviewing all the evidence in this case, it is my determination that the husband was a not a domiciliary resident of Virginia during the 2006 taxable year. While the husband did take steps indicative of establishing domicile in Virginia, he did not abandon his domiciliary residence in Country A. Further, although the wife was a resident of Virginia, her income in 2006 was insufficient for her to be required to file a Virginia income tax return under Va. Code § 58.1-321. Accordingly, the assessment for the 2006 taxable year has been abated.

While the Department concedes that the husband was not a resident of Virginia for the taxable year at issue, the Taxpayers should be aware that continuing connections with Virginia, such as possession of a Virginia driver's license, registering to vote or other indicators of a permanent residence in Virginia, will likely continue to result in future contacts by the Department with respect to the situs of the Taxpayers' domicile. As in any determination, a change in the facts and circumstances could result in a change in the Department's determination in subsequent taxable years.

The Taxpayers have indicated that because their children have graduated from their Virginia schools that they now reside in Country A. As such, the Taxpayers should contact DMV in order to clarify their eligibility to hold a Virginia driver's license. In addition, the wife should also contact the Virginia Board of Elections concerning her eligibility to vote in Virginia elections.

The Code of Virginia and regulation sections 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 website. If you have questions concerning this determination, you may contact * in the Office of Tax Policy, Appeals and Rulings, at ***.

Sincerely,

Craig M. Burns

Acting Tax Commissioner

AR/1-4390111746.B