Did Virginia property, vehicles, a license, and voter registration make a taxpayer living and working abroad a Virginia domiciliary in 2006?

Subject

Taxpayer retained foreign domicile despite substantial Virginia connections

Plain-English summary

Virginia abated a 2006 residency assessment because the taxpayer retained the foreign domicile he had established in 1999. He lived and worked full time abroad, maintained a home and driver's license there, received financial records at the foreign address, and belonged to social organizations there.

The taxpayer also owned Virginia residential property, registered vehicles in Virginia, held and renewed a Virginia driver's license, and registered to vote. He explained that the property was an investment occupied by the co-owner, the Virginia license was for convenience when visiting family and friends, and he never voted in Virginia.

Those Virginia steps suggested an intent to establish domicile, but they did not show both acquisition of Virginia domicile and abandonment of the established foreign domicile. Virginia warned that the continuing connections could cause future inquiries if the facts changed.

What this means for you

• Establishing Virginia domicile requires more than accumulating Virginia property and credentials when an existing domicile is retained elsewhere.
• Full-time foreign work, a permanent home, licensing, financial mail, and community ties supported the continuing foreign domicile.
• Virginia property, vehicles, a license, and voter registration remain significant and can trigger review.
• Domicile can change in a later year if the overall facts and intent change.

Common questions

Did owning a Virginia residence establish domicile?

No. The co-owner lived there and paid the utilities, while the taxpayer continued his settled life abroad.

Why did the Virginia license not control?

It was an important connection, but the taxpayer also maintained his foreign license and the complete record showed continuing foreign domicile.

What was the final result?

The 2006 Virginia residency assessment was abated.

Citations and references

• Va. Code § 58.1-302.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 10-91

Original ruling text

June 4, 2010

Re: 58.1-1821 Application: Individual Income Tax

Dear ****:

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

FACTS

The Taxpayer, a resident of * (State A), accepted employment in *** (Country A) in May 1999. In 2002, the Taxpayer purchased residential property located within Virginia. In the same year, he obtained a Virginia driver's license and a voter's registration card. He also co-purchased a motor vehicle registered in Virginia. The Taxpayer purchased and registered a second motor vehicle within Virginia in 2006. The Taxpayer renewed his Virginia driver's licenses in tax year 2006, and again in 2009.

Under audit for the 2006 taxable year, the Department determined the Taxpayer was a domiciliary resident of Virginia and assessed tax and interest. The Taxpayer contests the assessment, stating he has not spent more than 30 days in Virginia in his lifetime.

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.

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. The taxpayer has the burden of proving that he or she has abandoned his or her original domicile. If the information is inadequate to meet this burden, the Commissioner must conclude that the taxpayer did intend to return to his or her original domicile.

In this case, the Taxpayer performed several actions consistent with establishing a Virginia domicile. The Taxpayer purchased residential property and maintained motor vehicles registered within Virginia. He acquired a Virginia driver's license in 2002, which was renewed in 2006 and 2009. The Taxpayer was also registered to vote in Virginia.

The Taxpayer states that the Virginia property was purchased for investment purposes. It has been the Department's experience that residential investment property is usually leased by an investor in order to offset expenses and receive a return on investment. The evidence shows that the co-owner resided in the residence and paid all utilities until 2008.

The Taxpayer also represents that he inadvertently registered to vote and, in fact, never voted in Virginia. The voter's registration card was returned in 2009 after notification he was under audit by the Department. The Virginia driver's license was obtained as a convenience when visiting family and friends. At the same time, the Taxpayer renewed his driver's license in Country A, while working and residing there.

The Taxpayer established domicile in Country A in 1999. He was employed full time and he established a place of abode in Country A. He obtained a Country A driver's license and had financial records mailed to his address in Country A. The Taxpayer was also a member of social organizations located in Country A.

Because the Taxpayer was a domiciliary resident of Country A, the evidence must show that the Taxpayer both acquired domicile in Virginia and abandoned his domicile in Country A. While the Taxpayer did take steps indicative of establishing domicile in Virginia, he clearly retained his domicile in Country A in the 2006 taxable year. Accordingly, the assessment for the 2006 taxable year has been abated.

While the Department concedes the Taxpayer's Country A residency for the taxable year at issue, the Taxpayer should be aware that continuing connections with Virginia, such as possession of a Virginia driver's license, owning residential property, 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 Taxpayer's domicile. As in any determination, a change in the facts and circumstances could result in a change in the Department determination in subsequent taxable years.

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

Sincerely,

Janie E. Bowen

Tax Commissioner

AR/1-3937696380.D