Did attending college, working part time, and filing a resident return in another state end a student's Virginia domicile?

Plain-English summary

Virginia concluded that the student did not abandon Virginia domicile while attending college in another state. He attended school, worked part time, received financial statements, and filed an other-state resident return.

That return excluded interest, dividends, and capital gains as income not subject to the other state, which raised doubt about his claim of full resident intent. He also kept a Virginia driver's license, used his parents' Virginia address on his federal return, received financial statements there, and had their home available as a permanent place to return.

Virginia generally viewed college housing and student employment as temporary. The assessment was returned for adjustment because he might qualify for a credit on earned or business income tax paid to the other state.

What this means for you

• College attendance alone rarely proves a domicile change.
• Keep return positions consistent with a claimed new residence.
• Licenses, parents' home, mail, and federal addresses remain important.
• Document qualifying other-state tax for the Virginia resident credit.

Citations and references

• Va. Code §§ 58.1-302 and 58.1-332(A).

Subject

Taxpayer did not abandon his Virginia domicile for the taxable year at issue.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 11-121

Original ruling text

June 30, 2011

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 * (the "Taxpayer") for the taxable year ended December 31, 2007.

FACTS

The Department received information from the Internal Revenue Service that tax documents for the 2007 taxable year were sent to the Taxpayer at a Virginia address. The Department requested additional information from the Taxpayer in order to determine if his income was subject to Virginia income tax. When the Taxpayer did not respond to the information requests, the Department issued an assessment to the Taxpayer for the year in question. The Taxpayer appeals the assessment, contending he was a resident of * (State A) for the 2007 taxable year and provided documentation to support his claim.

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.

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 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 this burden, the Commissioner must conclude that he or she intended to remain indefinitely in Virginia.

The Taxpayer established several connections with State A. The Taxpayer attended college, accepted part-time employment, and received financial statements in State A. In addition, the Taxpayer filed a State A income tax return as a resident.

A review of the State A income tax return, however, shows that the Taxpayer excluded interest, dividends and capital gains as income not subject to State A tax. Virginia generally considers such income to be taxable in the state in which an individual is a resident. The Department has reviewed State A statutes, but was unable to identify a deduction or subtraction for this type of income. The fact that the Taxpayer sought to exclude this income from State A taxation raises doubt as to his intent to establish residency there.

The Taxpayer performed a number of actions consistent with maintaining domicile in Virginia. He maintained a Virginia driver's license, financial statements where received at the Virginia residence of his parents, and he used the Virginia address on his federal income tax return.

In this case, the Taxpayer moved to State A in order to attend college. It has been the Department's experience that college students rarely establish domicile in the state where they attend college.

Further, the Department does not generally consider college housing, whether it be in a dorm or apartment, to be a permanent place of abode. Likewise, employment engaged in by college students tends to be temporary in nature. In this case, the Taxpayer retained his Virginia driver's license and had a permanent place of abode to which he could return, his parent's home in Virginia.

Based on the information provided, I find that the Taxpayer did not abandon his Virginia domicile for the taxable year at issue. I note that the Taxpayer provided the Department a copy of his State A income tax return. Virginia Code § 58.1-332 A allows a Virginia resident a credit on the Virginia income tax return for income taxes paid to another state provided the income is either earned or business income. The Taxpayer may be eligible for an out-of-state tax credit for the 2007 taxable year. The assessment will be returned to the auditor to be adjusted accordingly.

The Code of Virginia sections and policy documents 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 regarding this determination, you may contact * in ***. the Office of Tax Policy, Appeals and Rulings, at

Sincerely,

Craig M. Burns

Tax Commissioner

AR/1-4670378063.D