Will Virginia cancel a resident income-tax assessment when the taxpayer does not provide the requested domicile evidence?

Subject

Taxpayer failed to provide information regarding his Virginia domicile

Plain-English summary

Virginia found no basis to cancel the assessment because the taxpayer had not supplied the requested evidence. IRS information showed that the taxpayer received financial statements at a Virginia address in 2007. When he did not respond to the Department's request for domicile documentation, Virginia assessed tax, penalty, and interest.

On appeal, the taxpayer said he was not subject to Virginia income tax until 2009, but still did not provide the records needed to show that he had abandoned Virginia domicile. Virginia assessments are presumed correct, and the person claiming a domicile change bears the burden of proving it through intent, conduct, and surrounding circumstances.

The Commissioner did not immediately close the case. He allowed the taxpayer 30 additional days to submit supporting documentation. If nothing was provided, the assessment would be upheld and an updated bill issued.

What this means for you

• A bare statement that you lived elsewhere is not enough to prove a Virginia domicile change.
• Respond to requests for evidence about housing, employment, family, property, licenses, registrations, and other contacts.
• An assessment starts out presumed correct; the taxpayer must supply evidence supporting an adjustment.
• This ruling left a final 30-day evidentiary window rather than granting relief on the existing record.

Common questions

Did the Commissioner definitively decide where the taxpayer was domiciled?

Not on a developed factual record. The ruling found no basis to change the assessment without evidence and gave the taxpayer 30 more days to provide it.

What happens if requested records are not provided?

In this case, the ruling said the assessment would be upheld and an updated bill with accrued interest would be issued.

Citations and references

• Va. Code § 58.1-302.
• Va. Code § 58.1-219.
• Va. Code § 58.1-205.
• Va. Code § 58.1-1826.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 11-80

Original ruling text

May 26, 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 (IRS) that the Taxpayer received financial statements at an address in Virginia for the 2007 taxable year. The Department requested that the Taxpayer provide documentation to ascertain his domicile. When no response was received, the Department issued an assessment of tax, penalty and interest to the Taxpayer for the 2007 taxable year. The Taxpayer appeals the assessment, contending he was not subject to Virginia income tax until the 2009 taxable year.

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. 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 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.

Virginia Code § 58.1-219 allows the Department the authority to investigate any books and records of a taxpayer in order to ascertain the proper tax liability. Virginia Code § 58.1-205 provides that in any proceeding relating to the interpretation of the tax laws of Virginia, an "assessment of a tax by the Department shall be deemed prima facie correct." Further, Va. Code § 58.1-1826 precludes a court from granting relief to taxpayers seeking correction of erroneous state tax assessments in cases in which the erroneous assessment is attributable to the taxpayer's willful failure or refusal to provide the Department with necessary information as required by law.

As such, the burden of proof is on the Taxpayer to show he was not a domiciliary or resident of Virginia. The Taxpayer has not provided the information requested during the audit and the pending appeal to substantiate his claim that he was not a domiciliary resident of Virginia during the taxable year at issue. Therefore, there is no basis to adjust or abate the assessment. However, I will allow the Taxpayer an additional 30 days, from the date of this letter to provide the Department with documentation to support his claim. The information should be sent to: Virginia Department of Taxation, Appeals and Rulings, P.O. Box 27203, Richmond, Virginia 23261-7203, Attn: *. If the information is not provided within 30 days, the assessment will be upheld and an updated bill for the 2007 taxable year, with interest accrued to date, will be issued.

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

Sincerely,

Craig M. Burns

Tax Commissioner

AR/1-4581494647.D