Did an inherited Virginia home, vehicle registration, driver's license, and federal-return address make a long-term foreign resident taxable as a Virginia resident?

Subject

Foreign domicile defeated Virginia resident assessment

Plain-English summary

Virginia found that the taxpayer had established domicile in another country before 2010 and therefore was not required to file a 2010 Virginia resident return. The assessment was abated and any paid tax was to be refunded.

The taxpayer had worked abroad since 2006, engaged in professional and civic activities there, progressed from an employment visa to resident status, used foreign driving credentials, and filed a foreign income-tax return. Those facts outweighed his retained Virginia connections.

He had inherited his parents' Virginia home, kept a Virginia-registered vehicle there, retained and renewed a Virginia driver's license, and initially used the Virginia address on his federal return. He explained the house was visited only once or twice a year, the federal address enabled electronic filing, and the license supported identification and an international driving permit. Virginia accepted the overall foreign-domicile evidence but warned that those ties could trigger future review.

What this means for you

• Retaining Virginia property or identification does not automatically prevent a foreign domicile change.
• Employment, immigration status, community activity, tax filings, and actual life abroad can collectively prove the new domicile.
• Virginia licensing, registration, and tax-address ties remain strong contrary evidence and can cause later inquiries.

Citations and references

• Va. Code §§ 58.1-302 and 46.2-323.1.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 14-184-0

Original ruling text

December 1, 2014

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, 2010.

FACTS

The Department received information from the Internal Revenue Service (IRS) that the Taxpayer had filed his 2010 federal income tax return using a Virginia address. A review of the Department's records, however, indicated that the Taxpayer had not filed a Virginia income tax return for the 2010 taxable year. The Department requested additional information from the Taxpayer to determine whether he was required to file a Virginia return. When a response was not received, an assessment was issued based on the available information. The Taxpayer appeals, contending he was a resident of * (Country A) during the 2010 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. 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 another country who has not abandoned his Virginia residency continues to be subject to Virginia taxation.

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, situs 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.

In this case, the Taxpayer performed a number of actions to show he established domicile in Country A. The Taxpayer has been employed in Country A since July 2006 and engaged in a number of professional and civic activities there. He initially entered Country A on an employment visa but obtained a resident alien visa in October 2010 and a permanent resident visa in December 2012. He also obtained a Country A driver's license in October 2011 after the expiration of his international driver's license which he had held since July 2006. In addition, he filed a Country A income tax return for the 2010 taxable year.

The Taxpayer also retained some connections to Virginia. In 2009, he inherited his parents' residence in Virginia and used that address to file his federal income tax return for the 2010 taxable year. The Taxpayer, however, states that he has only visited the home once or twice a year since acquiring it and he intends to sell it when market conditions improve. The Taxpayer also states that he used this address to file his federal income tax return on the advice of a tax professional to enable him to file the return electronically. The Taxpayer has since filed an amended return listing his address in Country A. Since 1995, the Taxpayer has also maintained a Virginia motor vehicle registration for a vehicle that was garaged at the residence. In addition, he retained his Virginia driver's license and renewed it in December 2008.

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. 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 they retain 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).

The Department acknowledges that a change in domicile may occur as part of a process in which no single factor is dispositive. Of particular concern is the fact that the Taxpayer retained his Virginia driver's license and renewed it in December 2008. The Taxpayer, however, states that he kept his Virginia driver's license because he was required to have a valid United States driver's license while holding the international driver's license. The Taxpayer also states that it was more convenient to hold a United States driver's license for identification and banking purposes because most of his other forms of identification were in Country A's language.

After carefully weighing the evidence presented, I find that the preponderance of the evidence shows that Taxpayer successfully changed his domicile to Country A prior to the 2010 taxable year. As such, the Taxpayer was not a resident of Virginia for the 2010 taxable year and was not required to file a Virginia income tax return. Accordingly, the assessment issued to the Taxpayer for the 2010 taxable year will be abated and a refund issued for any taxes paid.

The Taxpayer should be aware, however, that continuing connections with Virginia, such as maintaining a Virginia vehicle registration and driver's license and using a Virginia address for tax documents will likely result in future contacts by the Department with respect to the situs of the Taxpayer's domicile. Because the determination of residency is dependent on all attendant facts and circumstances, a change in such facts could result in a change in the Department's determination in subsequent taxable years. In addition, the Taxpayer should be aware that Virginia law does not permit nonresidents to obtain Virginia driver's licenses, and persons providing a false statement to an agency of the Commonwealth may be subject to penalty under Virginia law.

The Code of Virginia sections and public documents cited are available on-line at www.tax.virginia.gov in the Laws, Rules & Decisions 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/1-5744528823.M