Did a retiree who kept homes in two states become domiciled in Virginia after renewing a Virginia driver's license and maintaining vehicles there?

Subject

Driver's license and vehicle evidence established Virginia domicile

Plain-English summary

Virginia found that the taxpayer changed his domicile to Virginia in 2007. He had retired and moved to another state, owned a home there, voted there, belonged to a fraternal organization there, and generally spent more than half of each disputed year there. But he also had owned a Virginia residence since 1999, used the Virginia address for financial documents, renewed a Virginia driver's license in 2007, and kept numerous vehicles registered in Virginia.

Changing domicile requires both abandoning the old domicile with no intent to return and acquiring a new domicile through physical presence and intent to remain. The person claiming the change bears the burden of proof, and Virginia weighs conduct and circumstances rather than accepting a declaration alone.

The driver's-license history carried substantial weight. Virginia applicants certify that they are residents, so obtaining or renewing a Virginia license strongly indicates Virginia domicile, although the ruling acknowledged that retaining one is not always conclusive. Here, the taxpayer had relinquished the other state's license, allowed almost all vehicle registrations there to expire, renewed the Virginia license, and maintained several Virginia-registered vehicles.

The existing assessments were based on information available to the Department. The taxpayer was directed to file Virginia returns within 30 days so the correct liability could be calculated; otherwise the assessments would remain correct as issued and collection would resume.

What this means for you

• Spending most of the year outside Virginia does not by itself prove a non-Virginia domicile.
• Driver's licenses and vehicle registrations can be strong evidence because they involve formal residency representations.
• Owning homes in two states makes the rest of the factual record more important.
• Keep consistent records of voting, licenses, registrations, addresses, property, time spent, and intent when changing domicile.

Citations and references

• Va. Code §§ 58.1-302 and 58.1-111.
• Va. Code §§ 46.2-323.1 and 46.2-348.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 14-99

Original ruling text

July 2, 2014

Re: § 58.1-1821 Application: Individual Income Tax

Dear *:

This will respond to your letter in which you seek correction of the Virginia individual income tax assessments issued to * (the "Taxpayer") for the taxable years ended December 31, 2007, 2009 and 2010. I apologize for the delay in responding to your appeal.

FACTS

The Department received information from the Internal Revenue Service (IRS) that the Taxpayer may have income subject to Virginia income tax. The Department requested additional information. When there was no response, the Department issued assessments for the 2007, 2009, and 2010 taxable years. The Taxpayer appeals the assessments, contending he is a 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 the permanent place of residence of a taxpayer and the place to which he intends to return even though he may reside elsewhere. For a person to change domiciliary residency to another state or country, 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 in another country who has not abandoned his Virginia residency continues to be subject to Virginia taxation. Additionally, 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, situs of real or 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 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. A taxpayer has the burden of proving that he or she abandoned his or her Virginia domicile. If the information is inadequate to meet this burden, the Tax Commissioner must conclude that he or she intended to remain indefinitely in Virginia.

According to the Taxpayer, he retired from his employment in 1989 and moved to State A where he owned a home. The Taxpayer registered to vote and held a membership of a fraternal organization in State A. For the taxable years at issue, the evidence indicates the Taxpayer typically spent more than half of each year residing in State A.

The Taxpayer has maintained a residence in Virginia since 1999. The Taxpayer contends that he resided most of the year in State A but spends from four to five months in Virginia. The Taxpayer provided sworn affidavits from personal references attesting to this information.

The Taxpayer filed his 2007 federal return using his State A address. The Department, however, has identified a number of financial documents that were mailed to the Taxpayer's Virginia address during the taxable years at issue. The Taxpayer argues that the financial statements were sent to Virginia for convenience because his preparer is located in Virginia.

The Taxpayer states that he became ill in 2006 while in Virginia. Because his State A license was about to expire, he obtained a Virginia driver's license. Research of motor vehicle records indicates that the Taxpayer obtained a Virginia driver's license in 1999 and a State A driver's license in 2002. The Taxpayer surrendered the State A license in 2004 and obtained a Virginia license that expired in 2006. In 2007, the Taxpayer renewed the Virginia license. Based on the evidence, the Taxpayer already had a Virginia driver's license when he let his State A driver's license expire. Thus, he had no need to obtain a new license in either state.

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 states that every person applying for a driver's license must execute and furnish to the Commissioner of the Department of Motor Vehicles (DMV) a statement that certifies that the applicant is a Virginia resident. Further, any applicant who knowingly makes a false statement to DMV is subject to penalties under Va. Code § 46.2-348. The Department has found that an individual may successfully establish a domicile outside Virginia even if he retains a Virginia driver's license. See 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 (12/9/2002).

The Taxpayer maintained motor vehicles registered in both states. Almost all of the State A registrations were expired in October 2011. DMV records indicate that the Taxpayer also had numerous motor vehicles registered in Virginia, including four automobiles, a pickup truck, and a motor home.

In P.D. 10-249 (11/04/2010), a taxpayer asserted that many residents of State A, the same state in which the Taxpayer claims to be a domiciliary resident, maintain driver's licenses and automobile registrations in other states because of high costs for automobile insurance. According to those taxpayers, these actions were taken as a matter of convenience and cost savings for the State A residents. The Department considers the fact that a taxpayer seeks to gain the benefits of lower costs available to Virginia residents to be strong intent of a taxpayer's desire to be a domiciliary resident of Virginia.

According to numerous Virginia court cases, changing domicile is a two-step process. First, a person must intend to permanently move away from one domicile. Second, the person must acquire a new domicile where he intends to remain permanently or indefinitely. See Robert H. Talley v. Commonwealth of Virginia , 127 Va. 516, 103 S.E. 612 (1920), State-Planters Bank, v. Commonwealth of Virginia , 174 Va. 289, 6 S.E.2d 629 (1940), and Barbara B. Woods v. Commonwealth of Virginia , Circuit Court of Wise County and the City of Norton, Law No. 97-422 (3/20/2002).

The Department acknowledges that a change in domicile occurs as part of a process in which no single factor is dispositive. Because the Taxpayer had homes in both states, other evidence must be given more weight in determining the Taxpayer's intent. In this case, the fact that the Taxpayer relinquished his State A driver's license and then allowed the motor vehicle registrations to expire indicate an intent to abandon State A as his state of domicile. That coupled with the fact the he renewed his Virginia driver's license in 2007 and continues to own motor vehicles registered in Virginia suggest he intended to change his domiciliary residence to Virginia. After carefully weighing all of the evidence, I find that the Taxpayer did intend to change his domiciliary state of residence to Virginia in 2007.

The assessments at issue are based on information available to the Department pursuant to Va. Code § 58.1-111. As such, the Taxpayer should file Virginia income tax returns to more accurately reflect the tax liability for the 2007, 2009 and 2010 taxable years. The returns should be submitted to Virginia Department of Taxation, Office of Tax Policy, Appeals and Rulings, P.O. Box 27203, Richmond, Virginia 23261-7203, Attention: *, within 30 days from the date of this letter. If the returns are not received, the Department's assessments will be considered to be correct as issued and collection actions will resume.

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

Sincerely,

Craig M. Burns

Tax Commissioner

AR/1-5269497462.D