Did a taxpayer's unsupported claim of another-state residence justify changing Virginia's 2011 income-tax assessment?

Subject

Unsupported other-state domicile claim did not change assessment

Plain-English summary

Virginia found no basis to revise the 2011 assessment because the taxpayer provided no objective evidence supporting his claimed domicile in another state. His federal return used a Virginia address, and Department records showed Virginia returns before 2011 and again for 2012 and 2013.

The assessment remained presumed correct because the taxpayer did not answer the Department's domicile questions or meet his burden of proof.

Result: Virginia allowed one final 30-day period to submit domicile documentation. Without it, the assessment would be upheld and immediately payable.

What this means for you

• Support another-state domicile with housing, licenses, vehicles, employment, voting, tax, and other objective records.
• Explain gaps between years of Virginia filing.
• Do not rely on a bare statement of residence after an IRS-based assessment.
• Respond within the Department's evidence deadline.

Common questions

Q: Did Virginia finally decide the taxpayer was domiciled there?

A: It left the assessment in place for lack of proof but gave a final chance to document the claim.

Q: Could nonresponse affect later court relief?

A: Yes. The ruling cited the statute limiting relief when an assessment results from willful failure to provide required information.

Citations and references

• Va. Code §§ 58.1-302, 58.1-205, and 58.1-1826.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 15-126

Original ruling text

June 24, 2015

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, 2011.

FACTS

The Department received information from the Internal Revenue Service (IRS) that the Taxpayer filed his 2011 federal income tax return using a Virginia address. The Department requested information to verify whether the Taxpayer was subject to Virginia income tax. When the Taxpayer failed to respond, an assessment was issued based on the available information. The Taxpayer appeals the assessment, contending he was a resident of * (State A) during the 2011 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 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 Department must conclude that he or she intended to remain indefinitely in Virginia.

In this case, the Taxpayer contends he was a resident of State A during the taxable year at issue. Department records indicate the Taxpayer filed Virginia income tax returns for a number of taxable years prior to 2011 and has filed returns for 2012 and 2013. By letter dated March 19, 2015, the Department requested additional information to ascertain the Taxpayer's domiciliary status for that year. As of the date of this letter, the Taxpayer has provided no objective evidence to substantiate his claim.

Pursuant to Va. Code § 58.1-205, any "assessment of a tax by the Department shall be deemed prima facie correct." As such, the burden of proof is on the Taxpayer to show he was not subject to income tax in Virginia. In addition, 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 assessment was attributable to a taxpayer's willful failure or refusal to provide the Department with necessary information as required by law.

Because the Taxpayer has failed to provide the requested information, there is no basis to revise the assessment. I will, however, grant the Taxpayer a final opportunity to provide the requested information regarding his domicile for the 2011 taxable year. Please send the documentation within 30 days from the date of this letter to: Virginia Department of Taxation, Office of Tax Policy, Appeals and Rulings, Post Office Box 27203, Richmond, Virginia 23261-7203, Attention: *. If the requested information is not provided within the allotted time, the assessment will be upheld and become immediately due and payable.

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

Sincerely,

Craig M. Burns
Tax Commissioner

AR/1-5970894527.M