Could a nonfiler overturn a 2012 Virginia assessment by claiming domicile in another state but providing no objective evidence?

Subject

The burden of proving that the domicile has been changed lies with the person alleging the change, and that information has not been provided.

Plain-English summary

IRS information suggested that the taxpayer may have needed to file a 2012 Virginia return. He did not file, ignored two Department requests to verify residency, and was assessed from the information available.

The taxpayer claimed domicile in another state. Virginia explained that a domicile change requires abandonment of the old Virginia domicile with no intent to return and acquisition of a new domicile through presence and intent to remain permanently or indefinitely. The person claiming the change carries the burden of proof.

The taxpayer provided no objective evidence, so Virginia could not make an informed residency decision and he did not overcome the assessment's presumption of correctness. The assessment was upheld.

Virginia nevertheless allowed one final 30-day period for sufficient domicile evidence. Without it, the assessment would become immediately due and payable.

Common questions

Is stating another state's domicile enough? No. Virginia requires objective evidence of conduct, presence, and intent.

Why did the assessment stand? The taxpayer failed to respond to records requests and did not carry the burden of proof.

Citations and references

• Va. Code §§ 58.1-111, 58.1-205, 58.1-302, and 58.1-1826.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 15-213

Original ruling text

November 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, 2012.

FACTS

The Department received information from the Internal Revenue Service (IRS) indicating that the Taxpayer may have been required to file a Virginia individual income tax return for the 2012 taxable year. A review of the Department's records showed that the Taxpayer had not filed a return. The Department requested additional information from the Taxpayer in order to determine if his income was taxable in Virginia. When a response was not received, the Department issued an assessment. The Taxpayer appeals, contending that he was a domiciliary resident of * (State A) during the taxable year at issue.

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 has 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.

By letters dated June 16, 2015 and August 31, 2015, the Department requested the Taxpayer verify his residency status. To date, the Taxpayer has failed to provide any objective evidence as to his Virginia income tax liability for the 2012 taxable year.

When a taxpayer fails or refuses to provide documentation sufficient to calculate an accurate liability, Va. Code § 58.1-111 permits the Department to make an estimate of the amount of taxes due from any information in its possession and issue an assessment to such taxpayer. To date, the Taxpayer has failed to provide sufficient documentation on which the Department could make an informed decision concerning her domiciliary residence or her tax liability.

Further, under the provisions of Va. Code § 58.1-205 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." 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.

Based on the applicable law cited above and the information presented, there is no basis to abate the Department's assessment for the 2012 taxable year. Accordingly, the assessment is upheld and remains due and payable.

I will, however, grant the Taxpayer one final opportunity to provide sufficient evidence regarding his domicile for the 2012 taxable year. Such evidence should be provided within 30 days from the date of this letter to: Virginia Department of Taxation, Appeals and Rulings, Attention: *, Post Office Box 27203, Richmond, Virginia 23261-7203. If the requested information is not provided within the allotted time, the assessment will 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 questions regarding this determination, you may contact * in the Office of Tax Policy, Appeals and Rulings, at ***.

Sincerely,

Craig M. Burns
Tax Commissioner

AR/1-6038353223.B