Did an overseas assignment establish foreign domicile when the taxpayer kept a Virginia license, voting and vehicle ties, and intended to return?

Subject

Obtaining or renewing a Virginia driver's license is considered to be a strong indicator of intent to retain domiciliary residency in Virginia.

Plain-English summary

The taxpayer accepted an overseas assignment in 2008, leased a home there, obtained a foreign driver's license, and registered vehicles abroad. He argued that he was not a Virginia resident in 2009 and 2010.

He also remained registered to vote in Virginia, kept a vehicle registered and garaged here, retained and later renewed his Virginia driver's license, and said he intended to return if his employer had a Virginia assignment. His employer withheld Virginia tax, and he claimed to have filed Virginia resident returns, although the Department had no record of them.

Virginia explained that no one factor controls domicile, but renewing a Virginia license is a strong indicator because the applicant certifies Virginia residency. Taken with the other connections and expressed intent to return, the Department found that the taxpayer had not abandoned Virginia domicile.

He remained taxable as a Virginia domiciliary resident for 2009 and 2010. Virginia allowed 30 days to file resident returns so the best-information assessments could be adjusted.

Common questions

Can someone establish foreign domicile while retaining a Virginia driver's license? Sometimes, but the retained or renewed license is strong contrary evidence and must be weighed with all facts.

What was especially damaging here? The license, voter and vehicle ties, claimed resident filings, and the taxpayer's own intent to return.

Citations and references

• Va. Code §§ 46.2-323.1, 58.1-302, and 58.1-499 D.
• P.D. 00-151 and P.D. 02-149.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 15-244

Original ruling text

December 23, 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 assessments issued to * (the "Taxpayer") for the taxable years ended December 31, 2009, and 2010.

FACTS

The Department received information from the Internal Revenue Service (IRS) indicating that the Taxpayer may have been required to file Virginia individual income tax returns for the 2009 and 2010 taxable years. A review of the Department's records showed that the Taxpayer had not filed the returns. The Department requested additional information from the Taxpayer to determine if his income was subject to Virginia individual income tax. When the Taxpayer did not respond to the information request, the Department issued assessments. The Taxpayer appeals, contending he was a resident of the * (Country A) during the taxable years 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 taxpayers 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.

The Taxpayer was a domiciliary resident of Virginia, and filed Virginia resident income tax returns prior to the 2008 taxable year. The Taxpayer performed some activities indicating he intended to establish domicile in Country A in 2008. He accepted an assignment in Country A from his employer and began leasing a personal residence there. He also obtained a Country A drivers license and registered several vehicles in Country A.

The Taxpayer also maintained some connections with Virginia. He was registered to vote in Virginia. He also owned a vehicle that was registered and garaged in Virginia. In addition, he retained his Virginia drivers license and renewed it in December 2011.

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. The Department has found that an individual may successfully establish a domicile outside Virginia even if he retains 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 (12/9/2002).

The Taxpayer states that he never voted in United States elections while he resided in Country A. The Taxpayer also states that when he left Virginia for Country A in 2008, he left his vehicles with a family member. He tried to sell them but eventually decided to keep them for that family member's use. He explains that one of the cars remained garaged in Virginia with its license plates surrendered. In addition, he explains that he kept his Virginia driver's license because it was the only United States driver's license he had and he kept it in order to be able to drive when in the United States.

The Taxpayer also states that he intended to return to Virginia but did not because his employer had no assignments available for him in Virginia. His employer continued to withhold Virginia income tax from his wages, and he claims to have filed a Virginia resident income tax return for each of the 2009 and 2010 taxable years. The Department, however, has no record that the returns were filed.

A change in domicile occurs as part of a process in which no single factor is dispositive. After carefully considering the information and explanations provided, I find that although the Taxpayer performed actions indicating an intent to establish domicile in Country A, he did not abandon his Virginia domicile because of the Virginia connections he retained, the fact that he claims to have filed Virginia resident income tax returns and his stated intent to return to Virginia. As such, I find that the Taxpayer did not complete the process of changing his domicile and thus remained taxable as a domiciliary resident of Virginia for each of the 2009 and 2010 taxable years.

As stated above, the Department has no record that the Taxpayer filed a return for either the 2009 or 2010 taxable year. The Department's assessment was based on the information available. The Taxpayer, however, may have additional information to more accurately reflect his Virginia income tax liability. As such, the Taxpayer may file 2009 and 2010 Virginia resident individual income tax returns. The returns should be mailed to: Virginia Department of Taxation, P.O. Box 27203, Richmond, Virginia 23261-7203, Attention: *, within 30 days from the date of this letter. Once the returns are received, they will be processed and the assessments adjusted accordingly. If the returns are not filed within the time allotted, the assessments will be upheld and collection actions will resume. The Taxpayer should also be aware that any refund claims will be subject to the applicable statute of limitations. See Va. Code § 58.1-499 D.

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/1-6050006050.M