Could a taxpayer overturn a Virginia residency assessment without providing the domicile records the Department requested?

Subject

The burden of proof is on the Taxpayer to show he was not subject to income tax in Virginia.

Plain-English summary

Virginia assessed 2012 individual income tax after receiving IRS information, finding no Virginia return, and getting no response to its request for more information. The taxpayer appealed and said he had never been a Virginia resident.

The taxpayer said he had lived overseas, used a family member's Virginia address for mail, and spent no more than 45 days in the United States since retiring from the armed services in 2005. Department records also showed a Virginia driver's license obtained in July 2013 and possibly held earlier. Virginia treated a license as strong domicile evidence but explained that residency depends on the entire record.

The taxpayer bore the burden of proving that he had abandoned any Virginia domicile and acquired another. Because he did not answer the Department's request for domicile documentation, the best-information assessment remained presumptively correct on the existing record.

The Department nevertheless gave him one final 45-day opportunity to submit adequate domicile records or file a 2012 Virginia resident return. It said it would review and adjust the assessment if appropriate; otherwise the assessment would be considered correct and collection could follow.

Citations and references

• Va. Code §§ 58.1-302, 58.1-205, 58.1-111, and 58.1-1826.
• Va. Code § 46.2-323.1.
• P.D. 00-151 and P.D. 02-149.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 16-143

Original ruling text

June 27, 2016

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 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 an assessment. The Taxpayer appeals, contending he has never been a resident of Virginia.

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 had tax information returns sent to a Virginia address. The Department's records also indicate that the Taxpayer obtained a Virginia driver's license in July 2013 and may have had one prior to that.

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 explains that he was using a family member's address in Virginia to receive mail because he was overseas and did not have a permanent address. He states that he has not been in the United States for more than 45 days since he retired from the armed services in 2005. It appears that the Taxpayer was claiming * (State A) as his domicile while he was serving in the military.

By letter dated February 22, 2016, the Department requested additional documentation to determine the Taxpayer's domiciliary residency. To date, the Taxpayer has failed to respond to the Department's information request.

Virginia Code § 58.1-205 provides that in 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. Furthermore, 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 erroneous assessment is attributable to the taxpayers' willful failure or refusal to provide the Department with necessary information as required by law.

The assessment at issue was made based on the best information available to the Department pursuant to Va. Code § 58.1-111. The Taxpayer may have information that better represents his Virginia income tax liability for the year at issue. Therefore, the Taxpayer will be granted one last opportunity to provide adequate documentation with regard to his domiciliary status or file a 2012 Virginia resident tax return. The documentation should be submitted within 45 days from the date of this letter to: Virginia Department of Taxation, Office of Tax Policy, Appeals and Rulings, P.O. Box 27203, Richmond, Virginia 23161-7203, Attention: *. Upon receipt, the documentation will be reviewed and assessment will be adjusted, as appropriate. If the documentation is not received within the allotted time, the assessment will be considered to be correct as issued and collection actions may result.

The Code of Virginia section and public documents cited are available on-line at www.tax.virginia.gov in the Laws, Rules and 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/1-6250806276.M