Did a worker change domicile after moving from Virginia for a permanent out-of-state job, making Virginia wage withholding refundable?

Subject

Domicile, Withholding

Plain-English summary

A Virginia domiciliary resident moved to another state in January 2015 for a position described as permanent. He rented housing, obtained that state's driver's license, registered a vehicle there, and put Virginia property on the market. His employer nevertheless withheld Virginia income tax.

The worker still had significant Virginia connections. He and his wife used a Virginia address on their joint federal return, jointly owned Virginia-registered vehicles, and owned two Virginia residences. His wife remained in Virginia, and he returned after the out-of-state job ended.

Virginia evaluated all the evidence rather than treating any one fact as controlling. It concluded that the worker had taken enough steps to abandon his Virginia domicile and establish a new one before the job was terminated. The employer's Virginia withholding was therefore incorrect, and the Department ordered a refund with accrued interest.

What this means for you

• Permanent employment, housing, licensing, vehicle registration, and property-sale activity can support a domicile change.
• A spouse or property remaining in Virginia weighs against the change but does not automatically decide the result.
• An unexpected return to Virginia after job loss does not necessarily prove the earlier move was temporary.
• A taxpayer claiming a domicile change must document both abandonment of Virginia and acquisition of the new domicile.

Citations and references

• Va. Code § 58.1-302.
• 23 VAC 10-110-30 B 3.
• P.D. 15-84.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 17-196

Original ruling text

November 16, 2017

Re: § 58.1-1821 Application: Individual Income Tax

Dear *:

This will reply to your letter in which you seek a refund of individual income tax withheld from wages paid to * (the “Taxpayer”) for the taxable year ended December 31, 2015.

FACTS

In January 2015, the Taxpayer, a Virginia domiciliary resident, moved to * (State A) to accept an employment position. His State A employer withheld Virginia income tax. The Taxpayer's employment ended in April 2016, and he returned to Virginia. The Taxpayer filed a Virginia Special Claim for Individual Income Tax Withheld return (Form 763-S) indicating he was a domiciliary resident of State A during the 2015 taxable year. Under review, the Department denied his request. The Taxpayer filed an appeal asking for a refund of the income tax withheld for the period at issue.

DETERMINATION

Two classes of residents, a domiciliary resident and an actual resident, are set forth in Virginia 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 and 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 of the facts and circumstances of the particular case. A simple declaration is not sufficient to establish residency or domicile.

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 Department must conclude that he or she intended to remain indefinitely in Virginia.

The Taxpayer took some actions to establish domicile in State A. He accepted employment, rented places of abode, acquired a driver's license and registered a vehicle in State A. The offer letter from the State A employer indicates that the position was permanent. The Taxpayer, however, leased two different residences from January 2015 through April 2015. He rented a third residence from May 2015 until he left State A in July 2016. He surrendered his State A driver's license and obtained a new Virginia driver's license in February 2017.

The Taxpayer also performed actions consistent with retaining his Virginia domicile. He and his wife filed a joint 2015 federal income tax return using a Virginia address. The Taxpayer and his wife jointly owned two vehicles which were registered in Virginia. He also owned two Virginia residences. He sold his primary Virginia residence in June 2015 and his wife moved into the other residence. The Taxpayer moved back to Virginia in 2016 with his wife, but indicates that he only returned because his position in State A was terminated.

Ultimately, a person can have only one domicile. If he has two or more places of abode, his domicile is the one which he regards and uses as his permanent home. See Title 23 Virginia Administrative Code (VAC) 10-110-30 B 3. Moreover, a taxpayer must both abandon his Virginia domicile and acquire a new domiciliary residence in another state or country in order to change domicile.

The Taxpayer was required to take certain actions to show his intent to change his domicile from Virginia when he became employed in State A. Acceptance of an offer of permanent employment in another state indicates the intent to permanently reside in that state. See Public Document (P.D.) 15-84 (4/23/2015).

The Taxpayer acquired a driver's license, registered a car and eventually got long­-term housing in State A. In addition, although he continued to own real property in Virginia, it was placed on the market for sale when he acquired this residence in State A.

The Department acknowledges that a change in domicile occurs as part of a process in which no single factor is dispositive. In this case, the Taxpayer had taken actions to abandon his Virginia connections when his job in State A was terminated, resulting in his return to Virginia. After considering all the evidence in this matter, it is my determination that the Taxpayer took sufficient actions to change his domicile to State A for the 2015 taxable year. Therefore, his employer incorrectly withheld Virginia income tax from the Taxpayer's wages. Because the Taxpayer timely filed the refund request, the Department will issue a refund of any Virginia income taxes withheld for the 2015 taxable year along with accrued interest.

The Code of Virginia sections, regulation, 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 Department's Office of Tax Policy, Appe als and Rulings, at ***.

Sincerely,

Craig M. Burns

Tax Commissioner

AR/1237.B