Did a married couple abandon Virginia domicile by living and working in a U.S. territory for several years?

Subject

The preponderance of the evidence indicates that the Taxpayers had not abandoned their Virginia domicile.

Plain-English summary

A couple established Virginia domicile in 2000, then moved to a U.S. territory in 2007 for the husband's employment. They leased a residence there, and the husband obtained a local concealed-carry permit and driver's license. But they kept their Virginia house, returned to live there in 2012, and both obtained Virginia driver's licenses and registered a vehicle in Virginia in 2010. The husband also registered and voted in Virginia in the 2012 election.

Virginia found that the couple had not abandoned their Virginia domicile or shown an intent to remain in the territory permanently or indefinitely. Their permanent Virginia home, pre-return Virginia licensing, and the husband's Virginia voting outweighed the facts pointing toward the territory.

The couple remained taxable as Virginia domiciliary residents for 2012. Because the assessment used available information, the Department gave them 30 days to file a 2012 Virginia resident return so the liability could be recalculated; otherwise the assessment would stand and collection would resume.

What this means for you

Living and working elsewhere for years does not necessarily end Virginia domicile when a taxpayer keeps a permanent Virginia home and takes formal actions asserting Virginia residency. No single factor controls, but driver's licenses, vehicle registration, and voting can be strong evidence of intent.

Citations and references

• Va. Code §§ 58.1-302, 46.2-323.1, and 24.2-101.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 17-20

Original ruling text

March 15, 2017

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 “Taxpayers”) for the taxable year ended December 31, 2012.

FACTS

The Taxpayers, a husband and wife, moved to and established domicile in Virginia in 2000. In 2007, the husband obtained employment and the couple moved to the * (the “Territory”). The couple retained the house in Virginia where they returned to live.

The Department received information from the Internal Revenue Service (IRS) indicating that the Taxpayers may have been required to file a Virginia individual income tax return for the 2012 taxable year. The Department reviewed documentation provided by the Taxpayers and determined that they were Virginia residents during the 2012 taxable year and assessed additional Virginia income tax. The Taxpayers appealed, contending that they were residents of the Territory during the 2012 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, sites 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 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 Department must conclude that he or she intended to remain indefinitely in Virginia.

The Taxpayers performed some activities consistent with establishing a domicile in the Territory. They leased a residence in the Territory. The husband obtained employment and a concealed carry permit in the Territory. He also acquired a Territory driver's license, which he let lapse in March 2012.

The Taxpayers also performed activities indicative of being domiciled in Virginia. They maintained a permanent place of abode, which they purchased in 2000, and to which they returned in 2012. The Taxpayers both acquired Virginia driver's licenses and registered a motor vehicle with the Department of Motor Vehicles in 2010.

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).

In addition, the husband registered to vote in Virginia and voted in the 2012 election. Under Va. Code § 24.2-101, an individual qualified to vote in Virginia must be a resident of the precinct in which he offers to vote. This statute requires a resident to have both legal domicile and a place of abode in Virginia. For Virginia voting purposes, domicile is determined by the intention of the individual, supported by an individual's factual circumstances. See State Board of Elections (SBE) Policy 2009-005. By registering to vote in Virginia, the husband asserted to the SBE that he was a domiciliary resident of Virginia.

The Department acknowledges that a change in domicile occurs as part of a process in which no single factor is dispositive. While the Taxpayers did reside outside of Virginia for a period of time, they also maintained a permanent place of abode to which they could and, to which they actually did return. Further, the fact that the Taxpayers obtained Virginia driver's licenses in 2010 indicates that they already knew they would be returning to their permanent residence in Virginia.

As such, the preponderance of the evidence indicates that the Taxpayers had not abandoned their Virginia domicile and did not intend to reside in the Territory permanently or indefinitely. Accordingly, I find that the Taxpayers remained taxable as domiciliary residents of Virginia for the 2012 taxable year.

The Department's assessment is based on the information available. The Taxpayers, however, may have additional information to more accurately reflect their Virginia income tax liability. As such, the Taxpayers may file a 2012 Virginia resident individual income tax return. The return 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 return is received, it will be processed and the assessment adjusted accordingly. If the return is not filed within the time allotted, the assessment will be upheld and collection actions will resume.

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/799.B