Did a taxpayer prove she was a District of Columbia resident rather than a Virginia resident for 2015?

Subject

Residency, Assessment and Domicile

Plain-English summary

Virginia upheld a 2015 individual income tax assessment because the taxpayer did not prove that she had abandoned Virginia domicile and acquired domicile in the District of Columbia.

The taxpayer said she lived and paid tax in D.C. throughout 2015, but she provided no supporting domicile information after the Department requested it. Her Virginia resident returns before and after 2015 also indicated continued Virginia domicile. Because an assessment is presumed correct, the Department treated the assessment based on the best information available as valid.

The ruling gave the taxpayer one final 30-day opportunity either to document that she was not a Virginia resident or to file a 2015 Virginia resident return that more accurately reported her liability.

What this means for you

A statement that you lived elsewhere is not enough to establish a domicile change. Virginia considers conduct and circumstances such as employment, property, family ties, vehicle registration, licensing, and filing history. Taxpayers should answer residency-information requests with evidence showing both abandonment of the old domicile and acquisition of a new one.

Common questions

Does living in another jurisdiction automatically end Virginia domicile? No. A person must abandon Virginia domicile and acquire a new domicile through physical presence and an intent to remain permanently or indefinitely.

Who had the burden of proof? The taxpayer. Virginia assessments are presumed correct.

Was the assessment immediately final? The Department upheld it but allowed one last 30-day period for residency evidence or a 2015 return.

Citations and references

• Va. Code § 58.1-302 — domiciliary and actual residency.
• Va. Code § 58.1-205 — presumption that an assessment is correct.
• Va. Code § 58.1-1826 — consequences of failing or refusing to provide required information.
• Va. Code § 58.1-111 — assessment using the best information available.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 18-135

Original ruling text

July 11, 2018

Re: § 58.1-1821 Appeal: Individual Income Tax

Dear *:

This will respond 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, 2015.

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 2015 taxable year. Because no return was on file, the Department requested additional information in order to determine if her income was taxable in Virginia. When the Taxpayer did not respond with sufficient information within the allowed time, an assessment was issued. The Taxpayer appealed, contending she was a resident of the District of Columbia (D.C.) and not subject to Virginia income tax.

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 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.

In her appeal, the Taxpayer claims that she filed and paid taxes in D.C. because that is where she physically resided for the entire year at issue, but she provided no evidence of her proper domiciliary residence. By letter dated April 25, 2018, the Department requested information required to determine the Taxpayer’s domicile. As of the date of this letter, no information has been received. Additionally, the Taxpayer has taken actions consistent with maintaining her domicile in Virginia, including filing Virginia resident individual income tax returns before and after the year at issue.

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 that she was not subject to income tax in Virginia. Furthermore, Virginia 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 Virginia Code § 58.1-111. As such, the Department was correct in issuing the assessment. The Taxpayer, however, may have information that better represents her Virginia income tax liability for the taxable year at issue. Therefore, she should either provide additional information showing she was not a Virginia resident, or file a 2015 Virginia resident income tax return to reflect more accurately her Virginia tax liability.

The Taxpayer will be given one final opportunity to provide additional information or file a return. The return or additional information should be submitted within 30 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 information will be reviewed and the assessment will be adjusted, as appropriate. If no new information is received within the allotted time, the assessment will be considered correct and collection actions may result.

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 about this determination, you may contact * in the Office of Tax Policy, Appeals and Rulings, at ***.

Sincerely,

Craig M. Burns

Tax Commissioner

AR/1656.C