I moved to Virginia partway through the year -- the Department assumed I was a full-year Virginia resident, but I filed a part-year return. Who's right?

Plain-English summary

A husband and wife moved from another state ("State A") to Virginia during 2016. The Department first heard about them through IRS data suggesting they owed a Virginia return for 2016; when its records showed no return on file, it requested information, got no response, and issued an assessment. The couple then filed a Virginia PART-YEAR resident return reporting they'd become Virginia residents in August 2016. The Department initially disagreed, treating them as full-year Virginia domiciliaries and adjusting the return (and assessment) on that basis. The couple appealed -- and won.

Two ways to be a Virginia resident. Virginia taxes two kinds of residents: a "domiciliary resident" (whose permanent home, the place they intend to return to, is Virginia) and an "actual resident" (anyone who maintains a Virginia home for more than 183 days in the year, regardless of domicile). To CHANGE domicile from one state to another, a person must (1) actually abandon the old domicile with no intent to return, and (2) acquire a new one by being physically present with intent to stay permanently or indefinitely -- and the person claiming the change carries the burden of proving it.

How the Department weighs the evidence. No single fact or simple declaration decides domicile -- the Department looks at the whole picture: expressed intent, conduct, financial independence, employment, income sources, spouse's residence, marital status, location of real/tangible property, and vehicle/driver's license registration, among other factors. If the evidence is too thin to prove a change, the Department defaults to finding the person intended to remain in Virginia indefinitely.

Why the couple's evidence was enough. The couple showed they rented a home in State A and kept STATE A driver's licenses and vehicle registrations until July 2016 -- then, that same month, purchased a Virginia home and obtained Virginia licenses and registrations. Their 2016 tax documents were mailed to the new Virginia address, consistent with the claimed August 2016 move. The Department found this combination of concrete, verifiable actions -- not just a bare assertion -- showed a genuine intent to change domicile to Virginia at that point, even though the couple kept working for the same State-A-based employer after relocating (remote/out-of-state employment alone doesn't defeat a genuine domicile change).

Result. Because the evidence supported an August 2016 domicile change, the couple qualified to file as PART-YEAR Virginia residents -- taxed on Virginia-attributable income only for the August-December portion of the year, with prorated personal exemptions and standard deduction. Their part-year return was correct, and the assessment was ordered adjusted to match.

What this means for you

People who moved INTO Virginia partway through a year

Line up your concrete evidence early: the date you bought or leased your Virginia home, when you switched your driver's license and vehicle registration, and where your tax documents and mail were sent -- these are exactly the factors the Department weighed here, and a consistent, well-documented timeline carries real weight.

People whose employer stays in their old state after a move

Continuing to work for an out-of-state employer after relocating does NOT by itself defeat a domicile change -- the Department looks at the totality of your circumstances, not any single factor like where your paycheck comes from.

Anyone filing (or defending) a part-year return after an IRS-triggered inquiry

Don't assume the Department will automatically credit a part-year claim -- come prepared to substantiate the move date with the same kind of concrete documentation (home purchase/lease records, license/registration change dates, mailing address) that won this appeal.

Common questions

Q: What's the difference between a "domiciliary resident" and an "actual resident" in Virginia?
A: A domiciliary resident's permanent home (the place they intend to return to) is Virginia. An actual resident is anyone -- domiciled elsewhere or not -- who maintains a Virginia home for more than 183 days in the year. Either status triggers Virginia taxation.

Q: What do I need to prove to establish a mid-year domicile change into Virginia?
A: Concrete evidence of both abandoning your old domicile (with no intent to return) and establishing a new one in Virginia with intent to stay -- things like a home purchase/lease date, switching your driver's license and vehicle registration, and your mailing address, evaluated together rather than any single fact alone.

Q: Does keeping my out-of-state job after moving hurt my domicile-change claim?
A: Not by itself -- the Department looks at the whole pattern of evidence, and continuing to work for an out-of-state employer didn't prevent this couple from establishing a genuine Virginia domicile change.

Q: How is a part-year resident taxed?
A: Only on income attributable to the period of actual Virginia residency, with personal exemptions and the standard deduction (if claimed federally) prorated for the number of days you were a Virginia resident.

Subject

Residency : Domicile - Intent to Change; Part Year - Moving into Virginia

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 21-44

Original ruling text

March 23, 2021

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, 2016.

FACTS

The Department received information from the Internal Revenue Service (IRS) indicating that the Taxpayers, a husband and wife, may have been required to file a Virginia income tax return for the 2016 taxable year. A review of the Department’s records showed that the Taxpayers had not filed a return. The Department requested additional information from the Taxpayers in order to determine if their income was taxable in Virginia. When a response was not received, the Department issued an assessment. Thereafter, the Taxpayers filed a Virginia part-year return indicating that they had moved to Virginia from * (State A) in August 2016. Upon review, the Department determined the Taxpayers were domiciliary residents of Virginia for the entire 2016 taxable year. The return was adjusted and an assessment was issued. The Taxpayers appeal, contending their part-year return was filed correctly and request the assessment be abated.

DETERMINATION

Domicile

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.

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 have provided evidence that they maintained a rented personal residence in State A until July 2016, at which time they purchased a residence in Virginia and relocated there. They maintained State A driver’s licenses and vehicle registrations until July 2016, when they obtained Virginia driver’s licenses and vehicle registrations. Tax documents for the 2016 taxable year were mailed to a Virginia address, which is consistent with the Taxpayer’s statements of having moved to Virginia in August 2016. Following the move to Virginia, the Taxpayers continued to work for an employer based in State A. The actions indicated a strong intent to change their domicile from State A to Virginia.

Part-Year Residents

Virginia Code § 58.1-303 provides that a taxpayer who becomes a resident of another state during the taxable year is subject to taxation for the period in which they were a Virginia resident. Accordingly, Virginia taxable income is computed by determining income, deductions, subtractions, additions and modifications attributable to the period of residence in Virginia. In addition, part-year residents may claim a portion of their Virginia personal exemptions, but the exemptions will be prorated based upon the number of days that the taxpayer was a Virginia resident. Further, part-year residents may claim a prorated Virginia standard deduction if they claim the standard deduction for federal income tax purposes. See Public Document (P.D.) 14-67 (5/20/2014).

Pursuant to Virginia Code § 58.1-303, part-year residents are subject to tax only on their income that is attributable to Virginia. Title 23 of the Virginia Administrative Code (VAC) 10-110-40 B specifically defines income attributable to Virginia as “that which is received during the portion of the year in which the individual is a Virginia resident”. Taxpayers that are part-year residents are required to file Virginia part-year income tax returns if they have taxable income earned while they resided in the Commonwealth.

CONCLUSION

After carefully considering the information provided, I find that the Taxpayers became domiciliary residents of Virginia in August 2016. As permitted by statute, they were eligible to file as a part-year resident for the 2016 taxable year. Therefore, the Taxpayers 2016 part-year return should be processed and the assessment will be adjusted accordingly.

The Code of Virginia sections, regulation, and public document 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/3432.A

Related Documents

14-67