The IRS told Virginia I might owe tax and I'd never filed a return -- I argued I actually live in another state, but I kept renewing my Virginia driver's license and car registration the whole time. Do I still owe Virginia tax?

Plain-English summary

The Department found out from the IRS that a taxpayer likely needed to file a Virginia income tax return for 2017 -- but she never had. When the Department requested information to figure out her Virginia tax liability, it concluded she remained a Virginia domiciliary resident and assessed tax accordingly. She appealed, arguing she was actually a resident of a different State A.

Virginia recognizes two kinds of resident: a "domiciliary" resident (someone whose permanent home base is Virginia, the place they intend to return to) and an "actual" resident (someone who simply spends more than 183 days physically present in Virginia in a year, regardless of domicile). Changing your domicile away from Virginia requires proving two things at the same time: that you actually abandoned Virginia with no intent to return, AND that you established a new domicile elsewhere through physical presence plus an intent to stay there permanently or indefinitely. The taxpayer bears the burden of proving both halves.

The taxpayer had genuine State A connections -- she got a job there in 2016, leased a residence, and lived there continuously through 2020. But she also kept renewing her Virginia driver's license and continued registering her vehicle in Virginia the whole time, and her federal information returns were still going to her parents' Virginia address. When the Department specifically asked her to document her Virginia voting history and any additional State A ties (a lease, employment contract, voter registration, car registration, driver's license), she responded only with her State A lease -- a year-to-year rental, not necessarily a strong permanence signal on its own -- and never addressed the voting question or anything else asked.

The driver's-license renewal was the sharper problem. Virginia law generally requires a driver's license applicant to certify Virginia residency, and while someone CAN establish an out-of-state domicile while still holding an old Virginia license, actually RENEWING that license after domicile has supposedly already shifted elsewhere is treated as very strong evidence the person never really gave up Virginia domicile -- because by that point the renewal can't be explained away as just a holdover from the original six-month "deemed resident" licensing rule; it reflects an ongoing claim to be a Virginia domiciliary. Combined with her incomplete response to the Department's document request, the taxpayer didn't carry her burden on either half of the domicile-change test, so the Department found she remained taxable as a Virginia domiciliary resident and upheld the assessment (based on the Department's best available information), while giving her 30 days to file an actual 2017 return that might more precisely reflect her real liability.

What this means for you

Anyone who moved to another state but kept renewing a Virginia driver's license or vehicle registration

Renewing a Virginia license or registration AFTER you claim to have already abandoned Virginia domicile is treated as very strong evidence you never actually gave it up -- much stronger than the "strong indicator" weight given to an ordinary first license obtained under the six-month physical-presence rule. If you're genuinely moving your domicile, let the old license lapse rather than renewing it.

Anyone who gets a Department information request after an IRS non-filer referral

Answer every question asked, completely. This taxpayer's response ignored the Department's specific question about her Virginia voting record and provided only a partial picture of her State A ties -- an incomplete response left the Department with insufficient evidence to find in her favor, and the burden was entirely hers to fill that gap.

Anyone trying to prove a domicile change to escape a non-filer assessment

You must prove BOTH elements together: genuine abandonment of Virginia (no intent to return) AND establishment of a new domicile through physical presence plus intent to stay permanently or indefinitely. Genuine ties to the new state (job, lease, residence) aren't enough on their own if your conduct elsewhere (license renewals, registrations, mail) contradicts a true abandonment of Virginia.

Common questions

Q: Can I keep an old Virginia driver's license after moving my domicile to another state?
A: Simply retaining an old license doesn't necessarily defeat a domicile change. But actively RENEWING that license after you claim domicile has already shifted is treated as very strong evidence you never actually abandoned Virginia domicile.

Q: What happens if the IRS tells Virginia I might owe tax and I never filed a return?
A: The Department can assess tax based on the best information available to it. You can then contest that assessment, but the burden is on you to show your correct liability -- including proving any claimed change of domicile away from Virginia.

Q: What do I need to prove to show I changed my domicile away from Virginia?
A: Two things, together: that you actually abandoned Virginia domicile with no intent to return, and that you established a new domicile elsewhere through actual physical presence plus intent to remain there permanently or indefinitely. Both halves must be shown; genuine new-state ties alone aren't enough if your Virginia ties (license, registration, voting) suggest otherwise.

Q: What if I only partially respond to the Department's request for supporting documentation?
A: An incomplete response can be fatal to your appeal -- since the burden of proof is on you, the Department is not obligated to fill in gaps you left unanswered, and unanswered questions (like the taxpayer's unaddressed voter-registration question here) count against you.

Citations and references

• Va. Code § 58.1-302 (domiciliary resident: permanent home and intent to return; actual resident: 183+ days' physical presence)
• Va. Code § 58.1-205 (assessment presumed correct; burden on the taxpayer to disprove it)
• Va. Code § 58.1-1826 (no court relief where an erroneous assessment stems from the taxpayer's willful failure to provide required information)
• Va. Code § 58.1-111 (Department may assess based on the best information available)
• Va. Code § 46.2-323.1 (driver's license applicants must certify Virginia residency)
• Va. Code § 46.2-307 (nonresidents may continue to use an out-of-state license)
• Va. Code § 46.2-100 (definition of "nonresident" for Title 46.2)
• Va. Code § 46.2-300 et seq. (six-month deemed-residency rule for driver's licensing purposes)
• P.D. 00-151 (8/18/2000) (a domicile change can succeed even while retaining an old Virginia driver's license)
• P.D. 02-149 (12/9/2002) (obtaining/renewing a Virginia driver's license is a strong indicator of intent to retain Virginia domicile)

Subject

Residency: Domicile - Other State, Failure to Document Intent

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 22-92

Original ruling text

May 5, 2022

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 your client, * (the “Taxpayer”) for the taxable year ended December 31, 2017.

FACTS

The Department received information from the Internal Revenue Service (IRS) indicating that the Taxpayer may have been required to file a Virginia income tax return for the 2017 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 in order to determine if his income was taxable in Virginia. Based on the information provided, the Department concluded that the Taxpayer was a domiciliary resident of Virginia and issued an assessment. The Taxpayer appeals, contending she was a resident of * (State A).

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.

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 established connections in State A that indicate she may have intended to establish domicile there. She obtained employment in State A in 2016 and began leasing a residence there. The Taxpayer resided continuously in State A from October 2016 until October 2020.

The Taxpayer also retained connections with Virginia. She maintained a Virginia driver’s license that she renewed. The Taxpayer also owned a vehicle that she continued to register in Virginia. In addition, her 2017 federal information returns were sent to her parents’ residence in Virginia.

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 fact that an individual has a Virginia driver’s license is one factor to consider, among other possible factors, in any given domicile case. Nonresidents are not permitted to hold Virginia driver’s licenses. See Virginia Code § 46.2-323.1. They are, however, permitted to continue to use their licenses from their home states or countries. See Virginia Code § 46.2-307. For the purposes of Title 46.2 of the Code of Virginia , “nonresident” is generally defined as every person who is not domiciled in the Commonwealth. See Virginia Code § 46.2-100. Thus, in general, an individual must be a domiciliary resident of Virginia in order to hold a Virginia driver’s license.

Individuals who have resided in Virginia more than six months, however, are deemed to be residents for purposes of applying most of the provisions of Title 46.2 of the Code of Virginia , including the driver’s licensing provisions of Title 46.2, Chapter 3 ( Virginia Code § 46.2-300 et seq .). In addition, because an individual who has been physically present and residing in Virginia for more than six months may nevertheless remain a domiciliary resident of another state or country, it may be necessary in such cases to examine additional factors to determine whether a person who has obtained a driver's license based on physical presence and actual residency in Virginia also intended to become a domiciliary resident of Virginia. However, once it is clear that an individual has established domiciliary residency in Virginia, subsequent renewals of a Virginia driver’s license even while absent from the state will be considered very strong evidence of the individual’s intent to remain a domiciliary resident of Virginia. That is because the basis of the individual’s claim to be entitled to a Virginia driver’s license would no longer be based on the length of time he was physically present in Virginia as an actual resident, but rather on the implication that he remained a domiciliary resident of Virginia.

The Taxpayer indicates that she did not understand the implications of maintaining a Virginia driver’s license and car registration and that it was done out of convenience. She surrendered her Virginia driver’s license in 2021.

By letter dated February 14, 2022, the Department requested additional information regarding the Taxpayer’s Virginia voting record, if any, and any connections she may have established in State A, such as a lease, employment contract, voter’s registration, car registration, or driver’s license. The Taxpayer responded by only submitting a lease for the residence she rented in State A. The lease was subject to renewal on a year-to-year basis. The Taxpayer, however, did not answer the Department’s question concerning her Virginia voter’s record, nor did she provide any further information concerning connections she may have established with State A.

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 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 taxpayer’s willful failure or refusal to provide the Department with necessary information as required by law.

As stated above, a change of domicile requires that a taxpayer prove two elements concurrently: 1) that she abandoned the old domicile and had no intent to return to it; and 2) that she established a new domicile, which must have been formed by physical presence coupled with the intent to remain permanently or indefinitely. In this case, even if the Taxpayer had the requisite intent to establish domicile in State A, her ongoing connections with Virginia raise doubts as to her intent to abandon her Virginia domicile. In particular, the renewal of her Virginia driver’s license at a time when she asserts she was no longer a Virginia resident and had no intention of ever returning to Virginia for her domicile, as she stated in her appeal, raises a substantial doubt as to her intent. Further, the fact that the Taxpayer apparently made few, if any, connections with State A that would normally occur when an individual makes a permanent move raises substantial doubts even as to her intent to establish domicile in State A.

Ultimately, the Taxpayer bears the burden of proving that a change of domicile occurred and that the Department’s assessment was incorrect. After carefully reviewing all of the evidence provided, I find that that burden of proof has not been met. Therefore, I find that the Taxpayer remained taxable as a domiciliary resident of Virginia.

The assessment at issue was made based on the best information available to the Department pursuant to Virginia Code § 58.1-111. The Taxpayer, however, may have information that better represents her Virginia income tax liability for the taxable year at issue. Therefore, the Taxpayer should file a 2017 Virginia resident income tax return to more accurately reflect her Virginia tax liability. The return 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 return will be reviewed and the assessment will be adjusted, as appropriate. If the return is not received within the allotted time, the assessment will be considered correct and collection actions may result.

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 website. 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/3915.B

Related Documents

00-151

02-149