What happens to my Virginia residency appeal if I don't respond to the Department's requests for more information?

Plain-English summary

The IRS reported that a taxpayer might have owed a 2018 Virginia return; when he didn't file and didn't respond to the Department's information requests, the Department assessed him as a Virginia domiciliary resident using the best information it had available. He appealed, claiming residency in a different state, but the record showed he'd obtained a Virginia driver's license back in 2014, renewed it in 2021, and registered a vehicle in Virginia in 2017 and again in 2021 -- all years after he claimed to have already become a resident elsewhere -- with no evidence he'd ever obtained a license or registered a vehicle in the state he claimed as home.

Twice -- in July and August 2022 -- the Department sent him a domicile questionnaire seeking the detailed facts needed to actually evaluate his claim (financial ties, employment, property, and so on). He never responded to either request. Virginia law puts the burden of proving abandoned domicile squarely on the taxpayer, and treats a Department assessment as presumptively correct; separately, a distinct statute bars courts from granting relief on an erroneous assessment where the taxpayer's own willful failure to provide required information caused the problem in the first place. With no rebuttal evidence in the record, his renewed license and vehicle registrations stood as unanswered strong evidence of continuing Virginia domicile. Rather than immediately finalizing the assessment on that basis, though, the Department gave him one last 30-day window to either provide the missing information or file the return -- warning that if he still didn't respond, the assessment would instead be adjusted to at least allow a credit for the tax he'd actually paid to the other state (based on the return he'd filed there), with any remaining balance billed and treated as final.

What this means for you

Anyone appealing a Virginia residency assessment

Respond to the Department's information requests. The burden of proving you abandoned your Virginia domicile is on you, not the Department -- if you don't provide the requested facts, unrebutted evidence like a renewed license or vehicle registration will simply stand, and you also risk losing your ability to later get court relief if the resulting assessment turns out wrong.

Taxpayers who ignored a domicile questionnaire and are worried it's too late

It may not be -- here, even after two ignored requests, the Department still extended one final opportunity to respond before treating its position as settled. But don't count on unlimited chances; the ruling frames this as the final opportunity.

Accountants and tax professionals advising a client who under-communicated with the Department

Flag Va. Code § 58.1-1826 specifically: a willful failure to provide required information isn't just a missed opportunity to help your case -- it can independently bar a court from granting relief later, even if the underlying assessment might otherwise have been wrong on the merits.

Common questions

Q: What happens if I don't respond to the Department's requests for residency information?
A: The Department will decide based on the best information it has, and any unrebutted evidence (like a renewed driver's license or vehicle registration) works against you since the burden of proof is yours. There's also a real risk that a court could later be barred from granting you relief if your own willful nonresponse caused the erroneous assessment.

Q: Can I still get a credit for tax I paid to another state if my Virginia domicile claim doesn't succeed?
A: Yes -- Virginia's credit for tax paid to another state is separate from the domicile question. Here, the Department indicated it would apply that credit (based on the taxpayer's own out-of-state return) even if he never responded to the domicile questionnaire.

Q: Is renewing a driver's license years after claiming to have left Virginia a problem?
A: Yes -- it's treated as strong evidence of continuing Virginia domiciliary intent, and if you don't provide contrary evidence, it can stand unanswered against your residency claim.

Q: How many chances do I get to respond before an assessment becomes final?
A: It varies, but don't assume unlimited chances -- here, the Department explicitly framed a final 30-day window as the last opportunity before proceeding based on the available information.

Citations and references

• Va. Code § 58.1-302 (domiciliary and actual resident definitions)
• Va. Code § 46.2-323.1 (driver's license residency requirement)
• Va. Code § 58.1-332 A (credit for taxes paid to another state)
• Va. Code § 58.1-205 (assessment prima facie correct)
• Va. Code § 58.1-1826 (court relief barred for willful nonresponse)
• Va. Code § 58.1-111 (best information available)
• P.D. 00-151 (8/18/2000); P.D. 02-149 (12/9/2002) (driver's license as domicile evidence)
• P.D. 97-301 (7/7/1997) (credit computation limitation)

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 23-64-0

Original ruling text

May 24, 2023

Re: § 58.1-1821 Application: 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, 2018.

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 2018 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. When a response was not received, the Department issued an assessment. The Taxpayer appeals, contending he was a resident of (State A).

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 has abandoned his Virginia domicile. If the information is inadequate to meet this burden, the Department must conclude that he intended to remain indefinitely in Virginia.

The Taxpayer lived in State A in 2018 and filed a 2018 State A return attributing all of his income to State A. Prior to 2018, the Taxpayer was a Virginia resident. He obtained a Virginia driver’s license in 2014, which he renewed in 2021. In addition, the Taxpayer registered a vehicle in Virginia in 2017 and registered it again in 2021. It is unclear whether the Taxpayer ever obtained a State A license or registered a vehicle in State A.

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 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).

By letters dated July 5, 2022, and August 16, 2022, the Department requested the Taxpayer complete a domicile questionnaire in an attempt to gain additional information so that the Department could make an informed decision concerning his residency status. To date, the Taxpayer has failed to respond with the requested information.

Credit for Taxes Paid to Other States

Virginia Code § 58.1-332 A allows Virginia residents a credit on their Virginia income tax return for taxes paid to another state provided the income is either earned or business income. Virginia law does not necessarily allow a taxpayer to claim a credit for the total amount of tax paid to another state. Rather, the credit is limited to the lesser of the amount of tax actually paid to the other state or the amount of Virginia income tax actually imposed on the taxpayer on the income earned or derived in the other state. See P.D. 97-301 (7/7/1997).

CONCLUSION

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 he 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.

Because the assessment at issue was made based on the best information available to the Department pursuant to Virginia Code § 58.1-111, the Taxpayer will be given one final opportunity to provide the additional information or file a return. The additional information or 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 information or return will be reviewed and the assessment will be adjusted, as appropriate. If the information or return is not received within the allotted time, the assessment will be adjusted to allow a credit for tax paid to State A based on the return provided. If a balance due remains, a revised bill will be issued.

The Code of Virginia sections and public documents cited are available online 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/4206.X

Related Documents

97-301

00-151

02-149