Can I get the Department of Taxation to reconsider a final domicile determination just by pointing to a similar case that came out differently?

Plain-English summary

A taxpayer who'd already lost a domicile appeal (decided in P.D. 22-74, which found he remained a Virginia domiciliary resident for 2018) asked the Department to reconsider, arguing his facts were similar to a different, older case (P.D. 01-127) where the Department had found the taxpayer did abandon Virginia domicile.

The Department explained that reconsideration isn't a second bite at the apple -- it's available only in four narrow situations: the original facts were misstated or inaccurate and correcting them would change the result; the governing law has since changed; the Department applied the wrong legal standard (not just reached an unwelcome result under the right one); or there's genuinely new evidence that wasn't available when the original appeal was filed. Here, none applied -- there was no dispute that ordinary domicile law governed, and the Department had applied that law; the taxpayer simply disagreed with how it came out. The Department was blunt that if "the Department reached the wrong result" were enough, every losing taxpayer could ask for reconsideration, which would make the criteria meaningless -- and the right time to compare your case to favorable precedent is before the original appeal decision, not after.

Even so, the Tax Commissioner used the ruling to explain, in general terms, why domicile cases are decided the way they are: the common losing pattern is a taxpayer who fails to relinquish enough Virginia connections -- keeping a home actually returned to, renewing (not just retaining) a Virginia driver's license, and keeping vehicles registered in Virginia -- while establishing nothing comparable in the new state. By contrast, the taxpayer in the cited P.D. 01-127 had established far more connections with a foreign country than this taxpayer had with either state at issue, and merely retaining an old license (without renewing it) is a weaker signal than obtaining or renewing one. The Commissioner also flagged a broader structural point: because a handful of states have no income tax, domicile disputes involving those states become "all-or-nothing" -- a taxpayer who loses gets no credit at all (since there's no tax paid elsewhere to credit), unlike a "dual resident" who actually paid tax to another income-tax state and can usually get a credit that substantially reduces or eliminates the Virginia bill.

What this means for you

Anyone considering an appeal or a reconsideration request

Compare your facts to favorable precedent before you file your original appeal, not after you lose. Reconsideration is not available just because you believe the result was wrong or because you've since found a better-looking case -- you need a real factual misstatement, a change in law, a genuine misapplication of the legal standard, or new evidence that wasn't available before.

Taxpayers claiming domicile in a no-income-tax state

Be aware the stakes are structurally higher: if you lose a domicile dispute against a no-income-tax state, you get no offsetting credit at all, unlike someone who actually paid tax to another income-tax state (who typically gets a credit that can eliminate most or all of the Virginia liability). That asymmetry is exactly why these cases get litigated hard.

Accountants and tax attorneys handling domicile appeals

This ruling is a useful map of the Department's own pattern-recognition: renewing (not merely holding) a license, having vehicles registered locally, and a residence you actually return to are the recurring markers of "failure to abandon." Note also that overseas voter registration retention doesn't count as a domicile factor at all, under federal law (52 U.S.C. § 20309) -- a helpful distinction from in-state voter registration, which the companion rulings in this batch (P.D. 23-82) treat as very strong evidence.

Common questions

Q: Can I ask the Department to reconsider a final determination just because I think it got the answer wrong?
A: No. Simple disagreement with the result isn't one of the four reconsideration grounds -- you need misstated facts, a change in law, application of the wrong legal standard, or genuinely new evidence unavailable at the time of your original appeal.

Q: I found a case with facts like mine that came out differently -- can I use that for reconsideration?
A: Generally no, if the case was available to you before your original appeal was decided. The Department expects you to raise comparable precedent when you first submit your appeal, not afterward.

Q: What's the deadline to request reconsideration?
A: The request must be received by the Department no later than 45 days after the date of the original determination letter.

Q: Why does it matter whether the state I claim residency in has an income tax?
A: If you lose a domicile dispute against a state with no income tax, there's no tax paid there to credit against your Virginia bill, so you owe Virginia in full. If the other state does have an income tax and you actually paid it, Virginia's credit for taxes paid to another state can substantially reduce or eliminate what you owe Virginia even if you lose the domicile argument.

Citations and references

• 23 VAC 10-20-165 F (four reconsideration criteria)
• Va. Code § 58.1-1822 (final determinations)
• Va. Code § 58.1-332 (credit for taxes paid to another state)
• Va. Code § 46.2-348 (false DMV residency statement, criminal penalty)
• 52 U.S.C. § 20309 (overseas voter registration not a domicile factor)
• P.D. 01-127 (9/14/2001) (distinguished precedent)
• P.D. 20-188 (11/10/2020) (reconsideration standard)
• P.D. 85-15; P.D. 96-198; P.D. 10-203; P.D. 13-93; P.D. 22-41; P.D. 22-74 (related prior rulings)
• United States v. Minnesota, 97 F. Supp. 2d 973 (D. Minn. 2000)

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 23-83

Original ruling text

July 13, 2023

Re: § 58.1-1821 Application: Individual Income Tax

Dear *:

This will reply to your letter in which you seek reconsideration of the the Department’s determination letter, issued as Public Document (P.D.) 22-74 (4/19/2022).

FACTS

In PD. 22-74, the Department found that the Taxpayer remained taxable as a domiciliary resident of Virginia for the 2018 taxable year. The Taxpayer contends that the facts of his case are like those in P.D. 01-127 (9/14/2001), in which the Department determined that the taxpayer abandoned his Virginia domicile. The Taxpayer seeks a reconsideration of P.D. 22-74, asserting that the Department’s determination was incorrect.

DETERMINATION

Reconsideration

Title 23 of the Virginia Administrative Code ( VAC) 10-20-165 F provides that a taxpayer who disagrees with the Department’s final determination issued pursuant to Virginia Code § 58.1-1822 may request a reconsideration of the determination. In order to grant a request for reconsideration, the request must be received by the Department no later than 45 days after the date of the determination letter, and a taxpayer must meet one of four specific requirements set forth in that section:

1. The facts upon which the original determination is based are misstated by the Tax Commissioner or are inaccurate, and the determination would have a different result based on a correction of the Tax Commissioner’s misstatement of the facts presented or a clarification of the original facts presented in the taxpayer’s administrative appeal;

2. The law upon which the original determination is based has been changed by legislation, court decision or other authority effective for the tax period(s) at issue;

3. The policy upon which the original determination is based is misapplied, and he determination would have a different result based on the application of the proper policy; or

4. The taxpayer has discovered additional evidence or documentation that was not available to the taxpayer at the time the original administrative appeal was filed with the Department, and the additional evidence or documentation could produce a result different from the original determination.

In this case, none of the reconsideration requirements have been satisfied. The Taxpayer should be aware that the Department interprets the third criteria to mean that the Department has not applied the correct law to the case. Here, there is no dispute that the law of domicile applies, and this was the law that the Department applied to the facts in P.D. 22-74. The Taxpayer simply believes that the Department reached the incorrect result. If the Department were to interpret the third criteria in that manner, there would be no reason to have criteria. Every taxpayer who asks for a reconsideration could simply say that the Department “misapplied” policy by not arriving at the result the taxpayer was seeking. See PD. 20-188 (11/10/2020). In addition, specific reconsideration criteria are in place to ensure an economical administrative appeals process. The time for a taxpayer to compare and contrast past cases is when they first submit their appeal to the Department, not after they receive an adverse appeal determination.

Residency

Even though the Department finds that the reconsideration criteria have not been met in this case, I am taking the opportunity to add further comments in light of my own experience as Commissioner. Domicile is a frequent issue that comes before the Department on appeal, and the Department has issued hundreds of domicile determinations since determination letters have been made publicly available. While the Department strives for consistency, the determination of a bona fide intent to change one’s domicile is a factual matter that can only be resolved on an individual case-by-case basis. See P.D. 85-15 (2/14/1985), P.D. 96-198 (8/1 9/1996), PD. 13-93 (6/11/2013), and P.D. 22-41 (3/8/2022). In addition, as with any body of law, the analytical approach may evolve over time as more cases are examined and the agency gains more institutional experience dealing with the issue.

The facts of PD. 22-74 broadly fall into a pattern that has emerged over time: a taxpayer’s failure to relinquish Virginia connections to a degree that raises substantial doubts as to their intent to abandon Virginia as a domiciliary state. When a taxpayer maintains a personal residence that they do in fact return to, keeps a Virginia driver’s license which is renewed during the time they claim not to be a resident of Virginia, and maintains three registered vehicles in the state, cumulatively, those facts raise substantial doubts as to domiciliary intent. Abandonment of the prior domicile is one of the two prongs of the test which must be satisfied concurrently along with establishing a domicile elsewhere. Further, when a taxpayer performs none of those activities in the next state they claim to be their domicile, it is difficult for the Department reasonably to conclude that a domicile change was intended.

As for P.D. 01-127, the taxpayer clearly established far more connections with the foreign country than the Taxpayer established with either of the states at issue in P.D. 22-74. Although the taxpayer in P.D. 01-127 retained some connections with Virginia, there are several notable distinctions. Most notably, the mere retention of a driver’s license is seen as less of an affirmative demonstration of domiciliary intent than obtaining or renewing one. Individuals who are no longer residents of Virginia are generally not permitted to obtain or renew their Virginia driver’s license. In fact, making a false statement to the Department of Motor Vehicles concerning one’s residency status is an act subject to criminal penalty under Virginia Code § 46.2-348. In addition, retention of a previous state voter’s registration by a United States citizen living overseas cannot be considered a factor as to their domiciliary intent, pursuant to federal law. See 52 U.S.C. § 20309.

Most states in the United States do have a broad-based income tax substantially similar to Virginia’s, and in instances where an individual may have actually been living and working in another state but retained domiciliary residency with Virginia, that so-called “dual resident” taxpayer would be afforded a credit for income tax paid to the other state on their Virginia return. See Virginia Code § 58.1- 332. Often, such credit will substantially reduce, if not completely eliminate, a taxpayer’s Virginia income tax liability.

The Department has noticed, however, that the stakes are often raised in domicile cases simply by the fact that some states in the United States do not have an income tax. Typically, as here, an individual is attempting to claim the state that does not have an income tax as their one and only state of residence for state income tax purposes. In those cases, should the individual be found to have retained domiciliary residence with Virginia, no credit for income tax paid to the other state would be available. While other states are free to do as they will, the fact that some states do not follow the same or similar system as the majority of other states can magnify the domicile issue into an “all-or-nothing” proposition where a taxpayer is either going to owe no income tax to any state or all income tax to one state. Undoubtedly, this inconsistency in state taxing regimes has generated a substantial number of disagreements that the Department then has to adjudicate.

I recognize the Taxpayer’s disagreement with the Department’s determination in P.D. 22-74. However, he has failed to meet the requirements for a reconsideration. Consequently, P.D. 22-74 constitutes the Department’s final determination in this matter.

The assessments, therefore, are upheld. Updated bills will be issued to the Taxpayer shortly, which will include accrued interest to date. The Taxpayer should remit the balance due upon receipt to avoid the accrual of additional interest and possible collections actions.

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 (804) ***.

Sincerely,

Craig M. Burns

Tax Commissioner

AR/4208.B

Related Documents

85-15

96-198

01-127

10-203

13-93

20-188

22-41

22-74