Residence and Domicile in Virginia

Written by Robert A. Warwick, February 24, 2007

INSIGHT

An individual may be subject to Virginia resident income tax even though he or she resides outside of Virginia if the individual has established, and has not abandoned, a Virginia domicile.

ANALYSIS

An individual who is a resident of Virginia is subject to Virginia income tax on his or her entire income, whether generated inside or outside of Virginia.  Code of Virginia (“Va. Code”) §58.1-322.  In contrast, an individual who is not a Virginia resident pays Virginia income tax only on the portion of his or her income that was generated in Virginia.  Va. Code §58.1-325.  For this purpose, an individual is a Virginia resident if he or she maintains his or her place of abode in Virginia for at least 183 days during the year.  Even if the individual does not live in Virginia during the year, the individual will be a Virginia resident for income tax purposes if he or she is domiciled in Virginia.  Va. Code §58.1-203 (definition of “resident”).

Va. Code §58.1-302 defines an individual’s domicile as his permanent place of residence and the place to which he intends to return, even though he may reside elsewhere from time-to-time.  Section 302 suggests that objective factors such as: financial independence, business pursuits, employment, income sources, residence for federal income tax purposes, marital status, residence of parents, spouse and children, if any, sites of personal and real property owned or leased by the individual, motor vehicle and other personal property registration, and voter registration be taken into consideration in determining an individual’s domicile.

Further guidance in determining an individual’s domicile for Virginia tax purposes is provided by 23 VAC 10-110-30.  This regulation provides that an individual has only one domicile and, once established, continues until the individual moves to a new location with a bona fide intention to make his fixed and permanent home there.  Thus, a change in domicile requires two concurrent actions — residence in a new locale and the intention to remain there indefinitely.  The regulation also states no single factor is determinative in determining domicile but all relevant factors must be examined collectively to determine whether the intent to acquire or abandon a Virginia domicile exists.  However, the regulation states that the return of an individual to Virginia within six months after moving from the Commonwealth is prima facie evidence that the individual did not intend to move his domicile from Virginia.  Finally, the regulation imposes the burden the burden of proving abandonment or failure to establish domicile in Virginia on the individual seeking to avoid a Virginia domicile.

EXAMPLES

Each case is dependent on its specific circumstances and seemingly minor distinctions may lead to different results.  As a result, the Virginia Tax Commissioner has issued numerous rulings to individual taxpayers.  Among the more interesting:

Public Document (“PD”) 98-7, 1/14/1998: Taxpayer moved from Virginia to State A in connection with his employment.  While in State A, he rented an apartment, generally on successive six-month leases, purchased and registered a vehicle, obtained a driver’s license, registered to vote, registered for jury duty, received some personal and business mail, obtained a library card, and received medical and dental services under his employer’s health plan.  The taxpayer’s wife, however, remained in Virginia and their daughter attended college in Virginia paying in-state tuition.  Taxpayer and his wife did some house hunting in State A, ultimately making an offer that was rejected.  About two years after moving to State A, Taxpayer was reassigned to State B, where he lived for two years primarily in motels.  About four years after first moving to State A, Taxpayer left his employment and returned to Virginia.  On those facts, Taxpayer was held to have given up his Virginia domicile for the period of his absence.

PD 94-344, 11/18/94: Taxpayer joined the Air Force at age 17.  At that time Taxpayer’s father was also in the Air Force, stationed in Virginia.  The father claimed domicile in Florida.  As a minor, Taxpayer was considered to take his father’s domicile.  Taxpayer never lived in Florida, however he did visit relatives in Florida from time to time and registered to vote in Florida.  Several years into his military service, Taxpayer was assigned to Virginia and purchased a home and registered his car in Virginia.  On those facts, Taxpayer was held not to have abandoned his Florida domicile.

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