The Virginia Department of Taxation issued a private letter ruling on May 25, 2021, determining that a man who relocated out of Virginia as a result of a new position with his employer, but retained his Virginia driver’s license and motor vehicle registration in order to facilitate a potential return to the state in the event that the new employment position ended, did not prove intent to change his domicile from Virginia to another state.

Pursuant to Virginia Code § 58.1-302, Virginia recognizes two classes of residents for individual income tax purposes: domiciliary residents and actual residents. The domiciliary residence of a person is the person’s permanent place of residence and the place to which the person intends to return despite residing elsewhere. For a person to change his or her domiciliary residence, the person must (1) abandon his or her Virginia domicile without an intent to return, and (2) acquire a new domicile. The taxpayer has the burden of proof, and must provide sufficient facts and evidence to satisfy both requirements concurrently. An actual resident is a person who maintains a place of abode within Virginia for a total of more than 183 days of the taxable year.

The Taxpayer in this case filed a Virginia resident income tax return for the 2017 tax year. The Department issued an assessment, finding that the Taxpayer underreported his federal gross income on the return. Following the assessment, the Taxpayer contacted the Department and indicated that he resided in another state. In support of his position, the Taxpayer showed that his new employment required relocation to another state, that he leased a residence in the other state beginning in December of 2016, and that he was physically present in the other state during the year. Additional facts in this case showed the Taxpayer retained certain connections with Virginia, however: his parents resided in the state; he held a Virginia driver’s license and motor vehicle registration; and he filed a Virginia resident income tax return for the 2017 taxable year. Further, in response to the Department’s inquiries, the Taxpayer explained that he retained his Virginia driver license and motor vehicle registration to facilitate a potential move back to Virginia in the event that he did not retain his new employment position.

While the Department acknowledged that no one factor is dispositive when determining residency, the Department ultimately found that the Taxpayer’s explanations and retained connections with the state indicated that he had not formed the requisite intent to fully abandon his Virginia domicile. As a result, the Department upheld the assessment and determined that the Taxpayer remained a domiciliary resident of Virginia for the 2017 tax year.

Virginia Letter Ruling 21-69 (May 25, 2021).