12-120 | Virginia Tax

Tax Type

Individual Income Tax

Description

Requirement for the Servicemembers Civil Relief Act were not satisfied.

Topic

Domicile

Records/Returns/Payments

Date Issued

07-26-2012

July 26, 2012

Re: § 58.1-1821 Application: Individual Income Tax

Dear *****:

This will reply to your letter in which you seek a refund of the Virginia individual income tax withheld for ***** (the "Taxpayer") for the taxable year ended December 31, 2010.

FACTS

The Taxpayer entered military service in 1988 with a home of record in ***** (State A). In 2004, the Taxpayer was married to a military service member while both were residing in Virginia and stationed in ***** (State B). The service member retained his domiciliary residence in ***** (State C). Just before retiring in April 2008, the Taxpayer changed her home of record to State C because the couple intended to retire there. In addition, the Taxpayer registered to vote in State C.

In 2010, the service member remained on active duty status at the State B duty station and the couple continued to reside in Virginia. The Taxpayer filed a claim for nonresident withholding for the 2010 taxable year. The Department denied the claim on the basis that the Taxpayer did not share the same domicile as the service member. The Taxpayer appeals the denial, contending she established legal residency in State B.

DETERMINATION

The Servicemembers Civil Relief Act (the "Act"), codified at U.S.C. § 571 et seq., was amended effective for the 2009 taxable year and thereafter, to provide that a spouse can neither lose nor acquire domicile or residence in a state when the spouse is present in the state solely to be with the service member in compliance with the service member's military orders, if the residence or domicile is the same for both the service member and spouse. In Tax Bulletin (VTB) 10-1 (1/29/2010), the Department explained that the domicile of a military spouse must be the same as the service member in order to be exempt from Virginia's income tax. The determination of a military spouse's domicile requires analysis of the facts and circumstances. The elements that may be examined include:

1. Whether the person claiming exemption is married to a service member who is present in Virginia pursuant to military orders.
2. The service member's domicile.
3. The spouse's domicile and the circumstances in which it was established.
4. The extent to which the spouse has maintained contacts with the domicile.
5. Whether the spouse has taken any action in Virginia that is inconsistent with maintaining a domicile elsewhere.

While the Act provides that military and naval personnel and their spouses do not abandon their legal domicile solely by complying with military orders that require them to take residence in a different state or country, it does not preclude the possibility that armed forces personnel may acquire a new legal domicile in the state where they are stationed, and thus subject themselves to taxation by that state as if they were a domiciliary resident. In order for the change of domicile to occur, there must be an abandonment of the old domicile and the acquisition of a new one. This change must be exhibited by an individual's intent and conduct. See United States of America v. Minnesota Department of Revenue, 97 F. Supp. 2d 973 (2000).

In general, the Department will not seek to tax a military service member or spouses so long as they maintain sufficient connections with another state to indicate intent to maintain their domicile. Such connections would include filing a State of Legal Residence Certificate (Department of Defense Form 2058), obtaining a driver's license, registering to vote and voting in local elections, registering an automobile, and exercising other benefits or obligations of a particular state. As long as a military service member and spouse maintain such connections, he or she would be considered to be a resident of the other state even though he or she works, lives, and establishes a permanent place of abode in Virginia.

In Coopers Adm'r v. Commonwealth, 121 Va. 338, 93 S.E. 680 (1917), the Virginia Supreme Court ruled that acquiring domicile in another state requires both intent and personal presence. As such, an individual must establish a physical presence in a state in order for Virginia to consider such individual to have established domicile there.

In this case, the Taxpayer maintained a permanent place of abode in Virginia, a Virginia driver's license and motor vehicles registered within Virginia. While residing in Virginia, the Taxpayer registered to vote in State B (by mail) and changed her home of record with the Department of Defense as indication of her intent to become a domiciliary resident in State B. No evidence has been provided to show that the Taxpayer physically resided in State B.

Absent a physical presence in State B, the Department finds that the Taxpayer satisfies other domiciliary factors indicative of establishing a Virginia domicile, i.e., obtaining a Virginia driver's license, maintaining a registered motor vehicle and establishing a permanent place of abode within Virginia. Accordingly, the Department finds that the service member did not share the same domicile as the Taxpayer in 2010. As such, the requirements of the Act were not satisfied, and the Taxpayer's request for refund of the Virginia individual income tax withheld is denied.

Further, as a Virginia resident, the Taxpayer is required to file a Virginia income tax return. See Va. Code § 58.1-341. The return, along with the payment of any tax due, should be submitted to: Virginia Department of Taxation, Office of Tax Policy, Appeals and Rulings, Attention: *****, P.O. Box 27203, Richmond, Virginia 23261-7203.

The Code of Virginia section and tax bulletin cited are available on-line at www.tax.virginia.gov in the Tax Policy Library section of the Department's web site. If you have any questions regarding this determination, please contact ***** in the Office of Tax Policy, Appeals and Rulings, at *****.

- - - - Sincerely,

- - - - Craig M. Burns
        Tax Commissioner

AR/1-4971 077924.D

Rulings of the Tax Commissioner