Tax Type
Individual Income Tax
Description
Preponderance of evidence indicates that the service member was a domiciliary resident of Virginia
Topic
Filing Status
Persons Subject to Tax
Records/Returns/Payments
Date Issued
10-18-2013
October 18, 2013
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 your client, ***** (the "Taxpayer"), for the taxable year ended December 31, 2010. I apologize for the delay in responding to your appeal.
FACTS
The Taxpayer, a domiciliary resident of ***** (State A), married a military service member in Virginia in 2007. The service member's leave and earnings statement reported State A as his withholding state. In 2010, the Taxpayer filed a Special Claim for Refund to receive her income tax withholding. The Department discovered that the service member held a Virginia driver's license and had filed Virginia resident income tax returns for 2005 and 2006. As a result, the Department denied the refund request on the basis that the Taxpayer did not share a domicile with her husband prior to residing in Virginia. The Taxpayer appeals the denial of the refund, contending both she and the service member were domiciliary residents of State A.
DETERMINATION
Residency of Spouse of Military Service Member
The Service Members 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. The Act does not apply to the spouses of military and naval personnel who have established domiciliary status within Virginia. In Virginia 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.
Because the Act is effective only for the 2009 taxable year and thereafter, the Department must examine the Taxpayer's activities in 2007 and 2008 to determine if she had acquired domicile in Virginia prior to 2009. In Public Document (P.D.) 96-293 (10/18/1996), the Department found that a military spouse was considered an actual resident of Virginia, subject to Virginia individual income taxation as a resident, because he resided in Virginia for more than 183 days during the taxable year. Further, the Department has ruled that residency status of a taxpayer requires analysis separate from their military spouse. See P.D. 05-92 (6/9/2005) and P.D. 05-150 (9/8/2005).
For taxable years prior to 2009, the Department must examine all the facts and circumstances regarding the military spouse in order to determine the domiciliary residence of such individual. See P.D. 10-39 (4/8/2010). When a spouse moves to follow military personnel to a new duty station they will generally abandon their former permanent place of abode, leave their employer, take or abandon personal property, and move the family. The spouse will establish a new permanent place of abode near the new duty station, enroll children in school, and seek employment of an indeterminate duration. The spouse will generally comply with jurisdictional authorities with regard to driving permits, vehicle registrations, voting registrations, and education requirements. The spouse will also change social, charitable, and church associations. Moreover, the military service member and the spouse move with no assurance that they may move back to a former duty station.
Under these circumstances, it seems reasonable to conclude that a military spouse will establish domicile in Virginia when following military personnel to Virginia and abandon Virginia domicile when following them to the next duty station. To do otherwise would require the Department to investigate whether a military spouse had established domicile and abandoned domicile at every duty station prior to coming to Virginia. Further, when a military spouse is determined to have changed their domicile to Virginia prior to 2009, they will continue to be considered to be Virginia domiciliary residents until he or she takes sufficient actions to abandon their Virginia domicile and establish their domicile elsewhere.
Domicile
Two classes of residents, a domiciliary resident and an actual resident, are set forth in Va. Code § 58.1-302. The domiciliary residence of a person means that the permanent place of residence of a taxpayer and the place to which he intends to return even though he may actually reside elsewhere. For a person to change domiciliary residency to another state, 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 the world 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, sites of real and 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 of the facts and circumstances of the particular case. A simple declaration is not sufficient to establish residency or domicile.
The Department concedes that it may be difficult to ascertain whether a taxpayer intends to return to Virginia. The Department determines a taxpayer's intent through the information provided. The Taxpayer has the burden of proving that he or she has abandoned his or her Virginia domicile. If the information is inadequate to meet his or her burden, the Commissioner must conclude that he or she intended to remain indefinitely in Virginia.
The only activity the Taxpayer performed to retain connections with State A was reregistering to vote in 2009. The Taxpayer had registered to vote in Virginia in 2008 and voted in Virginia in the 2008 general election. She states that she registered in State A after she learned she could retain her State A voter registration as a result of the 2009 amendments to the Act.
The Taxpayer also performed numerous actions to establish domicile in Virginia. The Taxpayer married the military service member in Virginia in August 2007, after the service member had been reassigned to a duty station in Virginia. The Taxpayer and the service member established a permanent place of abode in Virginia shortly thereafter. In October 2008, the couple purchased a home in Virginia where they continued to reside in 2010. The Taxpayer also found full time employment in Virginia in 2007. In 2007, the Taxpayer obtained a Virginia driver's license and registered an automobile in Virginia.
Based on the evidence, the Taxpayer became a domiciliary resident of Virginia after she moved to Virginia in August 2007. The evidence further shows that she retained her Virginia domicile in 2010. Accordingly, she does not qualify for exemption from income taxation by Virginia under the Act and must file a Virginia income tax return as a resident for the 2010 taxable year.
In addition, while the issue at hand involves a request for refund by a spouse of a military service member, facts obtained during the review of the appeal raise a question as to the domiciliary residence of the service member.
Residency of a Military Service Member
The Act provides that military and naval personnel do not abandon their legal domicile solely by complying with military orders that require them to take residence in a different: state or country. The Act, however, 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 so long as the member maintains sufficient connections with another state to indicate intent to maintain domicile there. 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 maintains such connections, they would be considered to be a resident of the other state even though they work, live, and establish a permanent place of abode in Virginia. See P.D. 10-237 (9/30/2010).
In this case, the service member left active duty in 2005 while residing in Virginia. He filed Virginia income tax returns as a resident for 2005 and 2006. In addition, he had previously obtained a Virginia driver's license in 2003 and registered a motor vehicle in Virginia. Absent any evidence to the contrary, it appears the service member established a domiciliary residence in Virginia when he went into the military reserve.
The service member took several actions indicating and intent to establish domicile in State A in 2007. The service member and the Taxpayer entered into a lease for an apartment in June 2007 and changed the home of record on his Department of Defense Form 2058 to State A.
The service member and the Taxpayer moved to Virginia in August 2007 after the service member was recalled to active duty. The service member renewed his Virginia driver's license in August 2007 and again in November 2011 and continued to maintain automobiles registered in Virginia. In addition, the service member executed, under oath, a divorce degree from his previous marriage, dated June 1, 2007, in which he declared that he was a domiciliary resident of Virginia more than six months prior to the divorce proceeding.
The Taxpayer asserts that the service member was permitted to vote, register a motor vehicle, and obtain a driver's license in states in which he was stationed. As indicated above, however, such actions could constitute a change in domicile.
With regard to voting, an individual qualified to vote in Virginia must be a resident of the precinct in which they offer to vote. See Va. Code § 24.2-101. Federal law, however, requires states to establish procedures in order to permit absentee voting in federal elections for absent uniformed services voters. See 42 U.S.C. § 1973ff-1. Under 42 U.S.C. § 1973ff-6(1), a uniformed services voter who is absent from their place of residence due to military service must be permitted to vote where the member would otherwise qualified to vote. To comply with federal law, the Virginia Board of Elections (VBE) has established procedures allowing overseas voters to be eligible for a temporary voter registration in order to vote in elections. Thus, while permitted to register in Virginia, the service member was not required to do so in order to vote in general elections.
In addition, Va. 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 Department of Motor Vehicles (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 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 (12/09/2002). In this case, the service member obtained a Virginia driver's license and has renewed it twice.
Moreover, Va. Code § 46.2-305 exempts United States armed services personnel stationed in Virginia from the requirement of obtaining a Virginia driver's license and Va. Code § 46.2-600 waives the registration requirement for any vehicle located in Virginia that is registered to a nonresident service member on active duty, nonresident activated reserve or national guard member, or nonresident mobilized reserve or national guard member living in Virginia. Because a nonresident service member is not required to obtain a Virginia driver's license or register his motor vehicle in Virginia, such actions show an intent to make Virginia their domiciliary residence.
Further, under Title 23 of the Virginia Administrative Code (VAC) 10-110-30, moving outside of Virginia and then returning within six months constitutes prima facie evidence that an individual did not intend to abandon their Virginia domicile. The service member obtained a place of abode in State A in June 2007, but moved back to Virginia in August 2007. Because he was considered to be a Virginia domiciliary resident before he moved to State A and he moved back to Virginia within six months, he would not be considered to have abandoned his Virginia domicile.
Based on the information available, the Department finds that, though the Taxpayer claimed State A as his home of record with the Department of Defense, the preponderance of evidence indicates that the service member was a domiciliary resident of Virginia for the 2007 through 2011 taxable years. As such, the service member must file Virginia income tax returns as a Virginia resident for the 2007 through 2010 taxable years. The returns, 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 sections, regulation, public documents and Tax Bulletin cited are available on-line at www.tax.virginia.gov in the Laws, Rules and Decisions section of the Department's web site. If you have any questions regarding this determination, please contact ***** at *****.
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- Sincerely,
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Craig M. Burns
Tax Commissioner
AR/1-5157050907.D
Rulings of the Tax Commissioner