October 27, 2015
Re: § 58.1-1821 Application: Individual Income Tax
Dear *****:
This will reply to your letter in which you request correction of the individual income tax assessment issued to ***** (the "Taxpayers") for the taxable year ended December 31, 2012. I apologize for the delay in responding to your appeal.
FACTS
The Taxpayers, a military service member and his wife, filed a 2012 part-year resident individual income tax return. The service member claimed part-year residency status while the wife claimed full-year residency. Under audit the Department changed the return type from part-year to full-year residents and issued an assessment. The Taxpayers appealed the assessment, contending the service member's home of record was ***** (State A) and his income was not subject to Virginia income tax until November 2012 when he exited the military.
DETERMINATION
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 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 in another country 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.
The Servicemembers Civil Relief Act (the "Act"), codified at 50 U.S.C. § 571 et seq., 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 an 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.
In this case, the service member entered the military while residing in State A and declared State A as his home of record with the Department of Defense (DOD). The Taxpayer, however, provided no proof of maintaining a domicile in State A during his years of service. Instead, information provided shows the service member established a permanent place of abode in Virginia in 2003, registered motor vehicles in Virginia, and held a Virginia driver's license since 1988. The driver's license has been renewed a number of times.
Virginia 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).
Furthermore, Virginia 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.
The service member's wife and children resided in Virginia during his tenure in the military. The Taxpayers filed a joint Virginia resident income tax return for the 2009 taxable year. The Department issued a joint nonfiler assessment for the 2010 taxable year. The Taxpayers made no protest and the assessment was paid in full. Again in 2011, the Taxpayers filed a joint Virginia resident return. In addition, the service member remained in Virginia after retiring from the military, instead of returning to State A.
The Department determines a taxpayer's intent through the information provided. The Taxpayers have the burden of proving that the service member maintained sufficient connections in State A to continue his domicile. Based on the information provided, the Department finds that the service member established domicile in Virginia long before the 2012 taxable year and took no steps to abandon such connections during his tenure with the military. As such, the Department's assessment is upheld.
The Taxpayers may have additional information to more accurately determine their 2012 Virginia income tax liability. Therefore, the Taxpayers may file an amended 2012 Virginia resident income tax return. The return should be filed within 30 days from the date of this letter and mailed to: Virginia Department of Taxation, Office of Tax Policy, Appeals and Rulings, Post Office Box 27203, Richmond, Virginia 23261-7203, Attention: *****. If the requested return is not provided within the allotted time, the assessment will be upheld and collection actions may resume.
The Code of Virginia sections and public documents cited are available on-line at www.tax.virginia.gov in the Laws, Rules & Decisions section of the Department's web site. If you have any questions regarding this determination, you may contact ***** in the Office of Tax Policy, Appeals and Rulings, at *****.
Sincerely,
Craig M. Burns
Tax Commissioner
AR/1-5905408933.D