December 22, 2015
Re: § 58.1-1821 Application: Individual Income Tax
Dear *****:
This will reply to your letter in which you request reconsideration of the Department's determination regarding individual income tax assessments issued to ***** (the "Taxpayer") for the taxable years ended December 31, 2009 and 2010. I apologize for the delay in responding to your request.
FACTS
In Public Document (P.D.) 14-80 (5/30/2014), the Department determined that the Taxpayer was subject to Virginia income tax for the 2009 and 2010 taxable years. The Taxpayer has requested that the Department reconsider its determination, asserting that she was a resident of ***** (State A), the same as her service member spouse, prior to moving to Virginia.
DETERMINATION
The Servicemembers Civil Relief Act (the "Act"), codified at 50 U.S.C. § 511 et seq. was amended, effective for 2009 taxable year and thereafter, to address the residency of military spouses. Specifically, 50 U.S.C. § 571(a)(2) was enacted 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, as the case may be, is the same for the service member and the spouse."
In P.D. 11-114 (6/21/2011), the Department found that the provision addressing the residency of a military spouse was not in effect for taxable years prior to its enactment. For taxable years prior to 2009, the Department has ruled that the 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). In addition, the Department has consistently ruled that military spouses who became domiciliary residents of Virginia prior to 2009 and fail to reestablish the same domicile as a service member spouse are not eligible for relief under the Act. See P.D. 11-16 (2/11/2011) and P.D. 11-66 (4/26/2011).
The Taxpayer moved into Virginia in 2008 and engaged in numerous activities consistent with an intent to establish domicile in Virginia over a number of years. See P.D. 14-80. The Department has acknowledged that a change in domicile occurs as part of a process in which no single factor is dispositive. See P.D. 05-91 (6/9/2005), P.D. 09-86 (5/28/2009), P.D. 10-180 (8/16/2010), P.D. 13-115 (6/26/2013), P.D. 14-141 (8/13/2014) and P.D. 15-75 (4/21/2015). In P.D. 13-115, the Department specifically found that an individual's actions in later years can reinforce an initial expression of intent to change or retain one's domicile. Here, the Taxpayer's initial action in 2008 was subsequently confirmed by actions in 2009 and 2010.
Further, 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 vs. Minnesota Department of Revenue, 97 F. Supp. 2d 973 (2000).
Virginia Code § 58.1-203 grants the Tax Commissioner power to issue rulings related to the interpretation and enforcement of the laws governing taxes administered by the Department. See P.D. 97-497 (12/10/1997). 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. A spouse cannot simply elect to claim the service member's domicile. In order to claim a domicile in another state, the spouse must have (i) resided in the other state with the intent to make a permanent home there, and (ii) not abandoned that domicile when moving to reside with the service member or for any other reason.
With her request for redetermination, the Taxpayer provides a proof of insurance statement and copies of military discharge orders for herself and her military spouse as evidence that she remained a resident of State A in 2009 and 2010. According to the statement provided, the insurance coverage expired in January 2009. The fact that the coverage expired in State A is consistent with the Taxpayer's other activities indicating a change of domicile to Virginia.
Further, the Taxpayer's discharge orders indicate her home of record was ***** (State B), while the service member's home of record was State A. Thus, even if the Taxpayer were not considered to be a domiciliary resident of Virginia during 2009 and 2010, there could be some question as to whether she and the service member shared the same residence or domicile as required by the Act. See also P.D. 11-158 (9/16/2011).
Based on the information provided, the Department finds that the Taxpayer changed her domiciliary residence to Virginia and is not eligible for the protections granted under the Act. As such, there is no basis to revise the determination in P.D. 14-80, and the assessments for the 2009 and 2010 taxable years are upheld.
The Department recognizes the Taxpayer's continuing disagreement with the validity of the assessments at issue; however, this letter constitutes the Department's final determination on this matter. The 2010 assessment has been satisfied and the assessment for the 2009 taxable year remains outstanding.
The Taxpayer may have additional information that more accurately reflects her 2009 and 2010 Virginia income tax liability. As such, the Taxpayer is requested to file a Virginia income tax return for each of the taxable years at issue. The returns, along with all schedules and Form W-2s, should be mailed to: Virginia Department of Taxation, Post Office Box 27203, Richmond, Virginia 23261-7203, Attn: *****. If the returns are not received within 45 days from the date of this letter, the assessments will be considered to be correct and collection action will resume on the 2009 assessment.
The Code of Virginia sections, tax bulletin 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/1-5841493705.D