April 11, 2016
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.
FACTS
The Taxpayers, a husband and wife, moved into Virginia in 2008 pursuant to the wife's military orders. The husband filed a 2008 part-year Virginia individual income tax return, and he filed as a resident for taxable years 2009 through 2011. The Department received information from the Internal Revenue Service that the Taxpayers may have income subject to Virginia income tax for the 2012 taxable year. The Department requested additional information from the Taxpayers. When no response was received, the Department issued an assessment. The Taxpayers filed an appeal, contending both were domiciliary residents of ***** (State A) and their income was exempt from Virginia income tax under the provisions of the Servicemember's Civil Relief Act (the "Act").
DETERMINATION
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 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 withno 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.
Residency of a Military Service Member
The Act, codified at U.S.C. § 571 et seq., provides that military 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 an active duty 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 Public Document (P.D.) 10-237 (9/30/2010).
After consideration of all of the evidence presented with this case, I find that the wife, a military service member, remained a domiciliary resident of State A in 2012. Accordingly, she was not required to file a 2012 Virginia income tax return.
Residency of a Military Spouse
The Act was amended, effective for the 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." The Act does not apply to the spouses of military and naval personnel who have established domiciliary status within Virginia. See P.D. 11-114 (6/21/2011). 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 actions in Virginia that are inconsistent with maintaining a domicile elsewhere.
In general, the Department will not seek to tax the spouse of a military service member so long as the spouse maintains sufficient connections with the service member's domiciliary state to indicate intent to maintain domicile there. Such connections would include obtaining and retaining 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 the spouse of a military service member maintains such connections, he or she would be considered to be a resident of the other state even though they work, live, and establish a place of abode in Virginia.
When a spouse moves to follow military personnel to a new duty station, they will generally abandon their former 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 into 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 domicile elsewhere. See P.D. 10-32 (4/08/2010), P.D. 11-16 (2/11/2011) and P.D. 11-66 (4/26/2011). Thus, for taxable years prior to 2009, the residency status of an individual requires analysis separate from their service member spouse. See P.D. 05-92 (6/9/2005) and P.D. 05-150 (9/8/2005).
In this case, the service member's state of record was State A. The husband contends he married the service member in 1999 and was a domiciliary resident of State A. The information provided, however, indicates the husband has never lived in State A. 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. Without establishing a physical presence in State A, the husband could not have established his domicile there.
The husband engaged in a number of activities consistent with establishing domicile in Virginia. He established a new permanent place of abode in Virginia near the wife's duty station and engaged in employment of an indeterminate duration. The husband filed Virginia returns as a resident for the 2008 through 2011 taxable years and obtained a Virginia driver's license. These actions coupled with the lack of any evidence that he retained his domicile elsewhere indicate intent to establish domicile in Virginia.
CONCLUSION
Based on the facts, circumstances and evidence provided in this case, the Department concludes that the service member and the husband did not share the same domicile prior to moving into Virginia. Accordingly, the husband is not eligible for the protections of the Act.
The assessment at issue was made based on the best information available to the Department pursuant to Va. Code § 58.1-111. The Taxpayers may have information that better represent the husband's Virginia income tax liability for the taxable year at issue. Therefore, the husband should file a 2012 Virginia resident tax return. The return should be submitted within 30 days from the date of this letter to:Virginia Department of Taxation, Office of Tax Policy, Appeals and Rulings, P.O. Box 27203, Richmond, Virginia 23161-7203, Attention: *****. Upon receipt, the return will be reviewed and the assessment adjusted, as appropriate. If the documentation is not received within the allotted time, the assessment will be considered to be correct and collection action may result.
The Code of Virginia sections, public documents and tax bulletin 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 ***** at *****.
Sincerely,
Craig M. Burns
Tax Commissioner
AR/1-6048701032.D