June 12, 2017
Re: § 58.1-1821 Application: Individual Income Tax
Dear *****:
This will reply to your letter in which you seek reconsideration of the Department's determination letter, issued as Public Document (P.D) 16-136 (6/24/2016), to ***** (the “Taxpayers”) for the taxable year ended December 31, 2012.
FACTS
In P.D. 16-136, the Department determined that the Taxpayers had not presented sufficient evidence to overturn the assessment for the taxable year at issue. The Department afforded the Taxpayers one final opportunity to respond to the Department's information request or file a Virginia individual income tax return. In response, the Taxpayers submitted the information requested, contending they remained domiciliary residents of Florida during the 2012 taxable year.
DETERMINATION
Residency
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.
Residency of Military Service Members and their Spouses
The Servicemembers Civil Relief Act (the “Act”), codified at 50 U.S.C. § 3901 et seq., provides that military and naval personnel do not abandon their legal domicile solely by complying with military orders that station them in a different state or country whether permanently or temporarily. See 50 U.S.C. § 4001. 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 addition, the Act was amended, effective for the 2009 taxable year and thereafter, to address the residency of military spouses. Specifically, 50 U.S.C. § 4001(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 Public Document (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:
- Whether the person claiming exemption is married to a service member who is present in Virginia pursuant to military orders.
- The service member's domicile.
- The spouse's domicile and the circumstances in which it was established.
- The extent to which the spouse has maintained contacts with the domicile.
- Whether the spouse has taken any action in Virginia that is inconsistent with maintaining a domicile elsewhere.
In determining domicile, the Department will generally consider 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, situs 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 domicile. See United States v. Minnesota, 97 F. Supp. 2d 973 (2000).
In general, the Department will not seek to tax an active duty military service member or spouse so long as the service member or spouse 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 or spouse 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).
The Taxpayers contend the facts of their case are similar to those in Cooper's Adm'r v. Commonwealth, 121 Va. 338, 93 S.E. 680 (1917), in which the court found that the taxpayer, despite having numerous connections with Virginia that would normally indicate an intent to establish domiciliary residency, had retained his West Virginia domicile. In Cooper's, the taxpayer came to Virginia to educate his children. He brought much of his tangible property with him, built a home, established a number of local business interests and consistently listed his Virginia address as his residence on official documents, such as life insurance and driver's license applications. The Court observed that if such facts stood alone, they would have been “unquestionably sufficient to justify the inference that Cooper was domiciled [in Virginia].” Id. at 348, 93 S.E. 683.
That was not the end of the analysis in Cooper's, however. The taxpayer had also retained a number of connections with West Virginia. The court stated that the taxpayer's “chief business was there, his largest property interests were there, that he was postmaster there and apparently desired to continue to hold the office, which he felt that he could not do if he changed his domicil [sic].” Id. at 349, 93 S.E. 683. The Taxpayer also continued to exercise his right to vote in West Virginia. The court stated:
[I]n doubtful cases particular significance should be attached to the repeated exercise of the right to vote, because this right depends upon citizenship and domicile, and must be generally, if not universally, supported by the oath of the voter. Its unlawful exercise subjects him to prosecution both for illegal voting and for perjury if he swears falsely, and such act is a distinct, unequivocal and public assertion by the voter of his legal domicil [sic].” Id.
Like the taxpayer in Cooper's, the Taxpayers established a number of connections with Virginia. They purchased a residence, registered their vehicles, and obtained voter's registrations in Virginia and voted in 2012 and 2014. The husband also obtained a Virginia driver's license.
The Taxpayers, however, did not retain connections to Florida to the same extent the taxpayer in Cooper's retained connections to West Virginia. Although the Taxpayers had Florida voter's registrations until 2008, they were registered to vote in Virginia in 2012 and 2014.
The Taxpayers emphasize the fact that they were only in Virginia temporarily in connection with the wife's military orders. The Department recognizes that military service members frequently rotate to different duty stations during their careers. The husband states that the wife's position rotates to different duty stations for two or three years at most. A review of the military orders provided, however, does not indicate she came to Virginia for any particular, pre-determined time period. It also appears that the Taxpayers remained for nearly four years at the prior duty station. Regardless of the length of time in Virginia, the Department must examine many other facts and circumstances to make a determination in any given domicile case.
In addition, the Taxpayers raise further issues regarding Virginia driver's licenses and voter's registrations. Each of these factors will be addressed in turn.
Driver's License
The Taxpayers assert that the applicable Department of Motor Vehicles (DMV) forms merely require an applicant to certify that he is a resident, with no distinction made between physical (actual) residency and domiciliary residency. The Taxpayers also assert that military dependents can obtain Virginia driver's licenses merely by showing their military dependent identification card and a copy of the spouse's orders. The Taxpayers claim they interpreted this rule to mean that only a local address is required.
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 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 Public Document (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 (12/9/2002).
The fact that an individual has a Virginia driver's license is one factor to consider, among other possible factors, in any given domicile case. Nonresidents are not permitted to hold Virginia driver's licenses. See Va. Code § 46.2-323.1. They are, however, permitted to continue to use their licenses from their home states or countries. See Va. Code § 46.2-307. For the purposes of Title 46.2 of the Code of Virginia, “nonresident” is generally defined as every person who is not domiciled in the Commonwealth. See Va. Code § 46.2-100. Thus, in general, an individual must be a domiciliary resident of Virginia in order to hold a Virginia driver's license.
Individuals who have resided in Virginia more than six months, however, are deemed to be residents for purposes of applying most of the provisions of Title 46.2 of the Code of Virginia, including the driver's licensing provisions of Title 46.2, Chapter 3 (Va. Code § 46.2-300 et seq.). In addition, because an individual who has been physically present and residing in Virginia for more than six months may nevertheless remain a domiciliary resident of another state or country, it may be necessary in such cases to examine additional factors to determine whether a person who has obtained a driver's license based on physical presence and actual residency in Virginia also intended to become a domiciliary resident of Virginia. However, once it is clear that an individual has established domiciliary residency in Virginia, subsequent renewals of a Virginia driver's license even while absent from the state will be considered very strong evidence of the individual's intent to remain a domiciliary resident of Virginia. That is because the basis of the individual's claim to be entitled to a Virginia driver's license would no longer be based on the length of time he was physically present in Virginia as an actual resident, but rather on the implication that he remained a domiciliary resident of Virginia.
In addition, Va. Code § 46.2-306 specifically exempts service members on active duty, their spouses, and dependent children residing in Virginia from the requirement to obtain a Virginia driver's license when such individuals have been licensed as drivers under the laws of their home state. Accordingly, when a service member or spouse obtains a Virginia driver's license, the Department will typically consider that action to be a strong indicator of intent to change domiciliary residency. The Department, however, may give the driver's license factor less weight in such cases if the service member or spouse provides evidence that they are no longer entitled to hold a driver's license in the home state, or that it was impossible or impractical to do so. The Taxpayers have not provided any such evidence in this case.
The Taxpayers also cite a DMV rule that allows military dependents to obtain Virginia driver's licenses by merely showing their military dependent ID card and the spouse's orders. This rule concerns proof of residency an individual may use to obtain a Virginia driver's license. The rule, however, is only applicable if the individual affirmatively chooses to obtain a Virginia license, which he can do despite the exemption under Va. Code § 46.2-306, provided that he satisfies the residency requirement of Va. Code § 46.2-323.1. Otherwise, if the individual relied on Va. Code § 46.2-306 to retain the out-of-state license, the rule is irrelevant.
The husband also contends that Virginia only allows its own resident military service members who are stationed out of state to extend their driver's licenses for three years. A review of DMV information for military personnel indicates that the DMV has procedures allowing Virginia residents serving in the armed forces outside the state to apply for an automatic three-year extension of an expired driver's license. It is unclear to the Department, however, whether this procedure precludes any individuals who are stationed outside Virginia longer than three years, but still claim Virginia domiciliary residency, to apply for renewal of their license, despite the fact that they may not be actually residing in Virginia at that particular time. Regardless, this procedure does not apply to the Taxpayers in this case.
Voter's Registration
The Taxpayers cite Cooper's for the proposition that the repeated exercise of the right to vote should be given significant weight in contested domicile cases. The Taxpayers indicate the husband was registered to vote in Florida and voted in elections using that registration from 1974 through 2008. The husband then obtained a ***** (State A) voter's registration and voted in the 2010 election. After that, the husband obtained a Virginia voter's registration and voted in the 2012 and 2014 elections. In February 2016, the husband obtained a Florida voter's registration, although the Taxpayers were by then living in ***** (State B). The wife's voting history essentially tracked the husband's, except she did not start voting with a Florida registration until 1988 and did not obtain a State A voter's registration or vote in the 2010 election because of a deployment.
Unlike the taxpayer in Cooper's, the Taxpayers did not engage in an unbroken pattern of voting in the state they claim was their domicile during the taxable year at issue. Prior to 2012, 2008 was the last election in which the Taxpayers voted while registered in Florida. In 2012, the Taxpayers obtained Virginia voter's registrations and then voted in subsequent elections. Article II, Section 1 of the Constitution of Virginia states in relevant part as follows:
In elections by the people, the qualifications of voters shall be as follows: Each voter shall be a citizen of the United States, shall be eighteen years of age, shall fulfill the residency requirements set forth in this section, and shall be registered to vote pursuant to this article.
The residence requirements shall be that each voter shall be a resident of the Commonwealth and of the precinct in which he votes. Residence, for all purposes of qualification to vote, requires both domicile and a place of abode.
The domicile and place of abode requirement found in the Constitution of Virginia is also reflected in the definition of “residence” or “resident” used in Virginia election statutes. See Va. Code § 24.2-101. In addition, should a military spouse choose to register to vote in Virginia, Virginia law provides a presumption that such spouse established domicile if he has a physical presence and place of abode in Virginia. See Va. Code § 24.2-417.1. The presumption can be overcome if the spouse expressly states otherwise. See id. This provision, however, provides no exception to the domicile requirement for military spouses. The fact remains that the spouse must be both domiciled in and have a place of abode in Virginia to be eligible to vote. Consistent with Cooper's, the Department will consider the fact that a military service member or spouse obtained a Virginia voter's registration and voted in elections in Virginia to be very strong evidence that that individual considered Virginia to be his domicile during the time he held and used such registrations.
In addition, the Taxpayers re-obtained a Florida voter's registration in February 2016. The Department carefully scrutinizes the timing of such actions while an assessment is pending, especially when the clear weight of the evidence indicates a taxpayer established domiciliary residency in Virginia. See P.D. 13-161 (8/13/2013). As stated above, the Taxpayers had not been registered to vote in Florida since 2008 and they were living in State B by February 2016.
Domicile of Servicemember
The Taxpayers continue to maintain that they shared a Florida domicile. In P.D. 16-136, the Department questioned the wife's claim to a Florida domicile because no evidence had been presented that she ever resided in Florida. Rather, it appeared that she had used the husband's home of record to substantiate such claim.
The Taxpayers first assert that the wife's domicile is irrelevant to the issue of whether he remained protected under the Act. As explained in VTB 10-1, the Act requires the spouses to share the same domicile. Thus, the Department was justified in requesting further evidence as to the wife's domicile claim.
The Taxpayers argue that the wife automatically became a domiciliary resident of Florida when they married in ***** (Territory A) in 1984. It appears that the wife was residing in Territory A with her father just prior to the marriage. The husband asks whether, under such circumstances, the Department is asserting that the spouse not be allowed to establish the same domiciliary residence as her husband. A spouse of a military service member can establish the same domicile as her husband, but if she was not already herself a domiciliary resident of that state, she would not be able to establish such domicile until she was herself physically present in that state with the requisite intent to remain permanently or indefinitely.
Alternatively, the Taxpayers assert that the wife was, in fact, in Florida during a period of military training and on visits with him, and she established the necessary intent to be a domiciliary resident of Florida at that time. Based on the information provided, it appears that the wife was temporarily in Florida from May to September 1991 living in government quarters for a military training program. The husband appears to have been stationed and living in another state at that time.
A change of domicile requires physical presence together with evidence that the individual concurrently intended to remain in that jurisdiction at that particular time. The Taxpayers claim that at some unspecified point during these temporary stays, the wife solidified her intent to return to Florida with him at the conclusion of their careers. Mere temporary stays with an intent to return at some future, undetermined time do not satisfy the establishment element of the change of domicile test. An intent to return at some unspecified later date is not equivalent to an intent to remain permanently or indefinitely in the present time.
Florida Court Case
The Taxpayers also present an additional argument that under Florida law, wives inherit the domiciles of their husbands upon marriage. The Taxpayer cites the case of Gordon v. Gordon, 369 So. 2d 421 (Fla. Dist. Ct. App. 1979). The issue in Gordon was whether the wife had established residency in Florida for the requisite six-month period prior to filing for divorce in a Florida court. See id. at 421. Prior cases in Florida established the principle that only actual residency counted for purposes of the six-month test. See id. at 423. The husband had moved to New York and there was no evidence the wife was still living in Florida. The court stated:
[A] wife's residence is normally that of her husband. The family relation presupposes that the wife and mother will have a residence with the family. In the instant case, the family was in New York until the separation of the parties. We hold that for the wife to establish a residence different from that of her husband, she must do so after a break-up of the marriage relationship.” Id.
It appears the court in Gordon essentially applied an evidentiary presumption that a wife is deemed to actually reside where the husband resides. Prior cases in Florida, cited in Gordon, had also established the principle that the wife's domicile generally follows that of the husband. Because Gordon involved evidence of actual residency, it did not establish an absolute rule that a wife always has the same domicile as her husband. In addition, to the extent that Gordon could be interpreted to create such an absolute rule, it was rejected by the later case of Eckel v. Eckel, 522 So.2d 1018 (Fla. Dist. Ct. App. 1988). In that case, the court stated: “We cannot accept the assumption that a husband and a wife can only maintain different residencies following the disruption of their marriage. It would be 'completely anachronistic' to hold that a wife could not obtain a domicile or residency different than that or her husband until the physical separation of the parties.” Id. at 1021 (quoting Bowers v. Bowers, 287 So.2d 722, 724 (Fla. Dist. Ct. App. 1973), cert. discharged, 326 So.2d 172 (Fla. 1976). Although it is true in many cases that a married couple will have the same domicile, the possibility that spouses may have different domiciles is not precluded by any provision of Florida or Virginia law of which the Department is aware.
Part-Year Residents
Virginia Code § 58.1-303 provides that a person who becomes a resident of Virginia is subject to taxation during the period in which he or she is a Virginia resident and is taxed as a resident only for the portion of the year that he or she resides in Virginia. Accordingly, Virginia taxable income is computed by determining income, deductions, subtractions, additions and modifications attributable to the period of residence in Virginia. In addition, a part-year resident may claim a portion of his Virginia personal exemptions, but the exemptions will be prorated based upon the number of days that the taxpayer was a Virginia resident. Further, a part-year resident may claim a prorated Virginia standard deduction if he claims the standard deduction for federal income tax purposes. See Public Document (P.D.) 14-67 (5/20/2014).
CONCLUSION
After carefully considering the Taxpayers' arguments and all of the information and evidence presented, I find that the Taxpayers were taxable as domiciliary residents of Virginia for that part of the 2012 taxable year after they arrived in Virginia to live and work. The Taxpayers, therefore, are directed to file a 2012 part-year resident Virginia individual income tax return reflecting their income attributable to their period of Virginia residency. 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 will be adjusted accordingly. If the return is not received within the allotted time, the assessment will be considered to be correct and collection actions 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 ***** in the Office of Tax Policy, Appeals and Rulings, at *****.
Sincerely,
Craig M. Burns
Tax Commissioner
AR/827.M