March 21, 2024
Re: § 58.1-1821 Application: Individual Income Tax
Dear *****:
This will respond to your letter in which you seek correction of the individual income tax assessment issued to ***** (the “Taxpayer”) for the taxable year ended December 31, 2019.
FACTS
The Department received information from the Internal Revenue Service (IRS) indicating that the Taxpayer may have been required to file a Virginia income tax return for the 2019 taxable year. A review of the Department’s records showed that the Taxpayer had not filed a return. The Department requested additional information from the Taxpayer in order to determine if his income was taxable in Virginia. Based on the information received, the Department determined that the Taxpayer was a domiciliary resident of Virginia and issued an assessment. The Taxpayer filed an application for correction contending, he was an active duty member of the military and was assigned to duty stations outside of Virginia during the 2019 taxable year.
DETERMINATION
Domicile
Two classes of residents, a domiciliary resident and an actual resident, are set forth in Virginia Code § 58.1-302. The domiciliary residence of a person means the permanent place of residence of that person and the place to which that person intends to return even though they reside elsewhere. For a person to change domiciliary residency to another state or country, that person must intend to abandon their 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 their 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 their 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 person’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 or 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 the facts and circumstances of the particular case. A simple declaration is not sufficient to establish residency.
The Department determines a taxpayer’s intent through the information provided. The taxpayer has the burden of proving that their Virginia domicile has been abandoned. If the information is inadequate to meet this burden, the Department must conclude that the taxpayer intended to remain indefinitely in Virginia.
Residency of a Military Service Member
The Servicemembers Civil Relief Act (the “Act”) 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 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) (hereinafter, “Minnesota”).
In general, the Department will not seek to tax an active duty military servicemember so long as the member maintains sufficient connections with another state to indicate the 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).
The Taxpayer was a military servicemember with a Virginia home of record (HOR) since 1996. The Taxpayer owned a residence in Virginia, but he had not lived there since 2013. During the taxable year at issue, the Virginia residence was used as a rental property. The Taxpayer also had various tax reporting documents for the 2019 taxable year sent to a Virginia and filed his 2019 federal income tax return using a Virginia address. By the time the 2019 return would have been due in 2020, however, the Taxpayer was residing in Virginia again. As such, use of the Virginia address to file the 2019 return is of little, if any, evidentiary value as to the Taxpayer's intent in this case.
The Taxpayer explains that he was stationed outside the United States for much of his military career. In 2015, however, he was assigned to a duty station in ***** (State A). The Taxpayer took significant steps to indicate his intent to treat State A as his domicile. He purchased a residence in State A, obtained a State A voter’s registration and a State A driver’s license, and registered several vehicles in State A. The Taxpayer also retained these connections when he was assigned to temporary duty stations in ***** (State B) and ***** (State C) in 2018 and 2019.
The Department concedes that the income taxation of military service members is a unique policy area which can have some complicated applications. For example, service members frequently confuse the term home of record with domicile. As the Department has previously observed, however, a service member’s home of record refers to the state from which a service member entered the military. Its primary purpose is determining military benefits such as travel entitlements upon separation from service. Depending on the circumstances, a service member’s state of legal domicile and home of record might be the same. That is not true, however, for all service members. A change of domicile results from the establishment of a new residency in fact, coupled with an intent to abandon the old domicile and remain in the new, regardless of what state is listed as the home of record.
In prior determinations, the Department has observed that when a military service member performs the same types of actions a civilian taxpayer would normally perform to establish a Virginia domicile, including purchasing or leasing a personal residence and obtaining a driver’s license, vehicle registration and voter’s registration, and the service member retains few, if any, connections to another state, they are be subject to taxation the same as any other Virginia resident. See, e.g., P.D. 19-96 (8/27/2019).
During the taxable year at issue, the Taxpayer had the types of connections with State A that would normally be associated with a domiciled resident, and he retained few such connections with Virginia. In addition, the Taxpayer retained these connections with State A even though he was assigned to temporary duty stations in other states in 2018 and 2019. Consistent with the Department’s treatment of servicemembers reporting a home of record in a state other than Virginia, I find that the Taxpayer was not taxable as a domiciliary resident of Virginia for the 2019 taxable year. Accordingly, the assessment will be abated.
The Taxpayer, however, appears to have returned to Virginia and obtained a new personal residence, driver’s license and voter’s registration. As such, it is likely that the Taxpayer has reestablished domicile in Virginia. The Department’s records, however, indicate that the Taxpayer has not filed any Virginia income tax returns since the 2015 taxable year. The Taxpayer should review his circumstances and take steps to file any past due Virginia income tax returns. The Taxpayer should be aware that he may have been liable for income tax as a nonresident to the extent that he had income from Virginia sources, which could include, among other things, rental income from property in Virginia, pass-though entity income or nonmilitary wages earned while performing job duties in Virginia. See Virginia Code § 58.1-302.
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 (804) *****.
Sincerely,
Craig M. Burns
Tax Commissioner
AR/4623.B