Tax Type
Individual Income Tax
Description
Military husband was not a domiciliary resident of VA and the wife had no income
Topic
Persons Subject to Tax
Residency
Date Issued
09-08-2005
September 8, 2005
Re: § 58.1-1821 Application: Individual Income Tax
Dear *****:
This will reply to your letter in which you seek correction of the individual income tax assessment issued to ***** (the "Taxpayers") for the 2002 taxable year.
FACTS
The Taxpayers are husband and wife. During the taxable year in question, the husband was on active duty in the United States military. Prior to 2002, the husband was a domiciliary resident of ***** ("State A") and was stationed in ***** ("State B"). In 2002, the husband was transferred to Virginia pursuant to military orders. He maintained his declaration as a resident of State A for purposes of his military compensation. He maintained a State A driver's license and registered his car in State A. In December 2002, the Taxpayers purchased a residence in Virginia. The wife became a Virginia resident in 2002, but was not employed in Virginia.
The Department audited the Taxpayers and issued an assessment for Virginia income tax, penalty and interest for failure to file a Virginia resident income tax return for 2002. The Taxpayers contend that they are not liable for Virginia income tax because the husband was not a domiciliary resident of Virginia and the wife had no income.
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 is Virginia and the place to which he intends to return is Virginia even though he may actually reside elsewhere. For a person to change domiciliary residency from one state to another state or country, that person must intend to abandon his domicile with no intention of returning to that state. 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 domiciliary resident of another state, therefore, working in Virginia who has not abandoned his domicile in the other state continues to be subject to taxation by the other state. Ordinarily, 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 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, sites 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.
The Department concedes that it is difficult to know whether a taxpayer intends to return to his or her initial state of domicile, especially when the taxpayer is in military service. The Department determines a taxpayer's intent through the information provided. The taxpayer has the burden of proving that he or she has not abandoned his or her initial domicile. If the information is inadequate to meet his or her burden, the Commissioner must conclude that he or she intended to remain indefinitely in Virginia.
Husband
The Soldiers' and Sailors' Civil Relief Act of 1940 (50 U.S.C.A. App. § 574) 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 military 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.
In addition, Va. Code § 58.1-321 B provides that members of the armed forces who are stationed in Virginia, who are not domiciled in Virginia, are not subject to income tax on compensation received from their military service.
The husband was stationed in Virginia by the United States military in 2002. The evidence presented indicates that the husband took steps to retain his domicile in State A even though he was stationed in Virginia. As such, the husband was a domiciliary resident of State A for the 2002 taxable year.
Although the husband was not a resident of Virginia during the taxable years at issue, he would be subject to Virginia income tax as a nonresident if he had other income from Virginia sources. The Virginia taxable income of a nonresident is defined under Va. Code § 58.1-325 as "an amount bearing the same proportion to his Virginia taxable income, computed as though he were a resident, as the net amount of his income, gain, loss and deductions from Virginia sources bears to the net amount of his income, gain, loss and deductions from all sources."
Aside from his military pay, the husband's only source of income was interest from a personal bank account. As such, the husband had no income from Virginia sources for the 2002 taxable year pursuant to Va. Code § 58.1-302.
Wife
The wife became a Virginia resident when the Taxpayers moved into Virginia in 2002. Part-year residents are required to file a Virginia income tax return if they meet the filing threshold. For the 2002 taxable year, a married part-year resident filing on a separate return from their spouse was not required to file an income tax return if their Virginia adjusted gross income ("VAGI") was less than $4,000.
When the Taxpayers moved, the wife left her employment in State B. She did not obtain employment in Virginia in 2002, but did earn a small amount of interest from a personal bank account. Because the wife's VAGI did not meet the filing threshold, she is not required to file a Virginia income tax return for the 2002 taxable year.
CONCLUSION
Based on the foregoing, the Virginia individual income tax assessment issued to the Taxpayers for the 2002 taxable year will be abated. The Code of Virginia sections cited are available on-line in the Tax Policy Library section of the Department's web site, located at www.policylibrary.tax.virginia.gov. If you have any questions regarding this determination, you may contact ***** in the Department's Office of Policy and Administration, Appeals and Rulings, at *****.
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- Sincerely,
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- Kenneth W. Thorson
Tax Commissioner
- Kenneth W. Thorson
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AR/55325B
Rulings of the Tax Commissioner