Tax Type
Individual Income Tax
Description
Residency of a Military Service Member
Topic
Domicile
Persons Subject to Tax
Date Issued
09-30-2010
September 30, 2010
Re: § 58.1-1821 Application: Individual Income Tax:
Dear *****:
This will reply to your letter in which you appeal the Department's denial of a refund claim filed by ***** (the "Taxpayers") for individual income tax withheld for the 2009 taxable year.
FACTS
The Taxpayers, a husband and wife, were domiciled residents of ***** (State A) prior to the husband's induction into the military. In December 1998, the husband was transferred to a military base located in Virginia. The wife moved to Virginia with her husband. The husband registered to vote in Virginia in 2005. He obtained a Virginia driver's license in 2007 and registered an automobile in Virginia in 2009.
Also in 2009, the husband was assigned to a temporary duty station in ***** (State B). While in State B, the husband changed his home of record with the Department of Defense from State A to State B.
In February 2010, the wife filed a claim to receive a refund for individual income tax withheld in the 2009 taxable year. The claim was denied on the basis that her husband changed his home of record in November 2009 to State B, and the wife no longer maintained the same domicile as the husband.
The Taxpayers appeal the Department's decision, contending the husband did not intend to establish domicile within State B, and they were both domiciliary residents of State A during 2009. The Taxpayers indicate that the husband changed his home of record only to obtain a hunting permit in State B while serving at a temporary duty
station.
DETERMINATION
Residency of a Military Service Member
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.
The Servicemembers Civil Relief Act (the "Act"), codified at 50 U.S.C. § 571 et seq., 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 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 a military service member so long as the member maintains sufficient connections with another state to indicate an 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 (e.g., obtaining an in-state hunting license). As long as a military service member maintains such connections, he would be considered to be a resident of the other state even though he works, lives, and establishes a place of abode in Virginia.
In this case, the husband obtained a Virginia driver's license, registered to vote in Virginia, and maintained an automobile registered in Virginia. The Taxpayers indicate that the husband's home of record on his Leave and Earnings Statement has always been State A, except for the short period of time he spent in State B. No other evidence had been provided to show the husband maintained any other connections with State A.
The Department determines a taxpayer's intent through the information provided. The taxpayer has the burden of proving that he or she has abandoned his or her original domicile and obtained a new domicile. Based on the information provided, it appears that the husband abandoned his domicile in State A and obtained domicile in Virginia.
Residency of Spouse of Military Service Member
The Act was amended, effective for 2009 taxable year and thereafter, 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 is the same for both the service member and spouse. See Tax Bulletin (VTB) 9-10 (11/12/2009) and VTB 10-1 (1/29/2010).
In VTB 10-1, the Department explained that the domicile of a military spouse must be the same as the servicemember 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 servicemember'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 action in Virginia that is inconsistent with maintaining a domicile elsewhere.
In this case, the evidence indicates that the wife established her domicile in State A before the husband entered the military. The husband, however, appears to have established domicile in Virginia. Accordingly, the wife's claim for refund of employer withholding must be denied.
Further, the husband must file Virginia income tax returns for the 2005 through 2009 taxable years. The returns, along with the payment of any tax due, should be submitted to: Virginia Department of Taxation, Office of Tax Policy, Appeals and Rulings, Attention: *****, P.O. Box 27203, Richmond, Virginia 23261-7203.
The Code of Virginia sections and tax bulletins cited are available on-line at www.tax.virginia.gov in the Tax Policy Library section of the Department's website. If you have any questions about thus determination, you may contact ***** at *****.
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- Sincerely,
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- Craig M. Burns
Acting Tax Commissioner
- Craig M. Burns
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AR/1-4363936154.D
Rulings of the Tax Commissioner