Tax Type
Individual Income Tax
Description
The Servicemembers Civil Relief Act
Topic
Servicemembers Civil Relief Act
Withholding of Tax
Date Issued
06-02-2011
June 2, 2011
Re: § 581-1821 Application: Individual Income Tax
Dear *****:
This will reply to your letter in which you seek a refund of the Virginia individual income tax withheld for ***** (the "Taxpayer"), for the taxable year ended December 31, 2009.
FACTS
The Taxpayer moved to Virginia from ***** (State A) in February 2008. In April 2008, she married a military service member assigned to a duty station in Virginia. The Taxpayer maintained a house in State A, and held a State A driver's license. The Taxpayer filed a refund claim for withholding for the 2009 taxable year. The Department denied the Taxpayer's claim on the basis that the Taxpayer established residence in Virginia prior to marrying the service member. The Taxpayer appeals the assessment, contending her only purpose in Virginia was to be with the service member.
DETERMINATION
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 station them in a different state or country whether permanently or temporarily. The Act did not apply to the spouses of military and naval personnel for the taxable years beginning prior to January 1, 2009. The Department has ruled that residency status of a taxpayer requires analysis separate from their military spouse. See Public Document (P.D.) 05-92 (6/9/2005) and P.D. 05150 (9/8/2005).
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. The Act does not apply to the spouses of military and naval personnel who have established domiciliary status within Virginia.
In Virginia Tax Bulletin 10-1, 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 action in Virginia that is inconsistent with
maintaining a domicile elsewhere.
In this instance, the Taxpayer engaged in activities consistent with establishing domicile within Virginia. She obtained a permanent place of abode and accepted employment in Virginia in February 2008 prior to her marriage to the service member. Her employer began withholding Virginia income tax from her salary.
The Taxpayer also maintained connections to State A. She continued to hold a State A driver's license and maintained a permanent place of abode. In 2008, the Taxpayer updated her motor vehicle registration in State A to include the service member.
The Department acknowledges that a change in domicile occurs as part of a process in which no single factor is dispositive. A person's true intention must be determined with reference to all of the facts and circumstances of the particular case.
The Department interprets the language of the Act as requiring both the service member and the spouse to have the same domicile for the Taxpayer to be exempt from Virginia income tax. Based on the information provided, I find that the Taxpayer demonstrated her intent to maintain her State A domicile in 2008. The evidence further indicates that she did not establish a Virginia domicile in 2009. The Taxpayer and her service member spouse maintained their domicile in State A. Accordingly, the Taxpayer's 2009 employee withholding will be refunded.
The tax bulletin and public documents cited are available on-line at www.tax.virginia.gov in the Tax Policy Library section of the Department's web site. If you have any questions regarding this determination, you may contact ***** in the Department's Office of Tax Policy, Appeals and Rulings, at *****.
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- Sincerely,
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- Craig M. Burns
Tax Commissioner
- Craig M. Burns
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AR/1-45936131931.D
Rulings of the Tax Commissioner