February 24, 2015
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 "Taxpayer") for the taxable year ended December 31, 2011.
FACTS
The Department received information from the Internal Revenue Service (IRS) indicating that the Taxpayer may have been required to file a Virginia individual income tax return for the 2011 taxable year. The Department requested information to verify whether the Taxpayer was subject to Virginia income tax. Based on the information provided, the Department determined that the Taxpayer was taxable as a Virginia resident and issued an assessment. The Taxpayer appealed, contending she qualified for relief from Virginia's income tax as the spouse of a military 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 before 2009. The Department has ruled that the 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. 05-150 (9/8/2005).
The Act was amended, effective for the 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 Virginia 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 service member in order to be exempt from Virginia's income tax. The spouse cannot simply elect to claim the service member's domicile. In order to claim a domicile in another state, the spouse must have (i) resided in the other state with the intent to make a permanent home there, and (ii) not abandoned that domicile when moving to reside with the service member or for any other reason. 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 general, the Department will not seek to tax the spouse of a military service member so long as the spouse maintains sufficient connections with the service member's domiciliary state to indicate intent to maintain domicile there. Such connections would include obtaining and retaining 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 the spouse of a military service member maintains such connections, he or she would be considered to be a resident of the other state even though they work, live, and establish a place of abode in Virginia.
The Taxpayer has failed to provide sufficient evidence to support her claim of maintaining domicile in ***** (State A). Although she may have retained a State A voter's registration, the Taxpayer did not vote in State A elections.
In addition to residing and working in Virginia, the Taxpayer registered her vehicle in Virginia. She also obtained a Virginia driver's license. The Taxpayer asserts that she obtained a Virginia driver's license after being instructed to do so by a law enforcement officer. Virginia Code § 46.2-306, however, provides exemptions for nonresident armed service personnel, their spouses and dependent children from Virginia's licensing requirements if they are licensed in their home state or country. Because the spouse of a nonresident service member is not required to obtain a Virginia driver's license, such an action is inconsistent with maintaining domicile elsewhere.
Based on the evidence provided, I find that the Taxpayer has failed to substantiate her claim that she retained her domicile in State A. The evidence indicates the Taxpayer took sufficient actions to establish domicile in Virginia. Therefore, the Taxpayer does not qualify for relief under the Act, and the assessment for 2011 is upheld. A revised bill, with interest accrued to date, will be mailed shortly to the Taxpayer. No additional interest will accrue provided the outstanding assessment is paid within 30 days from the date of the revised bill.
The Code of Virginia sections, public documents, and tax bulletins 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/1-5810123393.M