March 30, 2018
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, 2013. I apologize for the delay in responding to your appeal.
FACTS
The Department received information from the Internal Revenue Service, indicating the Taxpayer and his spouse may have income subject to Virginia's income tax. The Department conducted an audit and issued an assessment. The Taxpayer filed an appeal, contending his wife was a military service member with a home of record in ***** (State A), and he was a part-year resident of Virginia for 2013 taxable year and a nonresident for the 2014 through 2016 taxable years under the Servicemembers Civil Relief Act (the “Act”), codified at 50 U.S.C. § 3901 et seq. With the appeal, the Taxpayer filed a part-year resident income tax return for 2013, resulting in a revised assessment. The issue of his residency for the remainder of 2013 through 2016 remains at issue.
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 a taxpayer and the place to which he intends to return even though he may reside elsewhere. For a person to change domiciliary residency to another state or country, 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.
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, 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. A taxpayer has the burden of proving that he or she has abandoned his or her Virginia domicile. If the information is inadequate to meet this burden, the Tax Commissioner must conclude that he or she intended to remain indefinitely in Virginia.
In August 2012, the Taxpayers relocated to Virginia. As a service member, it appears the wife maintained her domiciliary residence in State A. Because the Taxpayers were not married at this time, the husband was not eligible for the protections afforded under the Act.
When the couple moved to Virginia, the husband performed a number of actions indicating an intent to change his domicile to Virginia. He established a permanent place of abode, accepted Virginia employment, filed a Virginia resident income tax return, registered a motor vehicle, and surrendered his State A driver's license for a Virginia driver's license.
The Taxpayer explains that he was required to obtain a Virginia driver's license in order to drive for his Virginia employer. Virginia Code § 46.2-323.1 states, “No driver's license ... shall be issued to any person who is not a Virginia resident.” In fact, this section states that every person applying for a driver's license must execute and furnish to the Commissioner of the Department of Motor Vehicles (DMV) a statement that certifies that the applicant is a Virginia resident.
The fact that an individual has a Virginia driver's license is one factor to consider, among other possible factors, in any given domicile case. Nonresidents are not permitted to hold Virginia driver's licenses. See Virginia Code § 46.2-323.1. They are, however, permitted to continue to use their licenses from their home states or countries. See Virginia Code § 46.2-307. For the purposes of Title 46.2 of the Code of Virginia, “nonresident” is generally defined as every person who is not domiciled in the Commonwealth. See Virginia Code § 46.2-100. Thus, in general, an individual must be a domiciliary resident of Virginia in order to hold a Virginia driver's license.
The husband also performed actions consistent with maintaining State A domicile. He appears to have jointly owned a home with his spouse in State A. State A voting records show, the husband was registered to vote in State A since 1998 and participated in State A elections until May 2012. No additional activity is reported until October 2016. After being contacted by the Department, the Taxpayer and his spouse filed an amended return with State A to include his income. Apparently, when they originally filed the State A return, the husband did not consider himself to be a State A resident.
The Department acknowledges that a change in domicile occurs as part of a process in which no single factor is dispositive. In this case, the Taxpayer was physically present in Virginia for an extended period of time and took sufficient actions to express an intent to indicate a change of domicile.
Residency of a Military Spouse
The Act, codified at 50 U.S.C. § 3901 et seq. (formerly 50 U.S.C. § 511 et seq.) was amended, effective for the 2009 taxable year and thereafter, to address the residency of military spouses. Specifically, 50 U.S.C. § 4001(a) (2) (formerly 50 U.S.C. § 571(a) (2)) was enacted 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, as the case may be, is the same for the service member and the spouse.” The Act does not apply to the spouses of military and naval personnel who have established domiciliary status within Virginia. See Public Document (P.D.) 11-114 (6/21/2011). In Virginia Tax Bulletin (VTB) 10-1 (1/29/2010), 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.
In Public Document (P.D.) 15-186 (9/28/2015), the Department suggested, given the language of the Act, that certain activities conducted by a military spouse, such as the spouse's profession or employment, income sources, permanent place of abode, enrolling children in local schools, and situs of real and tangible property, may no longer be considered to be activities associated with establishing domicile in a state. While such activities may normally be considered to be incidental to a spouse's presence in the state as a result of the service member's military orders, they will be considered when there appears to be an affirmative choice to make their current state of residence their domicile.
The Taxpayers were married in May 2013. Although the husband initiated certain actions to reconnect with State A after marrying the service member, the husband did not physically reside in State A when such actions were taken. In Coopers Adm'r v. Commonwealth, 121 Va. 338, 93 S.E 680 (1917), the Virginia Supreme Court held that acquiring domicile in a new location generally requires both intent and personal presence. See also P.D. 13-97 (6/11/2013). No evidence has been provided to show the husband established a physical presence in State A during 2013. In contrast, the information provided indicates the husband and the service member remained in Virginia from August 2012 through February 2017.
Based on the information provided, the husband was not a domiciliary resident of State A and, therefore, did not share the same domicile as his spouse for the 2013 taxable year. Accordingly, the husband is not eligible to claim the exemption from Virginia income tax under the Act.
The husband filed a 2013 Virginia part-year resident income tax return with the appeal. As a domiciliary resident of Virginia income, the husband should file an amended 2013 income tax return (Form 760) as a resident to report more accurately his tax liability.
In addition, it appears the husband may be required to file Virginia income tax returns for subsequent taxable years. Accordingly, the Taxpayer should review his residency status for the 2014 through 2016 taxable years in light of this determination to ascertain whether he should file additional returns as a Virginia resident.
The returns should be filed within 60 days from the date of this determination letter and mailed to: Virginia Department of Taxation, Office of Tax Policy, Appeals and Rulings, Attn: *****, Post Office Box 27203, Richmond, Virginia 23261-7203. If the returns are not filed within the allotted time, the Taxpayers liability may be adjusted according to this determination and additional assessments may be issued based on the information available.
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 *****.
Sincerely,
Craig M. Burns
Tax Commissioner
AR/1223.o