April 16, 2018
Re: § 58.1-1821 Application: Individual Income Tax
Dear *****:
This will respond to your letter in which you seek correction of the individual income tax assessment issued to ***** (the “Taxpayer”) for the taxable year ending December 31, 2013. I apologize for the delay in responding to your appeal.
FACTS
The Taxpayer, an active duty military service member, filed a joint federal income tax return for the 2013 taxable year, but no Virginia return was filed. The Department received information from the Internal Revenue Service (IRS), that the Taxpayer may have income subject to Virginia income tax. Under audit, the Department treated the Taxpayer as a domiciliary resident of Virginia and issued an assessment for the taxable year at issue. The Taxpayer appealed the assessment, contending he is a military service member domiciled in ***** (State A).
DETERMINAITON
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. § 3900 et. seq., provides that military 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 determining domicile, the Department will generally consider 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 and tangible property, motor vehicle registration and licensing, and 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 facts and circumstances of the particular case. A simple declaration is not sufficient to establish domicile.
In general, the Department will not seek to tax an active duty military service member so long as the member maintains sufficient connections with another state to indicate 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. As long as a military service member maintains such connections, they would be considered to be a resident of the other state even though they work, live, and establish a permanent place of abode in Virginia. See Public Document (P.D.) 10-237 (9/30/2010).
The Taxpayer asserts his home of record was State A. A service member's “home of record” refers to the state from which a service member entered the military. Its primary purpose is determining military benefits such as travel entitlements upon separation from service. Depending on the circumstances, a service member's state of legal domicile and home of record might be the same. That is not true, however, for all service members. A change of domicile results from the establishment of a new residency in fact, coupled with an intent to abandon the old domicile and remain in the new, regardless of what state is listed as the home of record.
The Taxpayer admits that during the 2009 taxable year, he purchased a Virginia residence, registered motor vehicles in Virginia, participated in Virginia's elections process and obtained a Virginia driver's license. The Taxpayer explains that he obtained these connections with Virginia because he had recently returned from an overseas deployment and his previous driver's license had expired. The Taxpayer, however, also filed Virginia resident income tax returns in 2010 and 2016. In addition, the Taxpayer stated he was a domiciliary resident of Virginia in a divorce decree issued January 2013.
In United States of America v. Minnesota Department of Revenue, the court observed that the Act could not prohibit a state from looking at factors, such as those identified above. The court observed that if a state could not look to such factors, it would give the Act a power Congress did not intend: “it would render every state [to which a service member is assigned] incapable of ever taxing the incomes of a serviceperson without the serviceperson's consent. Such a result would inherently be unfair.” See 97 F. Supp. 2d 973, at 984. Based on this understanding of the Act, the Department will consider such activities and obtaining a driver's license, registering to vote and voting in local elections, registering an automobile, and exercising other benefits or obligations of the Commonwealth in determining the residency of a military service member.
Virginia Code § 46.2-323.1 states, “No driver's license...shall be issued to any person who is not a Virginia resident.” 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 Department has found that an individual may successfully establish a domicile outside Virginia even if he retains a Virginia driver's license. See Public Document (P.D.) 00-151 (8/18/2000). However, obtaining or renewing a Virginia driver's license is considered to be a strong indicator of intent to establishing or retain domiciliary residency in Virginia. See P.D. 02-149 (12/09/2002).
Virginia Code § 46.2-306 specifically exempts service members on active duty, their spouses, and dependent children residing in Virginia from the requirement to obtain a Virginia driver's license when such individuals have been licensed as drivers under the laws of their home state. Accordingly, when a service member or spouse obtains a Virginia driver's license, the Department will typically consider that action to be a strong indicator of intent to change domiciliary residency. The Department, however, may give the driver's license factor less weight in such cases if the service member or spouse provides evidence that they are no longer entitled to hold a driver's license in the home state, or that it was impossible or impractical to do so. The Taxpayer has not provided any such evidence in this case.
Likewise, Virginia Code § 46.2-600 waives the registration requirement for any vehicle located in Virginia that is registered to a nonresident service member on active duty, nonresident activated reserve or national guard member, or nonresident mobilized reserve or national guard member living in Virginia. Because a nonresident service member is not required to register a motor vehicle in Virginia, such an action shows an intent to make Virginia the service member's domiciliary residence.
With regard to eligibility to vote, Article II, Section 1 of the Constitution of Virginia states in relevant part as follows:
In elections by the people, the qualifications of voters shall be as follows: Each voter shall be a citizen of the United States, shall be eighteen years of age, shall fulfill the residency requirements set forth in this section, and shall be registered to vote pursuant to this article.
The residence requirements shall be that each voter shall be a resident of the Commonwealth and of the precinct in which he votes. Residence, for all purposes of qualification to vote, requires both domicile and a place of abode.
The domicile and place of abode requirements found in the Constitution of Virginia are also reflected in the definition of “residence” or “resident” used in Virginia election statutes. See Virginia Code § 24.2-101. In addition, should a military spouse choose to register to vote in Virginia, Virginia law provides a presumption that such spouse established domicile if he has a physical presence and place of abode in Virginia. See Virginia Code § 24.2-417.1. The presumption can be overcome if the spouse expressly states otherwise. See id. This provision, however, provides no exception to the domicile requirement for military spouses. The fact remains that the spouse must be both domiciled in and have a place of abode in Virginia to be eligible to vote. Consistent with the precedent established by the Virginia Supreme Court in Coopers Adm'r v. Commonwealth, 121 Va. 338, 93 S. E. 680 (1917), the Department will consider the fact that a military service member or spouse obtained a Virginia voter's registration and voted in elections in Virginia to be very strong evidence that that individual considered Virginia to be her domicile during the time she held and used such registrations. See P.D. 17-126 (6/29/2017).
The Taxpayer acknowledges he has not physically resided in State A in thirty years. The Taxpayer however, presented no additional documentation to support maintaining a domicile with State A.
The Taxpayer received a permanent change of duty station (PCS) to relocate to ***** (Country B) in May 2013. In June 2014, the Taxpayer received PCS orders to relocate to ***** (State C) and a temporary change of duty station in October 2015 to *****. The Act 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. Thus, once the Taxpayer established a domicile in Virginia, certain actions must be taken to the abandon Virginia.
The Department determines a Taxpayer's intent through the information provided. The Taxpayer has the burden of proving that he maintained sufficient connections in State A to continue to claim State A as his domicile. Based on the information provided, the Department finds that the Taxpayer established domicile in Virginia during the 2009 taxable year and did not take any actions to abandon said connections before or during the 2013 taxable year. Thus, the Taxpayer is required to file a Virginia income tax return for the 2013 taxable year as a resident of Virginia.
The 2013 assessment was made based on the best information available to the Department pursuant to Virginia Code § 58.1-111. The Taxpayer may have information that better represents his Virginia income tax liability for the year at issue. Therefore, the Taxpayer should file a 2013 Virginia income tax return. The return should be submitted within 30 days from the date of this letter to: Virginia Department of Taxation, Office of Tax Policy, Appeals and Rulings, P.O. Box 27203, Richmond, Virginia 23161-7203, Attention: *****. Upon receipt, the return will be reviewed and the assessment will be adjusted, as appropriate. If the return is not received within the allotted time, the assessment will be considered correct as issued and collection actions may result.
In light of this determination, the Taxpayer may wish to evaluate his residency for each taxable year beginning with 2009 to determine whether he should have filed a Virginia income tax return. If the Taxpayer was required to file, but fails to do so, the Department may issue assessments at any time pursuit to Virginia Code § 58.1-312.
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/1195.o