April 16, 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 Taxpayers, a husband and a wife, filed a Virginia joint resident individual income tax return for the 2013 taxable year, but the amount of their joint federal adjusted gross income (FAGI) did not match the amount of FAGI reported on their federal income tax return. The Department selected the return for review and requested additional information from the Taxpayers in order to determine their proper filing status with Virginia. Based on the information provided, the Department determined that the husband was taxable as a domiciliary resident of Virginia. As a result, the Department adjusted the Taxpayers' return to include income earned by both the husband and the wife during the 2013 taxable year. The Taxpayers appealed, contending the husband was still a resident of ***** (State A).
DETERMINATION
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 Department must conclude that he or she intended to remain indefinitely in Virginia.
The husband was a service member and was assigned to a Virginia duty station in April 2010 until he left the military in August 2012. The Taxpayers leased a personal residence in Virginia from April 2010 to March 2011. The Taxpayers then purchased a personal residence in Virginia, which they owned from March 2011 to April 2016. The Taxpayer's spouse resided in Virginia during the taxable year at issue and paid Virginia income tax.
Upon his discharge from service in August 2012, the husband began graduate school in ***** (State B) and resided in State B until he graduated and returned to Virginia in January 2014. Prior to and during the taxable year at issue, the husband maintained connections with State A. He retained a State A vehicle registration and driver's license. He also continued to vote using his State A voter's registration through the 2012 election and did not register to vote in Virginia until 2014.
It has been the Department's experience that college students rarely establish domicile where they attend college. See Public Document (P.D.) 82-39 (4/2/1982) and P.D. 11-121 (6/30/2011). There is no indication the Taxpayer took any affirmative steps to change his domicile to State B. Thus, the determinative question is whether the Taxpayer changed his domicile to Virginia when he left the military in 2012.
At that time, the Taxpayer still held a State A vehicle registration, driver's license and voted in the November 2012 election using a State A voter's registration. He had also retained these connections throughout his period of military service after being transferred to his Virginia duty station in 2010.
The Servicemembers Civil Relief Act (the “Act”), codified at 50 U.S.C. § 3901 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 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 P.D. 10-237 (9/30/2010).
Because the Taxpayer retained such connections with State A until his separation from service and then immediately began living and going to school in State B, while continuing to retain such connections, the Taxpayer did not satisfy the elements necessary to show a domicile change until he returned to Virginia in 2014. At that time, the Taxpayer began residing in Virginia full-time, found employment, and began changing over his vehicle registration, driver's license and voter's registration to Virginia.
The Department acknowledges that a change of domicile occurs as part of a process in which no single factor is dispositive. After carefully considering all of the evidence presented, I find that the Taxpayer was not taxable as a domiciliary resident of Virginia for the 2013 taxable year. Accordingly, the assessment will be abated and a refund issued as warranted.
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/1258.M