October 4, 2019
Re: § 58.1-1821 Appeal: 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 ended December 31, 2014.
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 2014 taxable year. A review of the Department’s records showed that the Taxpayer had not filed a return. The Department requested additional information to determine if her income was subject to Virginia income tax. Based on the information received, the Department determined that the Taxpayer was taxable as a Virginia resident and issued an assessment. The Taxpayer appeals, contending that she was a resident of ***** (State A) and exempt from Virginia income taxation pursuant to the Servicemembers Civil Relief Act (the “Act”). The Taxpayer also contends that she did not file a return because she was following advice she received from the Department.
DETERMINATION
Residency of a Military Spouse
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 she intends to return even though she may reside elsewhere. For a person to change domiciliary residency to another state or country, that person must intend to abandon her 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 her 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 her 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 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 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) 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.”
Similarly, 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. 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 the 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 actions in Virginia that are inconsistent with maintaining a domicile elsewhere.
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 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 of the facts and circumstances of the particular case. A simple declaration is not sufficient to establish domicile. See United States v. Minnesota, 97 F. Supp. 2d 973 (2000).
The Department has typically found that when a spouse moves to follow military personnel to a new duty station, they will generally abandon their former real property and move the family. See Public Document (P.D.) 10-32 (4/8/2010). The spouse will establish a new permanent place of abode near the new duty station, enroll children in school, and seek employment of an indeterminate duration. The spouse will generally comply with jurisdictional authorities with regard to driving permits, vehicle registrations, and education requirements. The spouse will also change social, charitable and church associations. Moreover, the military service member and the spouse move with no assurance that they may move back to a former duty station.
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 states that in 1994 she married a military service member who was a resident of State A, and since that time, they both intended to maintain their domicile there. She explains that she is registered to vote in State A, has maintained a residence in State A, has significant familial ties to State A, and has always planned to return to State A at the conclusion of her husband’s military service. The Taxpayer contends that because she and her military service member spouse shared a State A domicile during the taxable year at issue, she was exempt from Virginia income taxation under the Act even though she was living and working in Virginia.
The Taxpayer, as a military service member spouse, however, was not exempt from changes to her residency and domicile pursuant to the Act until the 2009 taxable year. Before that, her domicile would have changed each time she physically and indefinitely relocated from one place to another. In 2009 and thereafter, she was exempt from changes to her residency and domicile only if she was in a jurisdiction solely to be with her service member spouse in compliance with his military orders and they shared the same residency or domicile.
The information provided shows that the Taxpayer lived in State A only until 1995. She and her service member husband were relocated to ***** (State B), where they both obtained State B driver’s licenses. Later, they were relocated to ***** (State C), where she obtained a State C driver’s license. After another relocation to ***** (Country A), they were relocated to Virginia in 2007. While in Virginia, the Taxpayer filed a Virginia resident individual income tax return for the 2008 taxable year, registered vehicles in Virginia in 2008, 2016, and 2017, obtained a Virginia driver’s license in 2013, and rented a residence in Virginia from 2007 to 2015 before purchasing a Virginia residence in 2015.
The Taxpayer claims to have continuously maintained a residence in State A, but the information provided does not support that assertion. The only State A residential lease provided was for a one-year term in 2018 and 2019, and she provided information showing that they rented rooms at a local resort when they visited State A in 2012, which is inconsistent with maintaining a permanent residence there. The Taxpayer is registered to vote in State A, but she did not obtain her State A voter’s registration until 2012. Additionally, the husband’s military service ended in March 2018, but the Taxpayer and her spouse continue to reside in Virginia.
Further, although the service member’s residency is not the primary issue in this case, the fact that he obtained a State B license raises questions as to his domiciliary residency. If the service member changed his domicile, the marriage provisions of the Act could have been nullified.
The facts in this case indicate a pattern of establishing connections with states in which the Taxpayer was physically located at any particular time. Under such circumstances, it does not appear the Taxpayer intended to remain domiciled in any state that she resided in prior to moving to Virginia. Because she moved to Virginia in 2007 and has not provided sufficient evidence of domiciliary residence elsewhere, the Department can only conclude the Taxpayer was a resident of Virginia in 2014.
Written Advice
The Taxpayer contends that a representative of the Department previously informed her that her income was exempt from Virginia income taxation pursuant to the Act. She states that, because her income was exempt pursuant to the Act, she was advised to file a return and pay Virginia income tax for 2008, and not to file a return or pay Virginia tax for subsequent years.
Pursuant to Virginia Code § 58.1-1835, the Department must abate any portion of any tax, interest, and penalty attributable to erroneous advice furnished to a taxpayer in writing by an employee of the Department acting in his official capacity when:
1. The written advice was reasonably relied upon by the taxpayer and was in response to a specific written request by the taxpayer;
2. The portion of the penalty or tax did not result from a failure by the taxpayer to provide adequate or accurate information; and
3. The facts of the case described in the written advice and the request therefore are the same, and the taxpayer’s business or personal operations have not changed since the advice was rendered.
The Taxpayer provided a copy of a “Live Chat” conversation she had with the Department’s representative in 2011. According to the transcript, the Department’s representative stated that after 2008, if her home of record is State A, the Taxpayer would not need to file a Virginia income tax return unless withholding was mistakenly taken out.
The Department’s “Live Chat” is considered a writing that can be relied on by taxpayers. See P.D. 16-160 (8/5/2016). Because the Taxpayer’s home of record is State A and has not changed since the Department’s advice was given, and the Taxpayer relied on that advice in not filing Virginia income tax returns and believing her income was not subject to Virginia income taxation, the Department is required to abate the assessment at issue pursuant to Virginia Code § 58.1-1835.
CONCLUSION
The Department was correct in concluding that the Taxpayer was a Virginia resident for the 2014 taxable year and issuing an assessment. Because the Taxpayer relied on the Department’s erroneous written advice, however, Virginia Code § 58.1-1835 requires that the Department abate the assessment. The Taxpayer should be aware that this determination serves as official notice that the information she received in response to her “Live Chat” inquiry is incorrect and can no longer be relied upon.
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/1970C