May 9, 2019
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 ended December 31, 2014. I apologize for the delay in responding to your appeal.
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 Servicemember’s Civil Relief Act (the “Act”).
DETERMINATION
Servicemember’s Civil Relief Act
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) (Minnesota).
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 contends that she and her military service member spouse shared a State A domicile during the taxable year at issue, and therefore, she was exempt from Virginia income taxation under the Act even though she was living and working in Virginia. In July 2004, the Taxpayer married a military service member who was a resident of State A. She explains that she lived in State A for approximately 30 days, from October 2004 to November 2004. While there, she obtained a State A driver’s license, registered her vehicle, and obtained a State A voter’s registration.
The information provided, however, shows that the Taxpayer and her spouse knew as early as August 2004 that they were going to relocate to ***** (Country A) in November 2004. The Taxpayer further stated that she never owned or leased a personal residence in State A, and never physically resided in State A other than the 30 days in October and November 2004. As such, it appears that the Taxpayer’s stay in State A was merely temporary before she left for Country A.
A change of domicile requires physical presence together with evidence that the individual concurrently intended to remain permanently or indefinitely in that jurisdiction at that particular time. See P.D. 17-97 (6/12/2017). Although the Taxpayer may have visited State A in 2004, her actions fail to show that she intended to remain there permanently or indefinitely at that time. Further, the Taxpayer could not have changed her domicile to State A at any other time because she never physically resided there. As such, it does not appear the Taxpayer has ever met the requirement of being physically present in State A at the same time she intended to remain there permanently or indefinitely. On the contrary, the evidence shows that she went to State A with the intent of moving on from there to Country A. Accordingly, the Taxpayer did not establish domicile in State A. Because the Taxpayer and her spouse did not have the same domicile, she was not exempt from Virginia income taxation pursuant to the Act for the 2014 taxable year.
Recent Amendments to the Act
On December 31, 2018, Congress enacted the Veterans Benefits and Transition Act of 2018. This federal legislation amends the Act, allowing the spouse of a service member to elect the same residence as the service member for state tax purposes, even if the spouse has a different residency or domicile from that of the service member. This election can be made annually beginning with taxable year 2018 for any taxable year of the marriage, regardless of the date on which the marriage of the spouse and the service member occurred. This election does not affect taxes imposed or paid for 2017 or earlier. See Virginia Tax Bulletin (VTB) 19-2 (2/25/2019).
CONCLUSION
After carefully considering the information and evidence provided, I find that the Taxpayer was taxable as an actual resident of Virginia for the 2014 taxable year. The assessment at issue was made based on the best information available to the Department pursuant to Virginia Code § 58.1-111. Because the Taxpayer was required to file a Virginia income tax return, the Department was correct in issuing the assessment. The Taxpayer, however, may have information that better represents her Virginia income tax liability for the taxable year at issue. Therefore, she should file a 2014 Virginia resident income tax return to more accurately reflect her Virginia tax liability.
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 adjusted based on the information available.
The Code of Virginia sections, public documents, and tax bulletin 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/1786.C