Tax Type
Individual Income Tax
Description
Residency
Topic
Taxpayers
Date Issued
06-21-1999
June 21, 1999
Re: Request for Ruling: Individual Income Tax
Dear****************
This will reply to your letter in which you request a ruling on whether your clients, ***** (the "Taxpayers') are required to file Virginia individual income tax returns. I apologize for the delay in responding to your letter.
FACTS
In 1980, the parents of the Taxpayer were stationed in Virginia on military orders where the Taxpayer lived and went to school. The Taxpayer states that he took his domiciliary residence to be Virginia, the domicile of his parents. While he was attending the Virginia college, his parents moved to Germany where they claimed to have become residents. They stayed in Germany until 1991 when they returned to the United States for medical reasons. In September 1984, the Taxpayer begin attending a Virginia college where instate tuition was paid. While attending this college, he worked on part-time jobs and filed Virginia income tax returns. He received a Reserve Officers' Training Corps (ROTC) scholarship. He committed to joining the Army Reserves for eight years after completion his ROTC program and graduating from college. After graduation in May 1987, he entered the military in July 1987 from Virginia, the home of record according to his military records. After finishing certain military training, he was discharged form the Army on November 1987.
Prior to being discharged from the military, he obtained civilian employment with the Department of the Army and was to be assigned to Germany. The initial employment contract was for three years with a two year extension thereafter. He states the employment contracts implied that, barring any unforseen adverse activity, employees could stay overseas for the length of their careers. In December 1987, he left for Germany where he intended to become a resident. He joined the American Army Reserves Forces in Germany where he remained active from August 1990 through January 1997.
After moving to Germany, the Taxpayer obtained German bank accounts, a driver's license, and car registration. In 1989, he married a German national and had three children, all of which were German citizens. He and his wife leased housing with the intent to purchase a house when financially feasible. On two occasions, the Taxpayer moved furniture from the United States to Germany. While in Germany, he did not pay German taxes because he fell under the jurisdiction of the Status of Forces Agreement. He was not registered to vote, did not own property, had no bank accounts, and had no drivers license in Virginia.
In 1990, the Taxpayer was called to active duty in Southwest Asia where he served in the Gulf War. After returning from the Gulf War, the Taxpayer moved to another city to avoid reduction in force layoffs imposed by the American Government. Later, they moved again to avoid the military drawdown in Europe. The United States military significantly reduced its troop strength, and the European Command implemented a plan limiting the length of employment contracts to five years. These actions, with the political and economic environment in Germany, forced the Taxpayer and his family to return to the United States after nine years of service in Germany.
Before returning to the United States, the Taxpayer registered in the Civil Service Placement Program in order to obtain employment when returning to the United States. He was willing to relocate in any state where he could find suitable employment. The Taxpayer indicated several states (including Virginia) where he was willing to relocate for employment. After receiving referrals for several positions, he accepted his first offer in Washington, D.C. He and his family moved back to Virginia in January 1997.
You indicate that this information demonstrates that the Taxpayer changed his domicile to Germany upon moving there. You are requesting a ruling to state that the Taxpayer was not a resident of Virginia while living in Germany and was not required to file Virginia income tax returns.
RULING
Two classes of residents, a domiciliary resident and an actual resident, are set forth in Code of Virginia § 58.1-302. The domiciliary residence of a person means that the permanent place of residence of a taxpayer is Virginia and the place to which he intends to return is Virginia even though he may actually reside elsewhere. An actual resident of Virginia is a person who, for an aggregate of more than 183 days of the taxable year, maintains a place of abode within Virginia.
As indicated by a number of Virginia court cases (e.g., Tallev v. Commonwealth 127 Va. 516, 103 S.E. 612 (1920); State-Planters Bank v. Commonwealth. 174 Va. 289, 6 S.E.2d 629 (1940); and Layton v. Pribble. 200 Va. 405, 105 S.E.2d 864 (1958)), 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. In determining the domicile, consideration must be given to a person's expressed intent, conduct, and all attending circumstances. An old domicile remains until a new domicile is established. The burden of proving that the domicile has been changed lies with the person alleging the change.
At issue in this case is whether the Taxpayer changed his domicile from Virginia to Germany when he moved overseas to work as a civilian employee with the Department of the Army. In the instant case, several factors seems to indicate a continued Virginia domicile. The Taxpayer lived with his parents in Virginia since 1980, and as a dependent, took on the domicile of his parents. He attended Virginia schools, including a Virginia college to which he paid instate tuition. When his parents moved to Germany during his attendance at the Virginia college, he continued to pay instate tuition as a domiciliary resident. After graduation, he enlisted in the military where his military records showed that his home of record was Virginia. He continued military training in Virginia until he was discharged from the military.
He accepted civilian employment with the Department of the Army and was assigned to Germany with a three year initial contract. Extensions of the employment contract continued to be granted. The Taxpayer states that this contract implied that, barring any unforseen adverse activity, employees could stay overseas for the length of their careers. An October 28, 1996, memorandum from the Department of the Army, however, was provided by the Taxpayer on the subject Overseas Tour Policy for Department of Defense (DOD) Civilian Employers. This memorandum stated, in pertinent part, that:
You referred to three letters written by the department, Public Document (P.D.) 83-61 (April 11, 1983), P.D. 85-192 (October 15, 1985), and P.D. 87-84 (February 27, 1987) that would substantiate your claim that the Taxpayer was not a domiciliary resident of Virginia during the time his stayed in Germany. In P.D. 83-61 (April 11, 1983), the taxpayer moved to Germany to work for an organization on a permanent basis. The permanent nature of this employment was verified by the employer. The establishment of his residence in Germany included moving his furniture there, obtaining permanent residency permits, and paying German taxes. In P.D. 85-192, the taxpayer moved from Virginia to Saudi Arabia where he was employed on an indefinite basis by a company. To establish residency in Saudi Arabia, he set up his residence, obtained drivers license, got married, raised a family, and paid taxes there. Lastly, P.D. 87-84 pertained to a federal civil service employee, who lived in several states and foreign countries. He moved from Panama to Virginia in order to facilitate his chances of being assigned by the federal government to Saudi Arabia. He was eventually selected for employment in Saudi Arabia, where he subsequently moved. In these three instances, the department held that the taxpayers permanently or indefinitely abandoned Virginia as their domiciliary residence and established domicile in the respective foreign countries where they resided.
Based on the information provided, it appears that the Taxpayer did not abandon Virginia as his domiciliary residence neither when he left for Germany nor at any time during his stay in Germany while working for the Department of the Army. Consequently, he would be required to file Virginia individual income tax returns for the taxable years 1987 through 1997. If you have further questions, please contact ***** at Office of Tax Policy, Virginia Department of Taxation, Post Office Box 1880, Richmond, Virginia 23218-1880 or at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/12493N
Re: Request for Ruling: Individual Income Tax
Dear****************
This will reply to your letter in which you request a ruling on whether your clients, ***** (the "Taxpayers') are required to file Virginia individual income tax returns. I apologize for the delay in responding to your letter.
FACTS
In 1980, the parents of the Taxpayer were stationed in Virginia on military orders where the Taxpayer lived and went to school. The Taxpayer states that he took his domiciliary residence to be Virginia, the domicile of his parents. While he was attending the Virginia college, his parents moved to Germany where they claimed to have become residents. They stayed in Germany until 1991 when they returned to the United States for medical reasons. In September 1984, the Taxpayer begin attending a Virginia college where instate tuition was paid. While attending this college, he worked on part-time jobs and filed Virginia income tax returns. He received a Reserve Officers' Training Corps (ROTC) scholarship. He committed to joining the Army Reserves for eight years after completion his ROTC program and graduating from college. After graduation in May 1987, he entered the military in July 1987 from Virginia, the home of record according to his military records. After finishing certain military training, he was discharged form the Army on November 1987.
Prior to being discharged from the military, he obtained civilian employment with the Department of the Army and was to be assigned to Germany. The initial employment contract was for three years with a two year extension thereafter. He states the employment contracts implied that, barring any unforseen adverse activity, employees could stay overseas for the length of their careers. In December 1987, he left for Germany where he intended to become a resident. He joined the American Army Reserves Forces in Germany where he remained active from August 1990 through January 1997.
After moving to Germany, the Taxpayer obtained German bank accounts, a driver's license, and car registration. In 1989, he married a German national and had three children, all of which were German citizens. He and his wife leased housing with the intent to purchase a house when financially feasible. On two occasions, the Taxpayer moved furniture from the United States to Germany. While in Germany, he did not pay German taxes because he fell under the jurisdiction of the Status of Forces Agreement. He was not registered to vote, did not own property, had no bank accounts, and had no drivers license in Virginia.
In 1990, the Taxpayer was called to active duty in Southwest Asia where he served in the Gulf War. After returning from the Gulf War, the Taxpayer moved to another city to avoid reduction in force layoffs imposed by the American Government. Later, they moved again to avoid the military drawdown in Europe. The United States military significantly reduced its troop strength, and the European Command implemented a plan limiting the length of employment contracts to five years. These actions, with the political and economic environment in Germany, forced the Taxpayer and his family to return to the United States after nine years of service in Germany.
Before returning to the United States, the Taxpayer registered in the Civil Service Placement Program in order to obtain employment when returning to the United States. He was willing to relocate in any state where he could find suitable employment. The Taxpayer indicated several states (including Virginia) where he was willing to relocate for employment. After receiving referrals for several positions, he accepted his first offer in Washington, D.C. He and his family moved back to Virginia in January 1997.
You indicate that this information demonstrates that the Taxpayer changed his domicile to Germany upon moving there. You are requesting a ruling to state that the Taxpayer was not a resident of Virginia while living in Germany and was not required to file Virginia income tax returns.
RULING
Two classes of residents, a domiciliary resident and an actual resident, are set forth in Code of Virginia § 58.1-302. The domiciliary residence of a person means that the permanent place of residence of a taxpayer is Virginia and the place to which he intends to return is Virginia even though he may actually reside elsewhere. An actual resident of Virginia is a person who, for an aggregate of more than 183 days of the taxable year, maintains a place of abode within Virginia.
As indicated by a number of Virginia court cases (e.g., Tallev v. Commonwealth 127 Va. 516, 103 S.E. 612 (1920); State-Planters Bank v. Commonwealth. 174 Va. 289, 6 S.E.2d 629 (1940); and Layton v. Pribble. 200 Va. 405, 105 S.E.2d 864 (1958)), 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. In determining the domicile, consideration must be given to a person's expressed intent, conduct, and all attending circumstances. An old domicile remains until a new domicile is established. The burden of proving that the domicile has been changed lies with the person alleging the change.
At issue in this case is whether the Taxpayer changed his domicile from Virginia to Germany when he moved overseas to work as a civilian employee with the Department of the Army. In the instant case, several factors seems to indicate a continued Virginia domicile. The Taxpayer lived with his parents in Virginia since 1980, and as a dependent, took on the domicile of his parents. He attended Virginia schools, including a Virginia college to which he paid instate tuition. When his parents moved to Germany during his attendance at the Virginia college, he continued to pay instate tuition as a domiciliary resident. After graduation, he enlisted in the military where his military records showed that his home of record was Virginia. He continued military training in Virginia until he was discharged from the military.
He accepted civilian employment with the Department of the Army and was assigned to Germany with a three year initial contract. Extensions of the employment contract continued to be granted. The Taxpayer states that this contract implied that, barring any unforseen adverse activity, employees could stay overseas for the length of their careers. An October 28, 1996, memorandum from the Department of the Army, however, was provided by the Taxpayer on the subject Overseas Tour Policy for Department of Defense (DOD) Civilian Employers. This memorandum stated, in pertinent part, that:
-
- Overseas tours normally are 3 years for DOD civilian employees. The tour may then be extended for 2 years, based on a mutual agreement between the employee and the commander. Tour extensions that result in a tour lasting longer than 5 years (that is, a 3-year tour and a 2-year extension) are generally restricted to 6 months or less for compassionate or personal reasons. Tours may be extended beyond 5 years for particularly urgent and unique organizational needs, but must be consistent with DOD criteria. Tour limitations do not apply to employees who are family members or to those who have been continuously employed overseas since before 1 April 1966.
During the protracted drawdown in the European theater, USAREUR (United States Army Europe) policy presumed that conditions existed which met DOD criteria for tour extensions beyond 5 years. Although USAREUR guidance authorizes specific high-level commanders to approve extensions beyond 5 years, commanders who exercise this authority must ensure that extensions decisions are consistent with DOD criteria. Commanders must also keep in mind that previous conditions sanctioning routine extensions beyond 5 years no longer exists.
With the civilian drawdown nearly over, commanders must again consider extension requests on an individual basis and ensure the extension decisions are consistent with DOD criteria and the policy of this memorandum. (Emphasis added.)
- Overseas tours normally are 3 years for DOD civilian employees. The tour may then be extended for 2 years, based on a mutual agreement between the employee and the commander. Tour extensions that result in a tour lasting longer than 5 years (that is, a 3-year tour and a 2-year extension) are generally restricted to 6 months or less for compassionate or personal reasons. Tours may be extended beyond 5 years for particularly urgent and unique organizational needs, but must be consistent with DOD criteria. Tour limitations do not apply to employees who are family members or to those who have been continuously employed overseas since before 1 April 1966.
You referred to three letters written by the department, Public Document (P.D.) 83-61 (April 11, 1983), P.D. 85-192 (October 15, 1985), and P.D. 87-84 (February 27, 1987) that would substantiate your claim that the Taxpayer was not a domiciliary resident of Virginia during the time his stayed in Germany. In P.D. 83-61 (April 11, 1983), the taxpayer moved to Germany to work for an organization on a permanent basis. The permanent nature of this employment was verified by the employer. The establishment of his residence in Germany included moving his furniture there, obtaining permanent residency permits, and paying German taxes. In P.D. 85-192, the taxpayer moved from Virginia to Saudi Arabia where he was employed on an indefinite basis by a company. To establish residency in Saudi Arabia, he set up his residence, obtained drivers license, got married, raised a family, and paid taxes there. Lastly, P.D. 87-84 pertained to a federal civil service employee, who lived in several states and foreign countries. He moved from Panama to Virginia in order to facilitate his chances of being assigned by the federal government to Saudi Arabia. He was eventually selected for employment in Saudi Arabia, where he subsequently moved. In these three instances, the department held that the taxpayers permanently or indefinitely abandoned Virginia as their domiciliary residence and established domicile in the respective foreign countries where they resided.
Based on the information provided, it appears that the Taxpayer did not abandon Virginia as his domiciliary residence neither when he left for Germany nor at any time during his stay in Germany while working for the Department of the Army. Consequently, he would be required to file Virginia individual income tax returns for the taxable years 1987 through 1997. If you have further questions, please contact ***** at Office of Tax Policy, Virginia Department of Taxation, Post Office Box 1880, Richmond, Virginia 23218-1880 or at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/12493N
Rulings of the Tax Commissioner