Did a military spouse who moved to Virginia solely to accompany an active-duty spouse remain domiciled in their shared prior state for 2009?

Subject

Military spouse retained the service member's non-Virginia domicile

Plain-English summary

Virginia abated the military spouse's 2009 income-tax assessment and issued the requested withholding refund. The taxpayer had moved to Virginia from State A to accompany an active-duty spouse under military orders.

Although the service member's military home of record remained State B, the evidence showed domicile in State A: repeated State of Legal Residence Certificates identified State A, the service member held a State A driver's license, and no meaningful connection to State B appeared beyond the Leave and Earnings Statement.

The taxpayer also had established domicile in State A and took no action showing an intent to become domiciled in Virginia beyond what was necessary to follow the service member. Because both spouses shared the same State A domicile, the military-spouse protection applied for the 2009 tax year.

What this means for you

• A military home of record is evidence, but it does not automatically decide current domicile.
• Virginia examines legal-residence forms, driver's licenses, voting, vehicle registration, and other conduct.
• The military-spouse rule applied only when the spouse and service member shared the same domicile and presence in Virginia resulted from military orders.
• Keep documentation showing continued ties to the claimed domicile and the absence of inconsistent Virginia actions.

Common questions

Did the service member's State B home of record control?

No. The broader evidence showed that the service member had established domicile in State A.

Did the spouse become a Virginia domiciliary merely by moving here?

No. The ruling found no Virginia conduct beyond accompanying the service member under orders.

What happened to the assessment?

It was abated, and the taxpayer's withholding refund was issued.

Citations and references

• Va. Code § 58.1-302.
• 50 U.S.C. § 571 et seq., as cited in the ruling.
• Virginia Tax Bulletins 09-10 and 10-1.
• United States v. Minnesota Department of Revenue, 97 F. Supp. 2d 973 (2000).

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 10-220

Original ruling text

September 16, 2010

Re: § 58.1-1821: Individual Income Tax

Dear *:

This will reply to your letter in which you appeal an assessment of individual income tax issued to * (the "Taxpayer") for the taxable year ended December 31, 2009.

FACTS

The Taxpayer moved to Virginia from * ("State A") in 2009 with her spouse, an active duty service member. The spouse joined the service from *** ("State B") and his home of record, for military pay purposes, remains in that state. The Taxpayer filed a Virginia Special Nonresident Claim for Individual Income Tax Withheld (Form 763-S) for the 2009 taxable year.

Under review, the Department disallowed the military spouse exemption claimed by the Taxpayer because the documentation provided showed the Taxpayer claimed to be domiciled in State A while the spouse's domicile was listed as State B. An assessment was issued based on the available information. The Taxpayer appeals the assessment, contending both she and her spouse were domiciliary residents of State A.

DETERMINATION

Residency of a Military Service Member

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. § 571 et seq. , provides that military and naval 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 a military service member so long as the member maintains sufficient connections with another state to indicate an 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.

In this case, the spouse reported his home of record to be State B on his Leave and Earnings Statement. While he was stationed in State A, however, the spouse began filing an annual State of Legal Residence Certificate declaring that he was a resident of State A. He has continued to file these certificates since he moved to Virginia. In addition, the spouse obtained a State A driver's license. Other than the Leave and Earnings Statement, there is no evidence that indicates the spouse maintained any other connection with State B.

The Department determines a taxpayer's intent through the information provided. The taxpayer has the burden of proving that he or she has abandoned his or her original domicile and obtained a new domicile. Based on the information provided, it appears that the spouse established domicile in State A.

Residency of Spouse of Military Service Member

The Act was amended, effective for 2009 taxable year and thereafter, 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 is the same for both the service member and spouse. See Tax Bulletin (VTB) 9-10 (11/12/2009) and VTB 10-1 (1/29/2010).

In VTB 10-1, 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 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 action in Virginia that is inconsistent with maintaining a domicile elsewhere.

In this case, the evidence indicates the Taxpayer established her domicile in State A while living there with her spouse. Further, the Taxpayer does not appear to have taken any steps that would indicate an intent to establish a domicile in Virginia, beyond those necessary to follow her service member spouse. Because both the Taxpayer and the spouse were domiciliary residents of State A, the 2009 income tax assessment will be abated and the Taxpayer's refund for tax withheld will be issued.

The Code of Virginia sections and tax bulletins cited are available on-line at www.tax.virginia.gov in the Tax Policy Library section of the Department's web site. If you have any questions about this determination, please contact * in the Office of Tax Policy, Appeals and Rulings, at ***.

Sincerely,

Linda D. Foster

Deputy Tax Commissioner

AR/1-4474853987.E