Could a military spouse claim the servicemember's State A domicile when her own records showed State B domicile?

Plain-English summary

Virginia denied the military spouse's 2010 withholding refund because she did not share the servicemember's claimed State A domicile. Before marrying, she had sold her State A home, bought and claimed a homestead exemption on a State B home, registered vehicles there, and identified State B residence on federal and Virginia returns.

The Servicemembers Civil Relief Act protected a spouse present with a servicemember under orders only when both shared the same domicile. It did not let the spouse elect State A despite her own State B evidence.

Because she lived and earned income in Virginia, Virginia required a 2010 resident return. It also invited a 2009 resident return to replace the best-information assessment; otherwise that assessment would stand and a 2010 assessment could follow.

Common questions

Q: Can marriage alone give a spouse the servicemember's domicile?
A: No. Virginia examined the spouse's independent domicile evidence.

Q: Was the 2009 amount final without another return?
A: It would be upheld if the taxpayer did not file a return with more accurate information.

Citations and references

• 50 U.S.C. § 571 et seq. (Servicemembers Civil Relief Act, as cited in the ruling).
• Va. Code § 58.1-341.
• Virginia Tax Bulletin 10-1.

Subject

Servicemembers Civil Relief Act

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 12-11

Original ruling text

February 27, 2012

Re: § 58.1-1821 Application: Individual Income Tax

Dear *:

This will reply to your letter in which you seek correction of an assessment and a refund of the Virginia individual income tax withheld for you, * (the "Taxpayer") for the taxable year ended December 31, 2010.

FACTS

The Taxpayer was a resident of * (State A). In 2005, she sold her home in State A and purchased a home in *** (State B). She obtained a State B driver's license and registered her motor vehicle in State B. In 2006, the Taxpayer obtained a professional license and became employed in Virginia, continued to live in State B, and filed nonresident returns with Virginia.

In 2008, the Taxpayer moved to Virginia and filed a Virginia resident return. In 2009, the Taxpayer married a member of the United States military and filed a part year Virginia income tax return. The Taxpayer filed a 2010 nonresident claim for withholding tax, attesting that she and the service member were domiciliary residents of State A. The Department issued an assessment for the 2009 taxable year, considering the Taxpayer as a full year resident of Virginia. The Department also denied the 2010 claim for refund on the basis that the Taxpayer failed to provide sufficient evidence that she maintained domiciliary connections with State B.

DETERMINATION

The Servicemembers Civil Relief Act (the "Act"), codified at 50 U.S.C. § 571 et seq. , 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. The Act does not apply to the spouses of military and naval personnel who have established domiciliary status within Virginia.

In 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 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.

The Department acknowledges that a change in domicile occurs as part of a process in which no single factor is dispositive. In this case, the evidence indicates that the Taxpayer took steps to establish domicile in State B when she purchased a State B residence in June 2005, claimed the homestead exemption on the residence, maintained vehicle registrations in State B and declared a State B residence when filing federal and Virginia income tax returns for taxable years 2005 through 2007. Each of these steps was completed prior to marrying the service member in 2009.

The Taxpayer has failed to provide sufficient evidence to support her claim of maintaining her domicile in State A. Absent of such evidence, the Department must conclude from the facts presented that the Taxpayer established domicile in State B. As such, she did not share the same domicile as the military spouse and does not qualify for the protection of the Act. Accordingly, the Taxpayer's refund request for the 2010 nonresident withholding is denied.

Because the Taxpayer resided and earned income within Virginia during the 2010 taxable year, the Taxpayer is required to file a 2010 Virginia resident return under Va. Code § 58.1-341. In addition, the 2009 assessment was based on the best information available to the Department. If the Taxpayer has additional information that more accurately reflects her taxable income, she should file a Virginia resident income tax return for the 2009 taxable year.

Please send the requested returns to: Virginia Department of Taxation, Office of Tax Policy, Appeals and Rulings, P.O. Box 27203, Richmond, Virginia 23261-7203, Attention: *. Once the returns are received, they will be processed. The 2009 assessment will be adjusted accordingly and the appropriate 2010 liability will be determined. If the returns are not filed, the 2009 assessment will be upheld and an assessment for the 2010 taxable year may be issued based on the information available.

The Code of Virginia section and tax bulletin cited are available on-line at www.tax.virginia.gov in the Tax Policy Library section of the Department's website. If you have any questions about this determination, you may contact * at ***.

Sincerely,

Craig M. Burns

Tax Commissioner

AR/1-4841840733.D