Did a military spouse remain a Virginia domiciliary in 2009 after selling her Virginia home and moving abroad with the service member's orders?

Subject

Military spouse abandoned Virginia domicile while abroad

Plain-English summary

Virginia found that the military spouse abandoned Virginia domicile when she moved abroad with the service member in 2007, so she was not a Virginia resident in 2009. The assessment was abated.

She had established Virginia domicile after moving there in 2004 through a home, employment, tax filings, voter registration, vehicles, and a driver's license. When military orders sent the couple abroad, she sold the home and vehicles, established a permanent abode at the foreign duty station, used that address on her federal return, and let the Virginia license expire.

The military-spouse provision protected a spouse whose domicile matched the service member's and whose presence followed military orders, but Virginia still analyzed the actual domicile facts. The evidence showed she did not know she would return to Virginia and had taken sufficient steps to abandon it.

What this means for you

• Military orders do not eliminate the need to document the spouse's domicile and intent.
• Selling the home and vehicles, moving the household, changing tax addresses, and allowing a license to expire supported abandonment here.
• Earlier Virginia voting and licensing established the starting domicile but did not make it permanent forever.

Citations and references

• 50 U.S.C. § 571 et seq.; Va. Code §§ 24.2-101 and 46.2-323.1.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 14-162

Original ruling text

September 3, 2014

Re: § 58.1-1821 Application: Individual Income Tax

Dear *:

This will reply 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, 2009. I apologize for the delay in responding to your appeal.

FACTS

The Taxpayer, the wife of a military service member, moved to Virginia in 2004. In October 2007, the Taxpayer accompanied the service member to his duty station in * (Country A). In February 2010, the service member was reassigned to a duty station in Virginia and the Taxpayer returned to Virginia with him.

The Department received information from the Internal Revenue Service (IRS), that the Taxpayer may have income subject to Virginia income tax for the 2009 taxable year. The Department requested additional information from the Taxpayer. When no response was received, the Department issued an assessment for additional tax and interest. The Taxpayer appeals the assessment, contending she was not a resident of Virginia during the year at issue and requests abatement of the assessment.

DETERMINATION

The Service Members Civil Relief Act (the "Act"), codified at U.S.C. § 571 et seq. , was amended effective for the 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 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 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. Where the spouse has taken any actions in Virginia that is inconsistent with maintaining a domicile elsewhere.

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 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.

When a spouse moves to follow military personnel to a new duty station, they will generally abandon their former personal property and move the family. 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, voting 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.

Under these circumstances, it seems reasonable to conclude that a military spouse will establish domicile in Virginia when following military personnel to Virginia, and abandon Virginia domicile when following them to the next duty station. To do otherwise would require the Department to investigate whether a military spouse had established domicile and abandoned domicile at every duty station prior to coming into Virginia. Further, when a military spouse is determined to have changed their domicile to Virginia prior to 2009, they will continue to be considered to be Virginia domiciliary residents until he or she takes sufficient actions to abandon their Virginia domicile and establish their domicile elsewhere. (See Public Document (P.D.) 10-32 (4/08/2010) .

When the Taxpayer moved to Virginia in 2004, she performed numerous actions indicating intent to establish domicile. While the Taxpayer continued to own a house in her former state of residence, she divested herself of all other connections to that state. The Taxpayer established a place of abode in Virginia, registered motor vehicles, obtained employment with a Virginia business, had Virginia taxes withheld from her pay, filed Virginia income taxes, registered to vote in Virginia and obtained a Virginia driver's license.

Under Va. Code § 24.2-101 an individual must be a resident of the precinct in which they offer to vote. This statute requires a resident to have both legal domicile and a place of abode in Virginia. For Virginia voting purposes, domicile is determined by the intention of the individual, supported by an individual's factual circumstances. See State Board of Elections (SBE) Policy 2009-005. Thus, when the Taxpayer registered to vote in Virginia, she was declaring Virginia as her domiciliary state.

In addition, Va. Code § 46.2-323.1 state "No driver's license...shall be issued to any person who is not a Virginia resident." In fact, this section states that every person applying for a driver's license must execute and furnish to the Commissioner of the Department of Motor Vehicles (DMV) a statement that certifies that the applicant is a Virginia resident. The Department has found that an individual may successfully establish a domicile outside Virginia even if he retains a Virginia driver's license. See P.D. 00-151 (8/18/2000). However, obtaining or renewing a Virginia driver's license is considered to be a strong indicator of intent to retain domiciliary residency in Virginia. See P.D. 02-149 (12/09/2002).

In October 2007, the service member received orders to relocate to Country A. The Taxpayer accompanied the service member to his new duty station. She sold her residence and motor vehicles and moved to Country A. In addition, she allowed her Virginia driver's license to expire in 2009. While the Taxpayer did not provide much information about her stay in Country A, she did establish a permanent place of abode and lived with her spouse while he served in the armed forces. The Taxpayer also filed her federal income tax return using the Country A address.

Though the Taxpayer maintained some connections with Virginia, she did not renew her driver's license. Finally, the Taxpayer provided a copy of the service member's orders, which state the service member would be stationed in Virginia as of June 2010. The Taxpayer attests that she returned to Virginia in April 2010.

The evidence provided indicates that the Taxpayer did not know she would be returning to Virginia at the conclusion of the service member's tour in Country A. This is evidenced by the sale of her home and motor vehicle and by not renewing her Virginia driver's license after it expired. After consideration of all of the facts and circumstances of this particular case, I find that the evidence shows that the Taxpayer intended to abandon Virginia as her domicile when she relocated to Country A with the service member in 2007. As such, the Department's assessment for the 2009 taxable year will be abated.

The Code of Virginia sections, regulations, and tax bulletin cited are available on­line 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/1-5223854901.D