Did a military spouse prove that she retained another state's domicile and qualified for relief from Virginia income tax for 2011?

Subject

Military spouse did not prove continued out-of-state domicile

Plain-English summary

Virginia upheld the taxpayer's 2011 individual-income assessment because she did not prove that she retained the same out-of-state domicile as her military spouse. The Servicemembers Civil Relief Act did not allow her simply to elect her spouse's domicile.

The ruling required evidence that the spouse had lived in the claimed state with an intent to make a permanent home there and had not abandoned that domicile. Relevant contacts included driver's licensing, voting, vehicle registration, and other state benefits or obligations.

The taxpayer may have retained a State A voter registration, but she did not vote there. She lived and worked in Virginia, registered her vehicle in Virginia, and obtained a Virginia driver's license. The Commissioner treated the license as inconsistent with an out-of-state domicile because Va. Code § 46.2-306 exempted a qualifying nonresident service member's spouse from Virginia licensing if properly licensed in the home state or country.

Those facts supported Virginia domicile, so the military-spouse protection did not remove the 2011 Virginia tax liability. The assessment was upheld, with a revised bill and a 30-day payment window stated in the ruling.

What this means for you

• A military spouse's domicile requires a separate facts-and-circumstances analysis.
• The spouse cannot claim the service member's domicile without having established and maintained it personally.
• Voting, driver's licensing, vehicle registration, and other state contacts can be important evidence.
• Actions taken in Virginia may undermine a claim that another state remained the permanent home.

Common questions

Q: Was marriage to a nonresident service member enough?

A: No. The ruling required the taxpayer and service member to share the same domicile, supported by the taxpayer's own facts and contacts.

Q: Did voter registration alone establish State A domicile?

A: No. The ruling noted that she may have retained registration but did not vote there, while her Virginia contacts pointed the other way.

Q: Why did the Virginia driver's license matter?

A: The ruling said a qualifying nonresident military spouse was exempt from obtaining one, so choosing to obtain it was inconsistent with maintaining domicile elsewhere.

Citations and references

• 50 U.S.C. § 571 et seq., as cited in the ruling.
• Va. Code § 46.2-306.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 15-28

Original ruling text

February 24, 2015

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, 2011.

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 2011 taxable year. The Department requested information to verify whether the Taxpayer was subject to Virginia income tax. Based on the information provided, the Department determined that the Taxpayer was taxable as a Virginia resident and issued an assessment. The Taxpayer appealed, contending she qualified for relief from Virginia's income tax as the spouse of a military service member.

DETERMINATION

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 station them in a different state or country whether permanently or temporarily. The Act did not apply to the spouses of military and naval personnel before 2009. The Department has ruled that the residency status of a taxpayer requires analysis separate from their military spouse. See Public Document (P.D.) 05-92 (6/9/2005) and P.D. 05-150 (9/8/2005).

The Act 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. See Virginia 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 spouse cannot simply elect to claim the service member's domicile. In order to claim a domicile in another state, the spouse must have (i) resided in the other state with the intent to make a permanent home there, and (ii) not abandoned that domicile when moving to reside with the service member or for any other reason. The determination of a military spouse's domicile requires analysis of the facts and circumstances. The elements that may be examined include:

Whether the person claiming exemption is married to a service member who is present in Virginia pursuant to military orders.

The service member's domicile.

The spouse's domicile and the circumstances in which it was established.

The extent to which the spouse has maintained contacts with the domicile.

Whether the spouse has taken any action 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 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 has failed to provide sufficient evidence to support her claim of maintaining domicile in * (State A). Although she may have retained a State A voter's registration, the Taxpayer did not vote in State A elections.

In addition to residing and working in Virginia, the Taxpayer registered her vehicle in Virginia. She also obtained a Virginia driver's license. The Taxpayer asserts that she obtained a Virginia driver's license after being instructed to do so by a law enforcement officer. Virginia Code § 46.2-306, however, provides exemptions for nonresident armed service personnel, their spouses and dependent children from Virginia's licensing requirements if they are licensed in their home state or country. Because the spouse of a nonresident service member is not required to obtain a Virginia driver's license, such an action is inconsistent with maintaining domicile elsewhere.

Based on the evidence provided, I find that the Taxpayer has failed to substantiate her claim that she retained her domicile in State A. The evidence indicates the Taxpayer took sufficient actions to establish domicile in Virginia. Therefore, the Taxpayer does not qualify for relief under the Act, and the assessment for 2011 is upheld. A revised bill, with interest accrued to date, will be mailed shortly to the Taxpayer. No additional interest will accrue provided the outstanding assessment is paid within 30 days from the date of the revised bill.

The Code of Virginia sections, public documents, and tax bulletins 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/1-5810123393.M