My husband is in the military and we were stationed overseas -- I thought the Servicemembers Civil Relief Act meant I couldn't be taxed by Virginia during that time, but the Department disagreed. Why?

Plain-English summary

The IRS flagged that a military couple may have owed Virginia income tax for 2016 and 2017. Neither had filed, and after gathering information (and ultimately removing the husband's income from the assessment based on facts he provided), the Department assessed the wife. She appealed, arguing she was domiciled in "State A" (not Virginia), had lived in "Country A" during 2016-2017 while her husband was on military orders there, and that the Servicemembers Civil Relief Act (SCRA) -- and its 2009 Military Spouses Residency Relief Act (MSRRA) amendment -- exempted her from Virginia tax.

The SCRA generally lets a servicemember avoid abandoning their legal domicile just by complying with military orders to live elsewhere. The MSRRA extended a version of that protection to spouses, but with a critical condition: a spouse can neither lose nor gain a domicile solely by being present somewhere to be with the servicemember under orders, ONLY IF the spouse's domicile is the SAME as the servicemember's. The Department's own guidance lists factors for evaluating a military spouse's domicile, including whether the spouse maintains contacts with the claimed domicile, and whether the spouse has taken actions inconsistent with maintaining domicile elsewhere.

Here, the facts didn't support the spouse's MSRRA theory at all -- because she'd never shared her husband's domicile in the first place. The husband's home of record was "State B." The wife and her husband had bought a home in State A back in 1994 (kept until sold in 2020), and she held a State A driver's license until 2010 and State A voter registration until 2012. But when the husband was reassigned to Virginia in 2010, the couple bought a Virginia home, registered vehicles in Virginia, and got Virginia driver's licenses that same year -- and she registered to vote in Virginia in 2012. These were her OWN independent choices, not merely incidental effects of following orders: obtaining a Virginia driver's license is a strong domicile indicator, and Virginia's own voting law treats holding a Virginia voter registration (with physical presence and abode) as very strong evidence of Virginia domicile, and a military spouse's voter registration specifically triggers a statutory presumption of domicile under Va. Code § 24.2-417.1. The Department concluded she'd affirmatively established her own Virginia domicile in 2010, replacing whatever State A domicile she'd previously shared with her husband.

When the husband was reassigned overseas in 2016, the wife moved to Country A with one child (another stayed in Virginia for college, receiving in-state tuition based on the father's Virginia duty station under a separate statute covering military dependents -- which the Department noted doesn't itself carry domicile implications). She surrendered her Virginia license and cancelled her vehicle registration at that point, but she kept her Virginia home (unoccupied through 2016, then rented from 2017) and continued working remotely for her Virginia-based employer throughout. In 2018 the family returned to Virginia, leased a new home (their other property was still occupied), and later bought another Virginia home, re-registering vehicles and driver's licenses. Given all of this, the Department found she'd never actually abandoned her 2010-established Virginia domicile during the Country A years -- her continued Virginia home, remote work for a Virginia employer, and prompt return to Virginia all showed she hadn't intended to give up Virginia as her permanent home. Because MSRRA only protects a spouse whose domicile matches the servicemember's, and here the spouse had her own independent Virginia domicile rather than a shared one, the statute simply didn't apply -- she was taxed as an ordinary Virginia domiciliary resident for 2016 and 2017.

What this means for you

Military spouses who independently established their own domicile in a state where they were stationed

The MSRRA only helps you avoid tax in a state where you're present SOLELY because of the servicemember's orders and where your domicile matches the servicemember's. If you took your own affirmative steps -- buying a home, getting a driver's license, registering to vote -- to make that state your own domicile (rather than merely following your spouse there), you don't get MSRRA protection there, and you'll need to actually abandon that domicile (not just relocate again under new orders) to stop owing tax there.

Military families who keep a home and remote employment in their prior duty-station state during a later overseas or out-of-state posting

Retaining your home (especially if you don't rent it out right away), continuing to work remotely for an employer in that state, and returning there promptly after the assignment ends are all strong evidence you never abandoned domicile there -- regardless of how the current posting itself came about.

Military families with children receiving in-state tuition tied to a parent's Virginia duty station

In-state tuition eligibility for military dependents under Va. Code § 23.1-505 (available once a servicemember is assigned to a Virginia-area duty station and can continue even after a later reassignment elsewhere, as long as enrollment is continuous) doesn't itself prove -- or require -- domicile in the ordinary sense; the Department treats it as a distinct statutory benefit, not necessarily evidence pointing either way on a parent's separate domicile question.

Common questions

Q: Does the Military Spouses Residency Relief Act protect me from tax in every state where I live because of my spouse's orders?
A: No -- only in a state where you're present SOLELY to be with the servicemember under orders, and only if your domicile is the SAME as the servicemember's. If you've independently established your own domicile in a state (through your own choices, not just following orders), MSRRA doesn't protect you there.

Q: I got a driver's license and registered to vote in the state where my spouse was stationed -- does that matter for MSRRA purposes?
A: Yes, significantly. Those are treated as strong, affirmative evidence that you established your OWN domicile there (rather than merely being present incidental to the servicemember's orders), which can defeat an MSRRA claim in a later dispute.

Q: If I move overseas with my servicemember spouse but keep a house and remote job back in the state where we were previously stationed, have I abandoned domicile there?
A: Not necessarily -- keeping the home (especially unrented at first), continuing remote employment there, and returning there after the overseas assignment are all evidence you didn't intend to abandon that domicile, even though you were physically living elsewhere.

Citations and references

• Va. Code § 58.1-302 (domiciliary resident and actual resident defined)
• 50 U.S.C. § 3901 et seq. (Servicemembers Civil Relief Act; servicemembers don't abandon domicile solely by complying with military orders)
• 50 U.S.C. § 4001(a)(2) (Military Spouses Residency Relief Act: a spouse can't lose or gain domicile solely by being present to follow the servicemember's orders, IF the spouse's domicile is the same as the servicemember's)
• Virginia Tax Bulletin 10-1 (1/29/2010) (factors for evaluating a military spouse's domicile claim)
• Va. Code § 46.2-323.1 (driver's license applicants must certify Virginia residency; obtaining/renewing one is a strong domicile indicator)
• Va. Const. art. II, § 1; Va. Code § 24.2-101 (Virginia voter eligibility requires both domicile and place of abode)
• Va. Code § 24.2-417.1 (a military spouse's Virginia voter registration creates a presumption of established domicile, rebuttable only by an express statement otherwise)
• Cooper's Adm'r v. Commonwealth, 121 Va. 338, 93 S.E. 680 (1917) (voter registration and voting is very strong evidence of domicile)
• Va. Code § 23.1-505 (in-state tuition for military dependents tied to the servicemember's Virginia-area duty station, continuing through later reassignment if enrollment is continuous)
• P.D. 00-151 (8/18/2000) and P.D. 02-149 (12/9/2002) (Virginia driver's license retention/renewal as a domicile factor)
• P.D. 10-34 (4/8/2010) (typical pattern of a military spouse establishing a new domicile at a new duty station)
• P.D. 15-186 (9/28/2015) and P.D. 17-126 (6/29/2017) (activities incidental to following military orders vs. an affirmative choice to make the current state a domicile)
• P.D. 10-180 (8/16/2010), P.D. 11-90 (6/2/2011), and P.D. 13-115 (6/26/2013) (a domicile change is a process; no single factor is dispositive)
• United States v. Minnesota, 97 F. Supp. 2d 973 (2000) (a simple declaration is not sufficient to establish domicile)
• Va. Code § 58.1-111 (assessment based on best information available)

Subject

Residency: Domicile - Military Spouse

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 22-106

Original ruling text

June 1, 2022

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 assessments issued to * (the “Taxpayer”) for the taxable years ended December 31, 2016, and 2017. I apologize for the delay in responding.

FACTS

The Department received information from the Internal Revenue Service (IRS) indicating that the Taxpayer and her husband may have been required to file a Virginia income tax return for the 2016 and 2017 taxable years. A review of the Department’s records showed that neither the Taxpayer nor her husband had filed a return. The Department requested additional information in order to determine if their income was taxable in Virginia. When a response was not received, the Department issued assessments. The Taxpayer subsequently provided information disputing the taxability of their incomes in Virginia. Based on the information received, the Department adjusted the assessments to remove the husband’s income. The Taxpayer appeals, contending she was a domiciliary resident of * (State A) who lived in *** (“Country A”) during 2016 and 2017 while her husband was on military orders and they were exempt from Virginia income taxation pursuant to the Servicemembers Civil Relief Act (the “Act”).

DETERMINATION

Two classes of residents, a domiciliary resident and an actual resident, are set forth in Virginia 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 reside elsewhere. For a person to change domiciliary residency to another state or country, 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 Act, codified at 50 U.S.C. § 3901 et. seq., provides that military 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 was amended, effective for the 2009 taxable year and thereafter, to address the residency of military spouses. Specifically, 50 U.S.C. § 4001(a)(2) was enacted 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, as the case may be, is the same for the service member and the spouse.”

Similarly, 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 the 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 actions in Virginia that are inconsistent with maintaining a domicile elsewhere.

In determining domicile, the Department will generally consider the individual’s expressed intent, conduct, and all attendant circumstances including but not limited to, financial independence, profession or employment, income sources, residence of spouse, marital status, situs of real and tangible property, motor vehicle registration and licensing, and such other factors as may be reasonably deemed necessary to determine the person’s domicile. A person’s true intent must be determined with reference to all the facts and circumstances of the particular case. A simple declaration is not sufficient to establish domicile. See United States v. Minnesota , 97 F.Supp. 2d 973 (2000).

The Department has typically found that when a spouse moves to follow military personnel to a new duty station, they will generally abandon their former real property and move the family. See Public Document (P.D.) 10-34 (4/8/2010). 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, and educational 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.

In P.D. 15-186 (9/28/2015), the Department suggested, given the language of the Act, that certain activities conducted by a military spouse, such as the spouse’s profession or employment, income sources, permanent place of abode, enrolling children in local schools, and situs of real and tangible property, may no longer be considered to be activities associated with establishing domicile in a state. While such activities may normally be considered to be incidental to a spouse’s presence in the state as a result of the service member’s military orders, they will be considered when there appears to be an affirmative choice to make their current state of residence their domicile. See P.D. 17-126 (6/29/2017).

In addition, the Department has repeatedly stated that a change of domicile occurs as part of a process in which no single factor is dispositive. See, e.g., P.D. 10-180 (8/16/2010), P.D. 11-90 (6/2/2011), and P.D. 13-115 (6/26/2013). Therefore, more weight may be assigned to such factors to the extent any continued after the service person retired or was reassigned elsewhere from a Virginia duty station. The Department would consider the fact that any such connections continued to be evidence that a taxpayer initially intended to establish a Virginia domicile.

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 husband was a military service member whose home of record was * (State B). The Taxpayer and her spouse purchased a residence in State A in 1994 which they maintained until it was sold in 2020. She kept a State A driver’s license until December 2010 and her State A voter’s registration until 2012.

The husband was stationed in Virginia beginning in 2010, and the Taxpayer and her husband purchased a residence in the Commonwealth that same year. They also registered vehicles in Virginia and obtained Virginia driver’s licenses in 2010. In addition, the Taxpayer registered to vote in Virginia in 2012.

Virginia Code § 46.2-323.1 states, “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 (12/9/2002).

With regard to eligibility to vote, Article II, Section 1 of the Constitution of Virginia states in relevant part as follows:

In elections by the people, the qualifications of voters shall be as follows: Each voter shall be a citizen of the United States, shall be eighteen years of age, shall fulfill the residency requirements set forth in this section, and shall be registered to vote pursuant to this article.

The residence requirements shall be that each voter shall be a resident of the Commonwealth and of the precinct where he votes. Residence, for all purposes of qualification to vote, requires both domicile and place of abode.

The domicile and place of abode requirement found in the Constitution of Virginia is also reflected in the definition of “residence” or “resident” used in Virginia election statutes. See Virginia Code § 24.2-101. In addition, should a military spouse choose to register to vote in Virginia, Virginia law provides a presumption that such spouse established domicile if he has a physical presence and place of abode in Virginia. See Virginia Code § 24.2-417.1. The presumption can be overcome if the spouse expressly states otherwise. See id . This provision, however, provides no exception to the domicile requirement for military spouses. The fact remains that the spouse must be both domiciled in and have a place of abode in Virginia to be eligible to vote. Consistent with the precedent established by Cooper’s Adm’r v. Commonwealth , 121 Va. 338, 93 S.E. 680 (1917), the Department will consider the fact that a military service member or spouse obtained a Virginia voter’s registration and voted in elections in Virginia to be very strong evidence that that individual considered Virginia to be his domicile during the time he held and used such registrations. In addition, consistent with the principles of domicile law, Virginia Code § 24.2-417.1 provides that once residence is changed, the military spouse may not revert to any previous residence without re-establishing new physical presence and intent to remain or return.

In May 2016, the Taxpayer began to reside in Country A after a permanent change of duty station for her husband. One child went with the Taxpayer, while another child remained in Virginia to attend a public university, receiving in-state tuition rates. The Taxpayer surrendered her Virginia driver’s license and cancelled the vehicle registrations in May 2016. The Taxpayer, however, retained her Virginia residence which remained unoccupied through the 2016 taxable year, but was rented beginning in 2017. The Taxpayer continued to work remotely for her Virginia based employer throughout the time her husband was stationed in Country A. The Taxpayers returned to Virginia in 2018. They leased a new residence at that time because their other Virginia residence was still occupied. They later purchased another residence in Virginia and also registered their vehicles and obtained driver’s licenses in Virginia again.

The Taxpayer indicates that her son was able to attend a public Virginia university using in-state tuition pursuant to her husband’s status as a military servicemember. Previously, the Department has found that representations of residency made to Virginia universities to obtain in-state tuition rates constitute strong evidence of domiciliary intent. See, e.g., P.D. 02-149 (12/9/2002). Dependents of military servicemembers, however, are deemed domiciled in Virginia and are eligible for in-state tuition rates if the servicemember is assigned to a duty station in Virginia, the District of Columbia or a contiguous state and also resides in Virginia. Further, such dependents can continue to receive in-state rates even if the servicemember later is assigned to a duty station outside Virginia as long as the enrollment is continuous. See Virginia Code § 23.1-505.

Because such dependents are considered Virginia residents for purposes of in-state tuition rates solely because the servicemember parent resides in Virginia pursuant to military orders, the usual domicile implications as to the receipt of in-state tuition rates may not apply in such cases. In this case, it appears the Taxpayer had a child who was receiving in-state tuition rates at a public Virginia university. It appears, however, that the child was able to do so because the father had been assigned to a Virginia duty station. In addition, the fact that the father was transferred to a duty station in Country A would have had no impact on the applicable tuition rates as long as the child’s enrollment at the institution was continuous.

As stated above, a change of domicile requires both the abandonment of the previous domicile with no intention to return, plus the establishment of the new domicile with physical presence and the intention to remain permanently or indefinitely. The Taxpayer admits that she did not share the same domicile as her husband and clearly took sufficient steps to establish a Virginia domicile following her relocation from State A in 2010. Although the Taxpayer and her husband owned property in State A, this property was eventually sold in 2020 and it appears the Taxpayer retained few, if any, other connections to State A during the period at issue. The evidence indicates, therefore, that the Taxpayer intended to abandon any prior State A domicile. To reestablish such domicile would require the Taxpayer to be physically present there again with the intent to remain permanently or indefinitely.

The facts also indicate that the Taxpayer did not abandon her Virginia domicile in 2016 and 2017 when her husband was stationed in Country A. Even if the Taxpayer could show that she intended to establish domicile in Country A, which would be highly unusual for the spouse of a military service member serving overseas, her continued connections with Virginia and subsequent return to Virginia in 2018 indicate that she did not intend to abandon her Virginia domicile. In the Department’s opinion, the Taxpayer has not satisfied her burden of proving that a change of domicile to Country A occurred. Therefore, she remained a domiciliary resident of Virginia during the 2016 and 2017 taxable years. Accordingly, the assessments are upheld.

The assessments at issue were based on the best information available to the Department pursuant to Virginia Code § 58.1-111. The Taxpayer, however, may have information that better represents her Virginia income tax liability for the taxable years at issue. Therefore, the Taxpayer is requested to file 2016 and 2017 Virginia resident income tax returns. The returns should be submitted within 30 days from the date of this letter to: Virginia Department of Taxation, Office of Tax Policy, Appeals and Rulings, P.O. Box 27203, Richmond, Virginia 23161-7203, Attention: *. The returns will be reviewed and processed, and the assessments will be adjusted as warranted. If the returns are not received within the allotted time, the assessments will be presumed to be correct and collection action may resume.

The Code of Virginia sections and public documents cited are available on-line at www.tax.virginia.gov in the Laws, Rules & Decisions section of the Department’s website. 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/3805.B

Related Documents

00-151

02-149

10-34

15-186

17-126

10-1

10-180

11-90

13-115