Was a military spouse still a Virginia resident in 2006 and 2007 after moving abroad with her husband and later moving to another state?

Subject

Military spouse was not a Virginia resident in 2006 or 2007

Plain-English summary

Virginia found that the military spouse abandoned her Commonwealth domicile and was neither a domiciliary nor an actual resident during 2006 or 2007. She moved abroad in 2004 when her active-duty husband received a new assignment.

She ended her Virginia employment, sold her vehicle, moved all tangible property abroad, and sold the Virginia home in 2005. Abroad, she obtained a local driver's license and a permanent place to live. She spent no days in Virginia during the two tax years and followed her husband to another state in 2007 rather than returning to Virginia.

She did retain Virginia voter registration and an unrenewed Virginia driver's license, and she filed Virginia resident returns for both years. The Department treated those as evidence of continuing ties but found the complete move and lack of any plan or assurance of returning more persuasive.

Because she was not a Virginia resident, the Department abated the assessment and ordered refunds of all Virginia income tax paid for 2006 and 2007, with applicable interest.

What this means for you

• Domicile turns on the whole pattern of conduct and intent, not one document or declaration.
• Selling a home and vehicle, moving possessions, obtaining housing and licensing elsewhere, and spending no days in Virginia supported abandonment here.
• Keeping an old Virginia license or voter registration does not always control, but it remains evidence the Department will consider.
• The ruling applied preexisting law to 2006 and 2007; later military-spouse protections may affect newer years.

Common questions

Did filing Virginia resident returns prevent relief?

No. The filings were evidence of a Virginia tie, but the Department found the other facts established a new domicile abroad.

Was the taxpayer an actual resident?

No. She spent no days in Virginia during either year, well below the more-than-183-day rule discussed in the ruling.

What happened to the assessment and tax already paid?

The assessment was abated, and the ruling directed refunds for 2006 and 2007 with applicable interest.

Citations and references

• Va. Code §§ 58.1-302 and 46.2-323.1.
• 50 U.S.C. § 574, as cited in the ruling.
• Virginia Public Documents 86-219, 96-207, 02-33, 96-293, 05-92, 05-150, 02-149, and 00-151.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 10-32

Original ruling text

April 8, 2010

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, 2006 and 2007. I apologize for the delay in responding to your letter.

FACTS

In November 2004, the Taxpayer moved to follow her husband, a domiciliary resident of another state on active duty in the military who was transferred to a duty station in * (Country A). At the time of the move, she sold a vehicle located in Virginia and moved all of her tangible property to her residence in Country A. Shortly after arriving in Country A, she acquired a vehicle and a Country A driver's license. The Virginia residence sold in March 2005. In May 2007, the Taxpayer moved to *** (State B).

Although she did not file a Virginia individual income tax return in 2005, the Taxpayer filed resident Virginia income tax returns using the married filing separate return status for the taxable years ended December 31, 2006 and 2007. For 2006, the Department disallowed a subtraction claimed on the return for a federal or state employee earning less than $15,000, because the total reported salary exceeded $15,000. This action resulted in a reduced refund. Further, an addition to tax for the underpayment of estimated tax, commonly known as the estimated underpayment penalty, was assessed for the 2007 taxable year because the Taxpayer had no Virginia tax withheld from her wages and did not make estimated payments.

The Taxpayer contests the 2007 assessment and requests a refund of tax paid for the 2006 and 2007 taxable years, asserting that she was not a domiciliary or actual resident of Virginia during those years.

DETERMINATION

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 accrual 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.

In order to change from one! legal domicile to another legal domicile, there must be (1) actual abandonment of the old domicile, coupled with an intent not to return to it, and (2) an acquisition of a new domicile at another place, which must be formed by personal presence and an intent to remain there permanently or indefinitely. The burden of proving that the domicile has been changed lies with the person alleging the change.

In determining domicile, consideration may be given to 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, sites 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 intention must be determined with reference to all of the facts and circumstances of the particular case. A simple declaration is not sufficient to establish residency.

In the case of individuals who engage in temporary work assignments overseas, the Department has ruled that such activities indicate an intent to abandon Virginia domicile is lacking. See Public Document (P.D.) 86-219 (11/3/1986), P.D. 96-207 (8/26/1996), and P.D. 02-33 (3/13/2002). The Soldiers and Sailors Civil Relief Act of 1940 (the "Act") (50 U.S.C. § 574) 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 does not apply to the spouses of military and naval personnel for the years in question. In P.D. 96-293 (10/18/1996), the Department found that a military spouse was considered an actual resident of Virginia, subject to Virginia individual income taxation as a resident, because he resided in Virginia for more than 183 days during the taxable year. Further, the Department has ruled that residency status of a taxpayer requires analysis separate from their military spouse. See P.D. 05-92 (6/9/2005) and P.D. 05-150 (9/8/2005).

Thus, the Department must examine all the facts and circumstances with regard to a military spouse in order to determine the domiciliary residence of such individual. When the spouse moves to follow military personnel to a new duty station he will generally abandon his former permanent place of abode, leave his employer, take or abandon personal property, and move his 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 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 to Virginia.

The Department determines a taxpayer's intent through the information provided. A taxpayer has the burden of proving that he or she has abandoned his or her Virginia domicile. If the information is inadequate to meet his or her burden, the Commissioner must conclude that he or she intended to remain indefinitely in Virginia.

In the instant case, the Taxpayer performed actions consistent with abandoning her Virginia domicile. She ended her employment in Virginia. The Taxpayer sold her Virginia home and vehicle and moved all her tangible possessions to Country A. The Taxpayer spent no days in Virginia in 2006 or 2007. While in County A, the Taxpayer acquired a Country A driver's license and obtained a permanent place of abode.

In addition to those actions she took to abandon her Virginia domicile when the Taxpayer moved to Country A, there was no assurance, plan or intent to move back to Virginia because there was no way of knowing where the husband would be transferred after completion of his duties in Country A. The Taxpayer, in fact, followed him to State B after the conclusion of her husband's tour in Country A.

The Taxpayer did, however, perform actions indicative of keeping a Virginia domicile. She retained a driver's license and voter registration in Virginia that she failed to surrender upon leaving Virginia. She also filed resident 2006 and 2007 Virginia income tax returns.

Regarding the Virginia driver's license, Va. 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 ruled that obtaining or renewing a Virginia license is a strong indicator of an individual's intent to be a domiciliary resident of Virginia. See Public Document (P.D.) 02-149 (12/09/2002). The Department has also found that an individual may successfully establish a domicile outside Virginia even if a Virginia driver's license is retained. See P.D. 00-151 (8/18/2000). In this case, although the Taxpayer retained her Virginia driver's license while she lived in Country A, she did not renew it.

After considering all of the facts and circumstances of this particular case, I find the evidence is sufficient to show that the Taxpayer moved to Country A and took sufficient actions to establish a domiciliary residence there. While such a move was temporary because it was dependent on her husband's military assignment, her actions clearly indicate that she lacked intent to move back to Virginia once her husband's tour of duty in Country A concluded. Thus, I find that the Taxpayer was neither a domiciliary nor an actual resident of Virginia for the 2006 and 2007 taxable years. Accordingly, the assessment has been abated and refunds for all income tax paid to Virginia for the 2006 and 2007 taxable years will be refunded with applicable interest.

The Code of Virginia sections and public documents 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 regarding this determination, you may contact * in the Office of Tax Policy, Appeals and Rulings, at ***.

Sincerely,

Janie E. Bowen

Tax Commissioner

AR/1-2439629024.B