I'm an active-duty servicemember with a Virginia 'home of record,' but I bought a home, got a driver's license, registered to vote, and registered my vehicles in the state where I was actually stationed -- am I still a Virginia domiciliary resident just because Virginia is listed as my home of record?

Plain-English summary

The IRS flagged that a military servicemember may have owed 2019 Virginia income tax; the Department found no return on file, determined he was a Virginia domiciliary resident, and assessed tax. He appealed, contending he was an active-duty servicemember assigned to duty stations outside Virginia throughout 2019 and had established domicile elsewhere.

Military status doesn't freeze domicile in place, but it doesn't automatically change it either. The same two-part domicile test used throughout this corpus applies to servicemembers: abandoning the old domicile with no intent to return, plus establishing a new one through physical presence and intent to remain permanently or indefinitely (Va. Code § 58.1-302). The Servicemembers Civil Relief Act adds a protection: military orders stationing someone in a different state, whether permanently or temporarily, do NOT by themselves cause an abandonment of legal domicile (50 U.S.C. § 4001; United States v. Minnesota Dep't of Revenue, 97 F. Supp. 2d 973 (2000)). But the Act doesn't PREVENT a servicemember from affirmatively acquiring a new domicile where they're stationed, either -- that still requires the same intent-and-conduct showing as for any civilian. In general, the Department won't tax an active-duty servicemember as a Virginia resident so long as they maintain sufficient connections to another state -- a DD Form 2058 State of Legal Residence Certificate, a driver's license, voter registration and voting, vehicle registration, and similar benefits/obligations of that state (P.D. 10-237) -- even while actually living and working in Virginia.

"Home of record" is a different concept from domicile. The taxpayer had listed Virginia as his home of record since 1996, and hadn't lived at his Virginia residence since 2013 (it was rented out during 2019). His federal tax documents and 2019 federal return used the Virginia address, but by the time that return was actually filed in 2020, he'd moved back to Virginia -- so that address choice carried little weight as evidence of his 2019 intent. The Department reiterated a recurring point of confusion: a servicemember's "home of record" mainly determines things like military travel benefits upon separation, and while it can coincide with legal domicile, it doesn't have to -- domicile turns on actual conduct and intent, not the administrative label.

Real connections built elsewhere controlled the outcome. Since a 2015 assignment to "State A," the taxpayer took the same kinds of affirmative steps a civilian would take to establish a new domicile: he purchased a home there, got a State A driver's license and voter registration, and registered several vehicles there. Notably, he KEPT these State A connections even through later temporary duty assignments to two other states in 2018 and 2019 -- rather than picking up new connections in either of those states, reinforcing that State A (not Virginia, and not the temporary-duty states) was where he intended to remain. Consistent with how the Department treats servicemembers who build the same kind of profile a civilian would use to establish Virginia domicile (P.D. 19-96), the same logic applied here in reverse: State A connections, few remaining Virginia ties, and consistency across intervening assignments together showed real, established domicile in State A.

Outcome, with a forward-looking flag. The Department found the taxpayer was not a Virginia domiciliary resident for 2019 and abated the assessment. But it noted he appeared to have moved back to Virginia and re-established a home, driver's license, and voter registration there -- and that Department records showed no Virginia returns filed since 2015. The Department urged him to review his situation and file any past-due Virginia returns, noting he may also have owed nonresident tax on Virginia-source income (such as rental income from the Virginia property, pass-through entity income, or nonmilitary wages earned while physically working in Virginia) even during the years he wasn't a Virginia domiciliary resident.

What this means for you

Military servicemembers whose "home of record" is Virginia but who are stationed and living elsewhere

Home of record and legal domicile are NOT the same thing -- if you take genuine, affirmative steps to establish domicile in your duty-station state (home purchase, driver's license, voter registration, vehicle registration) and maintain them consistently, even through later temporary assignments elsewhere, Virginia can find you're no longer a Virginia domiciliary resident despite the "home of record" label.

Servicemembers who build strong ties to one duty-station state, then get reassigned temporarily to others

Keeping your established state's connections in place (rather than picking up new ones in each temporary-duty location) reinforces that your ORIGINAL duty-station state remains your true domicile -- the Department found this consistency meaningful here.

Servicemembers who successfully establish domicile elsewhere and later return to Virginia

Returning to Virginia and rebuilding Virginia connections (a home, driver's license, voter registration) can re-establish Virginia domicile going forward -- and doesn't erase a prior filing gap; catch up on any past-due Virginia returns once domicile has shifted back.

Common questions

Q: My "home of record" with the military is Virginia, but I live and am stationed somewhere else -- am I automatically a Virginia domiciliary resident?
A: No. Home of record is a distinct military personnel concept (mainly relevant to benefits like travel entitlements) and doesn't automatically equal legal domicile -- domicile depends on your actual conduct and intent.

Q: I established real connections (home, license, voter registration, vehicles) in my duty-station state, then got temporarily reassigned elsewhere -- does that reassignment undo my established domicile?
A: Not if you keep your original state's connections in place through the temporary assignment, based on this ruling -- consistency across intervening assignments reinforces, rather than undermines, your established domicile.

Q: If I successfully change my domicile away from Virginia while stationed elsewhere, could I still owe Virginia tax as a nonresident?
A: Yes, if you have Virginia-source income -- for example, rental income from Virginia property you still own, pass-through entity income, or wages from nonmilitary work physically performed in Virginia.

Citations and references

Statutes:

• Va. Code § 58.1-302 -- domiciliary resident and actual resident defined
• 50 U.S.C. § 4001 -- Servicemembers Civil Relief Act; military orders alone don't change legal domicile, but don't prevent affirmatively acquiring a new one either

Case law: United States v. Minnesota Dep't of Revenue, 97 F. Supp. 2d 973 (2000) -- a servicemember can acquire a new legal domicile where stationed through the same intent-and-conduct showing as a civilian.

Prior rulings the Department relied on (described here, not linked): P.D. 10-237 (9/30/2010) -- the Department generally won't tax a servicemember as a Virginia resident if they maintain sufficient connections to another state; P.D. 19-96 (8/27/2019) -- a servicemember who builds the same connections a civilian would use to establish Virginia domicile, while retaining few out-of-state ties, is taxed the same as any other Virginia resident. A related ruling in this corpus applying the reciprocal military-domicile analysis (a servicemember found to REMAIN a Virginia domiciliary despite time stationed elsewhere) is P.D. 24-61.

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 24-30

Original ruling text

March 21, 2024

Re: § 58.1-1821 Application: Individual Income Tax

Dear *:

This will respond 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, 2019.

FACTS

The Department received information from the Internal Revenue Service (IRS) indicating that the Taxpayer may have been required to file a Virginia income tax return for the 2019 taxable year. A review of the Department’s records showed that the Taxpayer had not filed a return. The Department requested additional information from the Taxpayer in order to determine if his income was taxable in Virginia. Based on the information received, the Department determined that the Taxpayer was a domiciliary resident of Virginia and issued an assessment. The Taxpayer filed an application for correction contending, he was an active duty member of the military and was assigned to duty stations outside of Virginia during the 2019 taxable year.

DETERMINATION

Domicile

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 that person and the place to which that person intends to return even though they reside elsewhere. For a person to change domiciliary residency to another state or country, that person must intend to abandon their 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 their 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 their 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 person’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 or 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 the facts and circumstances of the particular case. A simple declaration is not sufficient to establish residency.

The Department determines a taxpayer’s intent through the information provided. The taxpayer has the burden of proving that their Virginia domicile has been abandoned. If the information is inadequate to meet this burden, the Department must conclude that the taxpayer intended to remain indefinitely in Virginia.

Residency of a Military Service Member

The Servicemembers Civil Relief Act (the “Act”) 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. See 50 U.S.C. § 4001. The Act, however, does not preclude the possibility that armed forces personnel may acquire a new legal domicile in the state where they are stationed, and thus subject themselves to taxation by that state as if they were a domiciliary resident. In order for the change of domicile to occur, there must be an abandonment of the old domicile and the acquisition of a new one. This change must be exhibited by an individual’s intent and conduct. See United States of America v. Minnesota Department of Revenue , 97 F. Supp. 2d 973 (2000) (hereinafter, “ Minnesota ”).

In general, the Department will not seek to tax an active duty military servicemember so long as the member maintains sufficient connections with another state to indicate the intent to maintain domicile there. Such connections would include filing a State of Legal Residence Certificate (Department of Defense Form 2058), obtaining 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 a military service member maintains such connections, they would be considered to be a resident of the other state even though they work, live, and establish a permanent place of abode in Virginia. See Public Document (P.D.) 10-237 (9/30/2010).

The Taxpayer was a military servicemember with a Virginia home of record (HOR) since 1996. The Taxpayer owned a residence in Virginia, but he had not lived there since 2013. During the taxable year at issue, the Virginia residence was used as a rental property. The Taxpayer also had various tax reporting documents for the 2019 taxable year sent to a Virginia and filed his 2019 federal income tax return using a Virginia address. By the time the 2019 return would have been due in 2020, however, the Taxpayer was residing in Virginia again. As such, use of the Virginia address to file the 2019 return is of little, if any, evidentiary value as to the Taxpayer's intent in this case.

The Taxpayer explains that he was stationed outside the United States for much of his military career. In 2015, however, he was assigned to a duty station in * (State A). The Taxpayer took significant steps to indicate his intent to treat State A as his domicile. He purchased a residence in State A, obtained a State A voter’s registration and a State A driver’s license, and registered several vehicles in State A. The Taxpayer also retained these connections when he was assigned to temporary duty stations in (State B) and ** (State C) in 2018 and 2019.

The Department concedes that the income taxation of military service members is a unique policy area which can have some complicated applications. For example, service members frequently confuse the term home of record with domicile. As the Department has previously observed, however, a service member’s home of record refers to the state from which a service member entered the military. Its primary purpose is determining military benefits such as travel entitlements upon separation from service. Depending on the circumstances, a service member’s state of legal domicile and home of record might be the same. That is not true, however, for all service members. A change of domicile results from the establishment of a new residency in fact, coupled with an intent to abandon the old domicile and remain in the new, regardless of what state is listed as the home of record.

In prior determinations, the Department has observed that when a military service member performs the same types of actions a civilian taxpayer would normally perform to establish a Virginia domicile, including purchasing or leasing a personal residence and obtaining a driver’s license, vehicle registration and voter’s registration, and the service member retains few, if any, connections to another state, they are be subject to taxation the same as any other Virginia resident. See, e.g., P.D. 19-96 (8/27/2019).

During the taxable year at issue, the Taxpayer had the types of connections with State A that would normally be associated with a domiciled resident, and he retained few such connections with Virginia. In addition, the Taxpayer retained these connections with State A even though he was assigned to temporary duty stations in other states in 2018 and 2019. Consistent with the Department’s treatment of servicemembers reporting a home of record in a state other than Virginia, I find that the Taxpayer was not taxable as a domiciliary resident of Virginia for the 2019 taxable year. Accordingly, the assessment will be abated.

The Taxpayer, however, appears to have returned to Virginia and obtained a new personal residence, driver’s license and voter’s registration. As such, it is likely that the Taxpayer has reestablished domicile in Virginia. The Department’s records, however, indicate that the Taxpayer has not filed any Virginia income tax returns since the 2015 taxable year. The Taxpayer should review his circumstances and take steps to file any past due Virginia income tax returns. The Taxpayer should be aware that he may have been liable for income tax as a nonresident to the extent that he had income from Virginia sources, which could include, among other things, rental income from property in Virginia, pass-though entity income or nonmilitary wages earned while performing job duties in Virginia. See Virginia Code § 58.1-302.

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 web site. If you have any questions regarding this determination, you may contact * in the Office of Tax Policy, Appeals and Rulings, at (804) ***.

Sincerely,

Craig M. Burns

Tax Commissioner

AR/4623.B

Related Documents

10-237

19-96