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Military Law

A Section of the Virginia State Bar.

Military Law Newsletter - Spring 2010

Military Law News


Military Spouses Residency Relief Act
by Christopher Dunne1

The Military Spouses Residency Relief Act (MSRRA) was signed into law by President Obama on November 11, 2009 (Veteran’s Day) as Public Law No. 111-97. The MSRRA amends the Servicemembers Civil Relief Act (SCRA)2 to provide certain rights and protections to the husbands and wives of military members regarding taxation, voting and land rights. This article will focus on the tax ramifications of the MSRRA in Virginia.


The SCRA ensures members of the military enjoy the advantage of neither gaining nor losing a residence or domicile with respect to taxation of personal property or income solely by virtue of being located in a tax jurisdiction in compliance with military orders.3 Therefore, income from military service is not deemed to be earned in the jurisdiction in which the member is serving, unless that is the individual’s actual domicile.4 Similarly, personal property shall not be deemed to be located where servicemembers are stationed, but rather in their state of domicile.5 Virginia law expressly recognizes this exclusion from taxation for domiciliaries of other states stationed in the Commonwealth.6 Military income of Virginia domiciliaries is subject to taxation, regardless of where they are stationed.

Historically, this advantage only applied to active duty military personnel. Civilian spouses, much like other private citizens, were generally deemed to be domiciled in the state in which they were residing. As a result, each time a military family moved to another state, the spouses would assume the new location as their domicile, or at least find themselves liable for income and personal property tax in their new location. This meant husbands and wives who lived in the same house were frequently domiciliaries of different states, which often caused considerable inconvenience for the family. By modifying 50 U.S.C. app § 571, the MSRRA is designed to remedy this situation and allow civilian spouses to retain their legal domicile as well. While the concept initially seems simple, the application of the change in the law to the factual situation of any given couple is often quite complicated.

Determining Domicile

The SCRA essentially uses the terms “domicile” and “residence” interchangeably. It does not define the terms, leaving that to the states. Virginia, however, does not treat these terms identically. Virginia law provides the following definitions:

"Domicile" 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. In determining domicile, consideration may be given to the applicant's expressed intent, conduct, and all attendant circumstances including, but not limited to, financial independence, business pursuits, employment, income sources, residence for federal income tax purposes, marital status, residence of parents, spouse and children, if any, leasehold, sites of personal and real property owned by the applicant, motor vehicle and other personal property registration, residence for purposes of voting as proven by registration to vote, if any, and such other factors as may reasonably be deemed necessary to determine the person's domicile.

"Resident" applies only to natural persons and includes, for the purpose of determining liability for the taxes imposed by this chapter upon the income of any taxable year every person domiciled in Virginia at any time during the taxable year and every other person who, for an aggregate of more than 183 days of the taxable year, maintained his place of abode within Virginia, whether domiciled in Virginia or not. The word "resident" shall not include any member of the United States Congress who is domiciled in another state.7

Under these definitions, it is clear that a person who is a domiciliary of another state can be taxed in Virginia if he or she lives in the Commonwealth for more than 183 days in a year. Therefore, prior to the passage of the MSRRA, military spouses living in Virginia were considered residents for tax purposes regardless of what state they considered home, and an analysis of a their domicile was not required in order to impose tax liability. That is clearly no longer the case.

The analysis of domicile is fact based. In addition to the factors listed in Va. Code § 58.1-302, other indicia of domicile may include the situs of professional or other licenses, claim of a homestead credit, declarations on Wills or other documents, notifying previous domicile of intent to abandon, location of service, social or religious memberships, driver’s licenses and claims of residence for tuition purposes. Generally, there will not be one single factor that determines domicile, and there are many wrinkles when dealing with a military family. For example, active duty members are directed to name their state of legal residence on DD Form 2058.8 Additionally, by law active duty members and their spouses and children are not required to get a Virginia driver’s license if they have a license in their home state, although as a practical matter it may be very difficult to renew licenses in other states.9 Many family members are not aware of this statute and will take the steps to acquire a Virginia license without necessarily intending to adopt a new domicile. Similarly, the Higher Education Opportunity Act10 requires public universities or colleges who receive Federal assistance to charge in-state tuition rates to servicemembers on active duty for more than 30 days and their dependents regardless of whether they are residents of that state. So while this factor could be extremely persuasive on the issue of domicile for most, it may be meaningless for the member of a military family.

Qualifying for the Exemption

The Virginia Department of Taxation (TAX) has updated two forms to allow military spouses to exempt income and refund taxes already withheld: Form VA-4 and Form 763-S. Virginia Form VA-4 states that individuals may be exempt from taxation on wages if:

i) your spouse is a member of the armed forces present in Virginia in compliance with military orders;
ii) you are present in Virginia solely to be with your spouse; and
iii) you maintain your domicile in another state.11

Form 763-S, which must be completed to get a refund of withheld taxes, adds the additional requirement that the spouse and the member must be domiciliaries of the same state to qualify.12 Although there is no explanation for the discrepancy on the forms, other guidance from TAX makes it clear that it is reading the MSRRA to require both spouses to claim the same domicile in another state in order for the spouse’s income to be exempt from Virginia taxation.13

Although TAX states that the MSRRA requires both spouses to claim the same domicile, not every state is taking that position.14 The reason for the varying interpretations is an inconsistency in the language of the MSRRA. Section 3(a) states that:

“A spouse of a servicemember shall neither lose nor acquire a residence or domicile for purposes of taxation with respect to the person, personal property, or income of the spouse by reason of being absent or present in any tax jurisdiction of the United States solely to be with the servicemember in compliance with the servicemember's military orders if the residence or domicile, as the case may be, is the same for the servicemember and the spouse.”

Section 3(c), however, does not include the requirement that the military member and spouse have the same residence or domicile when describing the income exemption:

“Income for services performed by the spouse of a servicemember shall not be deemed to be income for services performed or from sources within a tax jurisdiction of the United States if the spouse is not a resident or domiciliary of the jurisdiction in which the income is earned because the spouse is in the jurisdiction solely to be with the servicemember serving in compliance with military orders.”15

Since domicile requires the intent to make a place a permanent residence to which the individual intends to return when absent, there is some logic in requiring both members of the married couple to claim the same state. Unless they intend to live separately at the conclusion of the active duty member’s military career, they presumably cannot sincerely intend to return to different locations. On the other hand, the use of the phrase “as the case may be” in Section 3(a) seems to acknowledge a difference between residence and domicile. Therefore, the law as a whole can be read to apply to spouses who have the same current place of abode as their spouses, as opposed to the more permanent domicile. Given the ambiguity in the statute, the less inclusive interpretation requiring identical domicile is likely to be challenged by litigation in Virginia, and many other states as well.

Effective Dates

Regarding income tax, the MSRRA takes effect in tax year 2009, unless the spouse uses a fiscal year for tax purposes, in which case it applies to income for the fiscal year that includes the date of enactment, November 11, 2009. This means that spouses who qualify and had taxes withheld in 2009 are entitled to a full refund of all income taxes paid to Virginia last year.

Interestingly, since Section 3 (b) of the MSRRA only discusses state and local income tax in the context when the statutory benefits begin, TAX is interpreting the start date for personal property tax protection as November 11, 2009, the date it became a law.16 In counties that prorate the tax, people can apply for a refund for the last 58 days of the year. However, given a recent Attorney General opinion (discussed at length in the Message from the Chair by Neal Puckett), a strong argument can be made that a full refund of personal property tax should be provided to all military families who are not domiciliaries of Virginia.17

Impact in Virginia

While the MSRRA provides a financial benefit to many military families, it will most likely not be a gain for the Commonwealth. Some spouses who live with their military husbands or wives stationed in other states will undoubtedly use the MSRRA to maintain their domicile in Virginia and continue to pay Virginia taxes. While Virginia does allow a subtraction of basic pay for military service up to $15,000, the subtraction amount is reduced dollar-for-dollar by the amount which the taxpayer's military basic pay exceeds $15,000, and is therefore reduced to zero if the amount is equal to or exceeds $30,000.18 This phase out limit is so low that it generally provides relief only to the most junior personnel, and even that minimal benefit does not apply to spouses. It is then perhaps not surprising that, according to a recent unpublished Defense Manpower Data Center statistical analysis, over 34% of active duty personnel entering the service from Virginia adopt another state for their domicile, while less than 5% of members entering from income tax-free states Florida and Texas make a change. It is reasonable to assume military spouses will follow a similar pattern. Of the over 134,000 active duty military stationed in Virginia, approximately 50,000 are accompanied by their spouses. While many of these spouses may not live or work in Virginia, it seems likely the loss in tax revenue will be in the millions of dollars.


The purpose of the MSRRA is to limit the “confusion, difficulties, and burdens now faced by military families when they are moved to a new state.”19 While the law will relieve some burdens, it will very likely impose others. Although qualifying military spouses may not be liable for Virginia taxes, they are still governed by the tax law of their state of domicile. Many states either have no income tax or do not tax military pay, which provides a significant benefit to servicemembers.20 Those states that have an income tax but exclude military pay will not necessarily be excluding the spouses’ pay, and most tax worldwide income. Will smaller employers be able (and willing) to set up withholding for other states? If not, spouses who do not realize they are still subject to their state’s taxes will be unpleasantly surprised by both the taxes due and penalties for the underpayment of estimated tax. Additionally, what of spouses who have adopted at least some indicia of domicile in other states since they last resided in their “home” state? The SCRA never allowed servicemembers to simply choose whatever state they wanted; it just prevented an automatic change of domicile triggered by a move pursuant to military orders. The MSRRA does not change any of the rules regarding establishing domicile. Spouses seeking to claim a domicile they haven’t lived in for years may find their exemption claim subject to severe scrutiny. Given the current budgetary difficulties and the strict reading TAX is giving the law, military families, and the attorneys who advise them, would be wise to be cautious and thorough when seeking to utilize the benefits of the MSRRA.


1 Christopher Dunne is the Chief of Legal Assistance for the United States Coast Guard.
2 50 U.S.C. app §§ 501 et. seq.
3 50 U.S.C. app § 571 (a).
4 50 U.S.C. app § 571 (b).
5 50 U.S.C. app § 571 (c).
6 Va. Code § 58.1-321 B.
7 Va. Code § 58.1-302.
8 (last visited on May 6, 2010).
9 Va. Code § 46.2-306.
10 Public Law 110-315 §114.
11 (last visited May 21, 2010).
12  (last visited May 21, 2010).
13 (last visited May 21, 2010).
14 See e.g. the policies of Maryland at, of Michigan at,1607,7-238-43513_44135-234013--,00.html, and of Ohio at Income Taxes and the Military - Nonresident Military Spouses (all last visited May 11, 2010).
15 Pub. L. No. 111-97, 123 Stat. 3007 (2009).  The statute actually gives military spouses greater protection from taxation than the servicemembers because all income for services is excluded.  Only military pay is excluded for servicemembers, so other income, such as from a part-time job, is subject to taxation in the state in which it is earned.
16 Virginia Department of Taxation Tax Bulletin 10-1 at Military Spouses Residency Relief Act Tax Bulletin (last visited May 6, 2010) .
17 (last visited May 6, 2010).
18 Va. Code § 58.1-322 (23).
19 Senate Report 111-46.
20Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming have no income tax, and New Hampshire and Tennessee do not tax earned income.  Arizona, Illinois, Kentucky (beginning in 2010), Michigan, Minnesota, Montana and New Mexico do not tax active duty military pay.  California, Idaho, Missouri, New Jersey, New York, Ohio, Oregon, Pennsylvania, Vermont and West Virginia do not tax active duty military pay if the servicemember is stationed outside of that state and various other conditions are met.  Arkansas, Louisiana, Maryland, Oklahoma, and Virginia allow a portion of active duty military pay to be excluded from income if certain conditions are met.   The other states and the District of Columbia tax military pay as ordinary income.  This list does not address income earned in a combat zone, which is generally treated differently.