1. Your interpretation of my answer in regards XXXXX XXXXX is correct. As stated, NC and other states, while they base the return on the federal return, they do not follow or recognize all the IRS rules regarding foreign income exclusions. Even if they did, in order to take advantage of any exclusions, you have to file the return. If you do not file the return, after the statute of limitations, in those states that would allow it, you would loose the benefit. (based on the statute of limitations for refunds of three years).
2. Regarding the link ending in overseas-work: This is a posting made by perhaps the best tax expert in this site. He is talking about federal benefits and service in combat zones. There was a bill pending in congress to extend the same tax benefits of federal employees in combat zones as available to military members. But, that "tax parity" bill was never passed, and is currently marked dead in the congressional record. He is stating that the civilian employees are entitled to the foreign income exclusion on the federal taxes. However he does not address the issue of state taxes, that I could see. There is no question here that you should be able to enjoy the foreign income exclusion on your federal return. your issue is for state taxes.
3. liNK FOR O-CONUS: This article addresses state taxes in general, but is focused on the federal regulations. IT is posted by a tax firm name Atlas Tax Associates. General articles like this that pertain to the states, overlook the fact that all 50 states and Puerto Rico have slightly different variations of what domicile means. AND while most state taxes, including NC, are based on your Federal Return; being based on the Federal Return does not mean that the state is conforming 100% to federal laws, it means the states require entries on the state return found on the federal return. So you have to figure the federal return first, then do the state return. Many states conform to federal regulations on the issue of domicile, but many do not.
4. for link related to voting: They are speaking about the very act of voting, not the other conditions that might work together to determine your residency for tax purposes. I mentioned in my answer, that where you voted was among the conditions that can be used by NC to determine your state of residency, not independently. One single factor alone does not work. It will up front. In all states, they determine residency for tax purposes based on a long list of issues not related to just one or two items. So taken alone, voting in NC in a federal election does not in itself determine residency, or an intention to return. BUT, if they see that you were a resident, say last year, and you have not changed your residency, then NC will say: look, yes they sold the home, BUT, they still have a NC drivers license, they have not changed states, and they vote here. Even if the voting is in the federal elections, taken together in the full picture of things, they would consider you a resident, and it would be up to you to defend against that. If on the other hand, you do not have any NC bank accounts, driver's licenses, or vehicle registrations, AND you do not list NC as your home of record on the DOD regs, the act of voting in NC in a national election would not figure in at all.
5. Determining Domiciliary in NC. No one factor stands alone but for few exceptions. In administering the determination, the Department of revenue looks at primary factors, secondary factors, and other factors. Primary factors are things that could, based on that one or two things alone determine that for tax purposes your residency is NC, even if physically domiciled else where, such as overseas. Owning property is an example of a primary factor. A secondary factor would be things that when two or more exist, it can signal, together with other factors that you should be treated as a resident for tax purpose. Other factors includes things that only serve to substantiate the condition of intention, and have no other bearing. These would be for example, voting in national elections in NC when you have been a resident there.
A critical component of NC law is that you have to prove you are not a resident, if any of those factors are present. This also includes pertinent negatives, as you will see when I post the law. A pertinent negative in your case is that you did not buy property in another state, nor did you establish definitively, another residence in another state.
You can see it is not simply a matter of saying, hey, i have lived overseas for the past 10 years, and there for I no longer have a domicile in NC. Not that easy, especially if you (1) have any connection at all to NC, (2) you signal in some way an intention to eventually return, or (3) you have not established a residence in another state.
I am providing a copy of the law, and I am underlining and highlighting those elements that appear to affect you. Understand that you have not shared with me about if you have a driver's license for NC, a car still registered there, or bank accounts in NC.
17 NCAC 06B .3901 DEFINITION OF RESIDENT
(a) Only One Domicile. -- Domicile means the place where an individual has a true, fixed permanent home and principal establishment, and to which place, whenever absent, the individual has the intention of returning. In many cases, a determination must be made as to when or whether a domicile has been abandoned. A long standing principle in tax administration, repeatedly upheld by the courts, is that an individual can have but one domicile; and, once established, it is not legally abandoned until a new one is established. A taxpayer may have several places of abode in a year, but at no time can an individual have more than one domicile. A mere intent or desire to make a change in domicile is not enough; voluntary and positive action must be taken.
(b) Factors. -- Some of the tests or factors to be considered in determining the legal residence of an individual for income tax purposes are as follows:
(1) Place of birth of the taxpayer, the taxpayer's spouse, and the taxpayer's children.
(2) Permanent residence of the taxpayer's parents.
(3) Family connections and close friends.
(4) Address used for federal tax returns, military purposes, passports, driver's license, vehicle registrations, insurance policies, professional licenses or certificates, subscriptions for newspapers, magazines, and other publications, and monthly statements for credit cards, utilities, bank accounts, loans, insurance, or any other bill or item that requires a response. (NOTE: THESE ARE SECONDARY FACTORS)
(5) Civic ties, such as church membership, club membership, or lodge membership.
(6) Professional ties, such as licensure by a licensing agency or membership in a business association.
(7) Payment of state income taxes.
(8) Place of employment or, if self-employed, place where business is conducted.
(9) Location of healthcare providers, such as doctors, dentists, veterinarians, and pharmacists.
(10) Voter registration and ballots cast, whether in person or by absentee ballot. (NOTE: this is a primary factor if registered to vote in local and state elections; it is a secondary factor if on the National Elections, you use a NC address; it is an other if you do not list a NC address)
(11) Occasional visits or spending one's leave "at home" if a member of the armed services.
(12) Ownership of a home, insuring a home as a primary residence, or deferring gain on the sale of a home as a primary residence.
(13) Location of pets.
(14) Attendance of the taxpayer or the taxpayer's children at State supported colleges or universities on a basis of residence--taking advantage of lower tuition fees.
(15) Location of activities for everyday "hometown" living, such as grocery shopping, haircuts, video rentals, dry cleaning, fueling vehicles, and automated banking transactions.
(16) Utility usage, including electricity, gas, telecommunications, and cable television.
(c) When Change Occurs. -- The following events indicate a change in residency:
(1) Selling a house and buying a new one.
(2) Directing the U.S. Postal Service to forward mail to a new address.
(3) Notifying senders of statements, bills, subscriptions, and similar items of a new address.
(4) Transferring family medical records to a new healthcare provider.
(5) Registering a vehicle in a new jurisdiction.
(6) Transferring memberships for church, a health club, a lodge, or a similar activity.
(7) Applying for professional certifications in a new jurisdiction.
(d) Military Service. --A legal resident of North Carolina serving in the United States Armed Forces is liable for North Carolina income tax and North Carolina income tax shall be withheld from that individual's military pay whether the individual is stationed in this State or in some other state or country. An individual who enters military service while a resident of North Carolina is presumed to be a resident of this State for income tax purposes. Residency in this State is not abandoned until residency is established elsewhere. To change residency, an individual in military service must not only be present in the new location with the intention of making it a new domicile, but must also factually establish that the individual has done so.
6. You asked about NC coming after Taxes. If you can successfully prove you truly abandoned NC WITH NO INTENTION of returning, then you can avoid the taxes for all but the year in which you departed. If not, then NC can go back as far as they want, including the entire 10 years. This is is because, in NC there is no statute of limitations with regard to taxes where it involves acts of omission or fraud. Not filing a return at all, is considered an act of omission, and there for, the statute does not apply.
From the state perspective, the following elements may harm your position:
Your DOD home of record indicates an intention of returning to the state.
You did not make another state your residence.
If you have a NC driver's License
If you have a vehicle in NC.
If you have NC bank accounts
(voting in national elections is only a factor to show intent where other things are true, unless you show a NC address when you register to vote the national elections).
If you own a home in the country in which you are currently living, and you can divest of the other connections, you will most likely be able to prove a permanent residence overseas; else you would need to show a permanent residence in another state.
Remember: It only takes a couple or a few of the factors in the law to consider you a resident for tax purposes in NC law; not the entire list.