By C. Todd Lopez
WASHINGTON (Jan. 14, 2010) -- New legislation, signed by the president in November, allows military spouses to establish a permanent residence and carry it with them though each change of station.
The Military Spouses Residency Relief Act enables military spouses to do what their servicemembers have long been able to do -- claim and maintain residency in one home state, pay income taxes only to that state, and vote as a resident of that state, for the duration of their military career, without regard to where they are stationed.
"The purpose was to allow the spouse to maintain the same domicile as the servicemember," said Mary M. Benzinger, senior attorney, Pentagon Army and Air Force Legal Assistance Office.
The benefit of having both husband and wife be able to establish and maintain domiciliary status in the same state -- and carry that status wherever they go as a result of military PCS -- is two-fold.
First, it simplifies paperwork. In the past, spouses would have to re-establish residency in whatever state they moved to as part of a PCS. They had to pay income tax to that state if they worked, register their vehicle there, and get a driver's license there. Additionally, if their servicemember maintained permanent domiciliary status in another state, the two might have to file state income taxes separately.
"It allows them to establish a domicile, and carry it with them, every time they PCS, and not do what you hear a lot of: where the servicemember stays a resident of Texas his whole career, and she (the spouse) has to be a domiciliary of every place the servicemember is stationed," Benzinger said. "That's what happened before this. You could never have a constant domicile. You had to be a resident of whatever state you were living in."
Second, in many cases, military members have opted to continue to maintain domiciliary status in one of the states that do not have state income tax: Alaska, Florida, Nevada, South Dakota, Texas, Washington, Wyoming, New Hampshire and Tennessee. Those servicemembers do not pay state income tax. The new act would allow military spouses who have been present in one of those states -- and established domiciliary status there -- to maintain that status along with their servicemember spouse, and to then also not pay state income tax.
What the act does not allow, however, is for a spouse to "pick" a state where they can claim domiciliary status. Establishing domiciliary status in a state, in nearly every case, requires that the spouse has lived in the state.
"You cannot pick," Benzinger. "You have to synch up, by physical presence and intent to remain."
Being able to adequately defend a claim of residency of one state -- especially if doing so to avoid paying income taxes in the state where a spouse is currently living and working -- might require more than prior residence. It could also require, among other things, showing intent to return there, land ownership, driver's licenses, car registration or having voted there.
Additionally, the act does not mean military spouses do not need to pay state income tax. If the state where a spouse maintains domiciliary status under the new act requires civilian residents to pay state income tax, then they must as well. This includes those states where the requirement to pay state income tax by a servicemember changes if a servicemember doesn't actually live in the state while serving. The MSRAA, a federal law, does not convey to civilian spouses the benefits extended to servicemembers by individual states.
The MSRRA amendment applies retroactively to tax year 2009. This means that for some spouses -- those that can show they met the requirements for domiciliary status for a state they did not live in during 2009 -- those spouses may be able to get back tax withholdings from the state where they lived and worked.
The MSRRA is relatively new, and many states have yet to figure out how to deal with military spouse taxpayers who may want refunds, Benzinger said. Additionally, she said while states have in the past been relatively forgiving when considering for tax purposes the claims of non-state residence by uniformed servicemembers, they might not be so forgiving of civilian spouses.
Before changing or claiming a different state of residence on any forms, Benzinger said servicemembers and their spouses should seek legal advice.