New tax law affords military spouses' legal residence privileges

  • Published
  • By Capt. Sam Kidd
  • 22nd Legal Office
MCCONNELL AIR FORCE BASE, Kan. --  The president signed a Senate bill Nov. 11, which passed Public Law 111-97, the "Military Spouses Residency Relief Act."

The MSRRA amends the Servicemembers' Civil Relief Act and affords servicemembers' spouses an opportunity to maintain legal residency in their home states for tax and voting purposes, no matter where they move. This is a benefit already provided to military members.

In the past, servicemembers' spouses lost the right to vote in their home states and often had to pay taxes in a new state when they relocated to accompany a military member.

This is no longer the case, but there are some rules. Military members' spouses can only maintain residency in their home states if they relocate to accompany a servicemember who is moving to comply with military orders. Furthermore, they must establish that legal residence in order to claim it. Determining legal residency is a fact-based analysis, and simply registering a car or maintaining a driver's license in a certain state does not definitively make someone a legal resident.

According to this new law, the legal residence of the spouse should match that of the servicemember, and both should have sufficient ties to the state to support their claim.

In other words, the law does not permit a military member's spouse to simply pick and choose legal residence in a state that doesn't have income taxes.

The Servicemembers' Civil Relief Act is designed to protect military members' pay from being subject to income taxes in a state they are directed to reside in by military orders, unless that state is also their legal residence. The SCRA also states servicemembers do not need to change their state of legal residency solely because they are ordered to a new duty station.

The Congressional intent for the MSRRA amendment to the SCRA is to offer military members' spouses the same benefits concerning legal residence. In essence, the law states; if military members are entitled to SCRA benefits, their spouses are entitled to the same legal residence tax protection.

The initial burden of proving military members' and their spouse's legal residence falls on both the servicemembers and their partners. Should an individual's legal residency come under scrutiny, simply having a state of residency listed on the military member's leave an earnings statement will most likely not be enough, particularly if the state is one with tax havens, such as Florida and Texas. State officials might require additional evidence of legal domicile, such as proof of a prior physical residence and intent to return.

It seems almost every state is claiming to be struggling financially, so spouses wishing to change their legal residency may be carefully scrutinized by state tax authorities. If a military member's spouse wishes to take advantage of the relief offered by this law, there may be some unintended consequences. State taxing authorities may view claims of changed residency that have no basis in fact as fraudulent and subject the military family to significant additional taxes and penalties. Additionally, reclaiming legal domicile may also affect residency claims for tuition purposes at state universities.

If you are thinking about taking advantage of this law, please call the McConnell Law Center at 316-759-3590 for more information, or stop by Fridays from 9 to 11 a.m. for walk-in service legal assistance.