Military Spouses Residency Relief Act explained

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  • By The Legal Office
  • 49th Fighter Wing
On Nov. 11, 2009, the President of the United Stated signed into law an amendment to the Servicemembers Civil Relief Act providing certain protections for spouses of military members.

Because this is new legislation, there will be individuals that may fall into a category not clearly covered by the Military Spouses Residency Relief Act. The best approach is to understand what is clear about the MSRRA and then seek legal assistance on specific situations not covered.

The MSRRA simply extends the exemption to military spouses that already applies to military members -- they do not lose nor acquire a residence or domicile for purposes of taxation due to being present in a particular location in compliance with military orders.

The MSRRA applies to you if:
- You are a spouse of an active duty military member, and
- Your military spouse resides in a particular state in compliance with military orders, and
- You reside at the same location as your military spouse solely to be with your spouse, and
- You earn income

The application of this exemption does not mean spouses do not have to pay state income tax. It just means spouses, like military members, now have the option to choose which state's income tax they wish to pay, provided they are domiciled in that state. Neither the SCRA nor the new MSRRA provision in the SCRA changed the rules about domicile.

Domicile is where a person intends to permanently reside. Every person always has one domicile and can only have one domicile at any given time. Because we can never really know a person's true intent, evidence of a person's domicile is necessary. For all practical purposes, domicile is really the state with which you have the strongest association and connections. You can change your domicile -- whether intentionally or unknowingly -- by changing some of the factors listed below.

A non-exhaustive list of core factors considered in determining your domicile include:
- Physical presence
- Property ownership
- State issued licenses such as driver's, professional, hunting, fishing, etc.
- Vehicle registration
- Voter registration
- Local banking activity
- Local nonprofit membership
- Declaration of intent such as tax filing address, declaration of domicile, home of record, etc.
- Legal actions you have taken in the past such as marriage, divorce, other judicial proceedings

Think of these factors as things that indicate the level of stability you have in any given location. None of these factors alone is determinative, but the more connections you have with a particular state means you are evidencing your intent to remain there.

The MSRRA gives you the option to pay state income tax on earning to a state other than the state in which you currently reside. For spouses stationed with a military member here at Holloman, you still must be prepared to demonstrate that your connections to a state other than New Mexico are stronger than your connections to New Mexico. If you are comfortable that you have not changed your domicile to New Mexico and wish to pay another state's income tax even though you earned wages in New Mexico, the base Tax Center can provide you guidance on which forms to file.

It is important to note that at least one state successfully sued an active duty military member for his failure to pay that state's income taxes on his military pay, despite his declaration that his domicile and home of record were in a different state. The state's lawsuit was successful because the military member's domicile was where he lived due to his lack of significant contacts with any other state. This would also apply to spouses of military members.

The New Mexico Department of Revenue has issued a bulletin advising tax filers to keep proof of the qualified military spouse's residency, or evidence of domicile, in your records in case you are selected for audit or verification. Do not send the documentation with your tax return.

The best advice we can provide to you is to organize and maintain documentation on the factors listed above. If you make a conscious effort to document and demonstrate you are living in a particular state temporarily just to comply with military orders then you should not have a problem with a state challenging your domicile.