You should understand what is MSRRA

| February 1, 2018 | 0 Comments

Courtesy photo

Verndal Lee
Legal Assistance Office

Many personnel don’t know what guidelines state in the Military Spouses Residency Relief Act, or MSRRA.

The MSRRA amends the Servicemembers Civil Relief Act, or SCRA, to provide that the spouse of a service member does not lose or acquire a residence or domicile for purposes of taxation by reason of being absent or present in a tax jurisdiction of the United States solely to be with the military member in compliance with the service member’s military orders if the domicile of the SM and the spouse are the same.

Application and explanation
A state cannot tax income earned in that state by the military spouse if the military spouse and service member have established a common tax domicile outside the state and are present in the state solely due to the service member being assigned to that state.

Proceed with caution
The MSRRA does not change how domicile is established, or maintained, and it does not provide a means for a spouse to simply choose the same domicile as the service member. Also, the MSRRA does not allow a spouse to pick or choose a domicile in any state.

Prior to claiming domicile in a particular state for tax purposes, a spouse must have actually lived there and established and maintained residency contacts. MSRRA does not allow a spouse to automatically assume the service member’s domicile upon marriage. The spouse will need his or her own individual residency contacts in order to take advantage of MSRRA.

MSRRA also does not allow a spouse to recapture a previously abandoned domicile without physically returning to the state and re-establishing the appropriate contacts. Requests to assert MSRRA will, in all likelihood, be met with inquiries from the state into the military spouse’s status, domicile of the service member and domicile of the military spouse.

Furthermore, MSRRA does not relieve you of filing state tax returns. You are still responsible for filing a state return with the state in which you are claiming domicile.

Finally, an income tax exemption provided under MSRRA is not applicable to the General Excise Tax, the Use Tax and any other taxes administered by the state Department of Taxation. There are no exemptions under MSRRA for these tax types.

How is domicile established?
Domicile is established by being physically present in a state and forming an intent to remain for the indefinite future. Intent to remain is established by the following contacts:

• Where you vote, own property, hold professional licenses, register vehicles and/or hold a driver’s license;
• Where you accept tax breaks for registration of a motor vehicle;
• Where you have a declaration of homestead; and/or
• Where you have indicated your last will and testament should be probated.
A determination of domicile is fact specific, but the more contacts you can establish, the stronger your case.

Example Scenarios
1) Soldier’s domicile is Texas. Texas has no income tax. Soldier is assigned to Virginia. While in Virginia, Soldier meets and marries his spouse who is working in Virginia and whose domicile is Virginia. MSRRA does not permit the spouse to claim Texas as her domicile. Virginia can tax the spouse’s income.

2) Sgt. Orville P. Snorkel’s domicile is North Carolina. While assigned to Fort Polk, Louisiana, Snorkel meets and marries Louise Lugg, a native of New Orleans. Snorkel falls in love with Louisiana. He and Louise purchase a home in Louisiana. Snorkel decides Louisiana is where he wants to be after he retires from the Army. He registers to vote in Louisiana. He obtains a Louisiana driver’s license. He titles and registers his vehicles in Louisiana. Louise has already done all this as Louisiana is her domicile.
Sgt. Snorkel and Louise file and pay Louisiana income tax the entire time he is stationed in Louisiana. Then, Snorkel is assigned to Hawaii, and Louise moves to Hawaii to live with Snorkel and gets a job in Hawaii. Louise can now assert MSRRA; her domicile and Sgt. Snorkel’s are the same: Louisiana. Hawaii cannot tax Louise’s income earned in Hawaii; however, Louisiana can tax the income. It is incumbent on Sgt. Snorkel and Louise to file and pay Louisiana income taxes.

3) Staff Sgt. Amos T. Halftrack’s domicile is North Carolina. While stationed in Texas (his third duty station), Halftrack meets and marries Martha, whose domicile is Texas. Halftrack then makes a permanent change of station, or PCS move, to Hawaii. Halftrack and Martha have two different domiciles. Martha is unable to claim protection under the MSRRA.

For More Details
If you have any questions concerning these matters, please call the Legal Assistance Office for an appointment at (808) 655-8607.
The Legal Assistance Office is located at 278 Aleshire Ave., Bldg. 2037, Schofield Barracks.

We welcome service members, retirees and family members from all services, posts and bases.

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