By Capt. Leyla Carreras
Special to GUIDON

On Nov. 11, President Obama signed the Military Spouses Residency Relief Act into law.  This law amends the Servicemembers Civil Relief Act, or SCRA, to provide the ability for some military spouses to regain a “lost” domicile/residence for tax purposes.  As in everything, the devil is in the details.

There are some misconceptions about the MSRRA.  This law does not simply permit a Military Spouse to “pick” or “choose” a legal domicile in any state, say for example one that doesn’t have income tax.  The MSRRA explicitly states:

“A spouse of a service member shall neither lose nor acquire a residence or domicile for purposes of taxation with respect to the person, personal property or income of the spouse by reason of being absent or present in any tax jurisdiction of the United States solely to be with the service member in compliance with the service member’s military orders if the residence or domicile, as the case may be, is the same for the service member and the spouse.”

Essentially, this language mirrors the SCRA’s protection for service members and adds the provision that would apply when the service member and the spouse share the same domicile.  As used in the SCRA, the terms, “residence” and “domicile” are interchangeable.  These terms denote the place where a service member has his/her permanent home and to which they have the intention to return.  The SCRA protects the service member’s military pay from income taxes from the state where he/she resides due to military orders, unless that state is also his/her residence/domicile.

The MSRRA affords a military spouse the same protections, if the spouse established and maintains the same residence/domicile as the service member. This does not mean that a spouse may now simply pick their domicile to be the same as the service member, particularly when a spouse cannot meet the requirements to claim such state as his/her residence/domicile.

The States are still sorting out the implications of this law on their income tax and personal property tax systems. Most state forms for tax year 2009 were already in print when this law came into effect and do not address this change. Therefore, states have made amendments to their forms or have published instructions on how to address this issue. If the military household expects a refund for State Income Tax withheld, they can expect some inquiry into the domicile claim of both the service member and the spouse.  Whether a W-2 from DFAS with the service member’s domicile, a copy of the spouse’s dependent ID Card, or whether the state will ask for additional proof of that domicile remains to be determined and could differ between the states.  Service members and their spouse should contact the states department of revenue or visit their Web sites for more information.

For example, the Missouri Department of Revenue requires residents to file state income taxes.  Military personnel, and now their spouses, are required to file a MO-NRI or No Return Required form in order to claim the non-residency income tax exemption.  This form may now be filed online by using the following link: https://dory.dor.mo.gov /dor/tax/nri/default.aspx.  If either or both had Missouri tax withholdings and want to claim a refund, they must complete a Missouri tax return and include the Missouri Non Resident form.  They can even file for the 2007 and 2008 tax years, if taxes were withheld or they received a tax liability notification from the Missouri Department of Revenue.

The Fort Leonard Wood Tax Center has available most states for e-filing with the appropriate forms and amendments to take advantage of this benefit.  For more information, stop by the Fort Leonard Wood Tax Center in Bldg. 315, or call 596.1040 for an appointment. The center offers free tax preparation for military personnel, their dependents and retirees.

(Editor’s note: Carreras is the Fort Leonard Wood Tax Center officer-in-charge.)