Serving Clovis, Portales and the Surrounding Communities

Spouses now have domicile options

Submitted by: Capt. Ryan D. Malnar

On Nov. 11, 2009, President Barack Obama signed into law an amendment to the servicemembers Civil Relief Act to provide certain protections for spouses of military members.

The Military Spouses Residency Relief Act simply extends to military spouses the exemption 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 application of this exemption does not mean spouses do not have to pay state income tax. Spouses 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 changed the rules about domicile. But, what is domicile?

Domicile is where a person has a physical presence and intends to permanently re-side. Every person has but one domicile and can only have one domicile at any given time. 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 by changing some of the factors listed below.

A list of factors considered in determining one’s domicile includes: physical presence, property ownership, state issued licenses, vehicle registration, voter registration, local banking, local non-profit membership, declaration of intent such as one’s tax filing address, declaration of domicile or home of record, and legal actions such as marriage, divorce or other judicial proceedings, taken in the past .

These factors indicate the level of stability a person has in any given location. None of these factors alone are determinative, but the more connections you have with a particular state means you are evidencing your intent to return there.

The MSRRA applies if: You are a spouse of an active duty military member, 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.

The MSRRA gives you the option to pay state income tax on earnings to a state other than the state in which you currently reside. Civilian spouses here still need to be prepared to demonstrate that their connections to a state, other than New Mexico, are stronger than their 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, ask the base tax center to provide 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 was in a different state. The member lost due to lack of documentation of his domicile.

The best choice 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.

Visit the legal office for guidance on your situation.

 
 
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