Military Spouse Residency Relief Act

The MSRRA is designed to prevent spouses from having to change their state of residency for tax purposes if they are only accompanying a servicemember on military orders. If a military spouse can demonstrate proof of residency in another state (e.g., drivers license, voting registration, property documents, etc.), then the spouse can claim that state as his/her residence, and will be exempt from paying income tax in CA.

Having another state claimed on the servicemember's LES is not entirely sufficient for the spouse to claim that state - the spouse has to establish residency on his or her own. FTB pub. 1032 outlines the law pretty clearly: http://www.ftb.ca.gov/forms/2009/09_1032.pdf.

Acquisition of a drivers license in California is a function of state law and not related to MSRRA, so that alone should not disqualify a spouse from MSRRA. Also:

Other main points to remember on the MSRRA are:

. It is retroactive starting January 1, 2009 and may entitle eligible
spouses for a refund on their 2009 taxes (the link to request a refund is included below).
. It may, however, also require some spouses to file tax returns in
their State of domicile for tax year 2009, when they might otherwise not have been required to do so. Depending on the laws of the domiciliary State, the spouse may be required to pay income tax to the domiciliary State.
. Servicemembers and their spouses will likely have to provide
documentation of their claimed legal residence as determined by the non-domicile State.
. The exemption only applies to wage income and income from services
performed in the non-domiciled State. For example, a spouse operating a business in the non-domicile State may not qualify for exclusion of the business income. Similarly, income from business or rental property in that State will be subject to taxation in the non-domicile State.
. For 2010 and beyond, spouses should file new withholding forms with
their employer, designating their appropriate domicile state. If the employer cannot withhold taxes for that state, the spouse will have to make estimated quarterly tax payments to that state.

A couple of other references:

. FTB newsletter (see page 10): http://www.ftb.ca.gov/forms/2009/09_1032.pdf

. Please see below on information on the new law regarding the exemption of some military spouse income from California state taxes. Please go to http://www.ftb.ca.gov/aboutFTB/press/2009/Release_61.shtml for the full text article, and keep an eye on the California Franchise Tax Board website for updates.

. The govtrack site below provides the actual bill and some FAQs:
http://www.govtrack.us/users/questions.xpd?topic=bill:s111-475

. The facebook page provides lots of dialogue and some good links for some states, such as VA and CA, which have already provided information via their websites.
www.facebook.com/pages/Military-Spouses-Residency-Relief-Act/51457362877

. Here are the links to the exemption form and the refund form. Any "evidence" you have (tax documents, property information, identification, etc) should help.

Exemption from withholding (do this first:
http://www.edd.ca.gov/pdf_pub_ctr/de4.pdf
And then the refund http://www.ftb.ca.gov/forms/2009/09_540nrbk.pdf

PLEASE check your state's tax website for state-specific details. Some states are requiring you show proof of residency in the state in which your spouse is stationed in order to claim it as your tax state.

PLEASE REMEMBER to check with your local legal office for any additional info. What I have provided here is a brief overview of eligibility information. There is other good information on the links I have provided. If you have further questions, please consult with the Navy, Marine, or Air Force legal service offices.

V/R -
YN2 Stepheni Norton
Decon Admin & Training Support
Operations Section
Gulf Coast IMT - NOLA
14th Floor
619.602.8951 (c) (SMS)
stepheni.m.norton@uscg.mil

"DATA is DATA; it is neither good nor bad, it just is"