Technical Information Release  TIR 24-11: Legislation Impacting Residency Rules for Military Servicemembers and their Spouses

Date:	10/18/2024
Referenced Sources:	Massachusetts General Laws

I. Introduction

The Veterans Auto and Education Improvement Act (“VAEIA”)[1], enacted January 5, 2023, amends the rules in the Military Spouses Residency Relief Act (“MSRRA”)[2] for determining the residence, for state tax purposes, of servicemembers and their spouses (“military spouses”).  Specifically, the VAEIA changes the rules that govern the residency of military spouses and that govern the military spouse election, which permits servicemembers and their spouses to choose their residency from among qualifying alternatives.  The purpose of this Technical Information Release (“TIR”) is to explain the Massachusetts tax implications of these new rules, which apply to tax years beginning on or after January 1, 2023.

TIR 19-15 explains the Massachusetts tax consequences of a 2018 amendment to the residency rules in the MSRRA.  It also explains how servicemembers and their spouses’ income is taxed by Massachusetts and the rules that govern the Massachusetts withholding on their wages and the filing of their income tax returns.  TIR 19-15 remains in effect, except that the rules that it describes for determining the residency of military spouses in sections II.B and II.C.2, and for the military spouse election in section II.C.3, as further explained below, do not apply after December 31, 2022.

II. Discussion

A.  Massachusetts Residency and Taxation of Income

As explained in TIR 19-15, for Massachusetts income tax purposes, the taxation of an individual depends upon the individual’s status as a resident or non-resident.  Under G.L. c. 62, § 2, a Massachusetts resident is taxed, with certain limitations, on all income from whatever sources derived.  A Massachusetts resident is any natural person domiciled in the commonwealth, or any natural person who is not domiciled in the commonwealth who meets certain requirements.  See G.L. c. 62, § 1(f).  A domicile is the place which is an individual's true, fixed and permanent home, determined by established common law principles and the facts and circumstances in each case.  See 830 CMR 62.5A.1(2).  In contrast, a non-resident is taxed only on income derived from or connected to Massachusetts sources.  See G.L. c. 62, § 5A.  For a more detailed review of the residency rules that apply for purposes of Massachusetts personal income tax, as explained in the context of military servicemembers and their spouses, see TIR 19-15.  For a review of these rules in general, see TIR 95-7.

B.  Determination of Residency for Military Spouses

For tax years beginning on or after January 1, 2023, under the MSRRA as amended by the VAEIA, a military spouse “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 servicemember in compliance with the servicemember's military orders.”  50 USC § 4001(a)(2).

For tax years beginning before January 1, 2023, this rule applied only if the military spouse’s residence or domicile was the same as that of the servicemember.  See TIR 19-15, sections II.B and II.C.2.  For tax years beginning on or after January 1, 2023, this rule applies regardless of whether the military spouse’s residence or domicile is the same as that of the servicemember.

The rules set forth in the MSRRA, as amended by the VAEIA, protect military spouses from losing or acquiring a residence or domicile under the circumstances described in the Act.   However, a military spouse, as well as a servicemember, can by actions or intentions nonetheless affirmatively change domicile and therefore their residency for tax purposes, including to the state where they reside while the servicemember is on military duty.  See TIR 19-15, section II.B.

The rules pertaining to a change of residency do not require any further action by a military spouse or servicemember, other than filing the appropriate resident (Form 1) and/or non-resident (Form 1-NR/PY) return.  A qualifying, non-resident military spouse who is present in Massachusetts solely to be with the servicemember in compliance with the servicemember's military orders may be exempt from Massachusetts withholding.  Such a withholding exemption may apply whether the military spouse is a non-resident because of the rules set out in this section or by election, described below in section II.C.  For more information on withholding exemptions, see TIR 19-15, section III.A.  

C. Military Spouse Election

For tax years beginning on or after January 1, 2023, under the MSRRA as amended by the VAEIA, a servicemember and military spouse, for any taxable year of the marriage, may elect as their state of residence for tax purposes, regardless of the date of the marriage, any of the following: (a) the residence or domicile of the servicemember; (b) the residence or domicile of the military spouse; or (c) the permanent duty station of the servicemember.  50 USC § 4001(a)(3).

In contrast, for tax years beginning on or after January 1, 2018 through December 31, 2022, as described in TIR 19-15, section II.C.3, only the spouse of a servicemember could make an election and that election was more limited. During that prior period, the spouse could elect only to have the same state of residence for tax purposes as the servicemember.

The servicemember and spouse must file the appropriate resident (Form 1) and/or non-resident (Form 1-NR/PY) returns based on their election.  No other affirmative statement of residence, domicile, or permanent duty station is required with the filing, and the filing itself will be deemed an election under 50 USC § 4001(a)(3).  The Department reserves the right to request verification of residence, domicile, or permanent duty station.
 

                                                                                    /s/Geoffrey E. Snyder
                                                                                    Geoffrey E. Snyder
                                                                                    Commissioner of Revenue

GES:RHF:jgb

October 18, 2024

TIR 24-11

[1]  P.L. 117–333.

[2]  The MSRRA amended the Servicemembers Civil Relief Act, 50 U.S.C.S. § 4001.