Written by Spring 2023 M-VETS Student Advisor Hanna-Elizabeth B. Montgomery.
The Veterans Auto and Education Improvement Act of 2022 was signed into law on January 5, 2023.[1] This Act makes two major changes to the Service Members Civil Relief Act, specifically concerning military families. The first change allows military spouses to receive reciprocity for their professional licenses when they move to a new state under Permanent Change of Station (PCS) orders. The second change allows military families flexibility in where they file state taxes.
- PORTABILITY OF PROFESSIONAL LICENSES
Under PCS Orders, the Department of Defense (DOD) moves more than 400,000 service members and their families annually.[2] Every year, 14.5% of the military spouse population moves across state lines compared to the 1.1% of civilians that move across state lines.[3] Military OneSource, the Department of Defense’s (DOD) information portal for military families, estimates that “up to 34% of military spouses in the labor force are required to be fully licensed; and of those spouses, 19% experience challenges maintaining their licenses.”[4] The current Secretary of Defense, Secretary Austin, has identified this challenge as a top concern and describes the DOD’s commitment to military members and their families as “a sacred obligation … Our military families provide the strong foundation for our Force, and we owe them our full support.”[5]
The Veterans Auto and Education Improvement Act aims to alleviate this burden by ensuring that military spouses and servicemembers can transport their professional license from state to state. Specifically, when a servicemember or spouse of a servicemember relocated due to military orders, their license from the previous state must be considered valid at a “similar scope of practice” in the new state. The servicemember or spouse must (1) provide a copy of the military orders to the licensing authority in the new state; (2) remain in good standing with all licensing authorities that have issued licenses to the servicemember or spouse; and (3) submit to the authority of the new licensing jurisdiction for the purposes of “standards of practice, discipline, and fulfillment of any continuing education requirements.”[6] Law licenses are the only professional license specifically exempt under this statute.[7]
As of May 2023, there is still not a uniform process for military spouses or servicemembers to transfer their license from one state to another. In the wake of this act, multiple states, like Pennsylvania, Arkansas, and Massachusetts, have signed interstate compacts which create a uniform and relatively simple process for transferring licenses between states.[8] If there is an interstate compact agreement in a state, that process will govern.[9] The interstate compact agreements vary by profession and not all states have one. In states that lack interstate compacts, military families should check with the licensing authority in their new state. Military OneSource estimates that 66% of state licensing boards allow military spouses to begin working within 30 days.[10] Further, Secretary Austin, directed the DOD to “accelerate the development of seven additional occupational licensure interstate compacts with organizations representing multiple professions” in September of 2022.[11]
In addition to advocating for interstate compacts and reciprocity, the military provides financial support for transferring professional licenses. The Spouse License Reimbursement Program allows military spouses to be reimbursed for their licensing costs associated with a PCS move.[12] While each branch of the military has its own requirements for how to apply for the reimbursement, all can grant reimbursements of up to $1,000.[13]
2. RESIDENCE FOR TAX PURPOSES.
Filing taxes for military families is typically complicated. State taxes are usually filed based on someone’s state of residency. A residence is relatively transient. Often residency is determined by physical presence in a state. Most states have statutes defining how much of the year a person must be physically present in the state to be taxed in that state. For Virginia, a person needs to have a residence in Virginia for 183 days of the taxable year to be taxed in Virginia.[14] Other states, like California, requires taxes to be paid based off domicile as well as residency.[15]
Legally, a residence and a domicile are different, though the difference is nuanced. Someone’s domicile is his or her “true, fixed, and permanent home,” to which he or she has the “intention of returning whenever he is absent therefrom.”[16] Domicile is sticky and is difficult to remove.[17] One can change his or her domicile by moving to a different domicile (state) and intending to remain in the new domicile.[18] Servicemembers typically move from state to state under Permanent Change of Station orders. The servicemember is living in the new state for so long as their orders allow, and then they will move to another state. Although servicemembers are moving to and residing in a new state, they have no intent to remain in the new state.
Because servicemembers do not have intent to remain in the state they move to, their domicile often remains with the state in which they entered in the military. To accommodate servicemembers unique situation, Congress passed the servicemembers civil relief act in 2003. This act allowed servicemembers to file taxes in either their place of residence or their domicile. Subsequent to the SCRA, Congress passed the Military Spouses Residency Relief Act (MSRRA).[19] Since military spouses and their servicemembers often file joint taxes, the MSRRA aims to simplify the burden military families faced in becoming required to file taxes for differing states due to a PCS. The MSRRA allowed military spouses to declare the same state of residency and domicile as their servicemember spouse.[20]
Now the Veterans Auto and Education Improvement Act provides multiple options for military families to file taxes. The law states that “for any taxable year of the marriage, a servicemember and the spouse of such servicemember may elect to use for purposes of taxation, regardless of the date on which the marriage of the servicemember and the spouse occurred, any of the following: (A) The residence or domicile of the servicemember. (B) The residence or domicile of the spouse. (C) The permanent duty station of the servicemember.” [21] This means that servicemembers and spouses can choose between which state they file income taxes in. Certain states, like Florida and Texas, are well known in the military community for having no state income tax.
This Act can give servicemembers and their families up to four different states to file their taxes in. Servicemembers domicile is typically the place he or she entered in the military. Spouses may have a separate domicile from before the marriage if he or she lived in a state and had intent to remain there before marrying the servicemember. If the servicemember and his or her spouse are living apart, then the spouse and servicemember may have a different residence. The law allows servicemember and their spouse to elect the residence of either the servicemember or the spouse. Finally, the servicemember can file at his or her permanent duty station. In the National Capital Region, a servicemember may reside in a state that is not where he or she is stationed. For example, a servicemember may live in Maryland, but work at the Pentagon, in Virginia.
Conclusion
These changes are expected to help military families navigate the geographic instability of military life. The military spouse licensing relict should greatly dimmish the waiting time and costs associated with obtaining a new license. As Secretary Austin explained, “military spouses provide the strong foundation upon which their loved ones in uniform stand – and our communities and our Nation rely on their resilience. We owe them our energetic, unwavering support.”[22]
[1] P.L. 117-333, Veterans Auto and Education Improvement Act of 2022.
[2] PCS: The Basics of Permanent Change of Station, Military OneSource, Jul. 8, 2022, https://www.militaryonesource.mil/moving-housing/moving/planning-your-move/pcs-the-basics-about-permanent-change-of-station/
[3] Enhanced Military Spouse Licensure Portability, 2022, https://statepolicy.militaryonesource.mil/key-issue/enhanced-military-spouse-licensure-portability/2022
[4] Id.
[5] Llyod Austin, Secretary of Defense, Taking Care of Our Service Members and Families Memorandum, Sept 22, 2022, https://media.defense.gov/2022/Sep/22/2003083398/-1/-1/0/TAKING-CARE-OF-OUR-SERVICE-MEMBERS-AND-FAMILIES.PDF (hereinafter “Austin”).
[6] P.L. 117-333, SEC. 705A(a).
[7] The Military Spouse J.D. Network advocates for licensing accommodations for military spouse attorneys. Currently, 44 states have licensing accommodations for military spouse attorneys, and MSJDN has efforts underway in four other states. Rule Change, MSJDN, https://msjdn.org/rule-change/.
[8] Gross, Natalie, It’s Getting Easier For Military Spouses to Transfer Professional Licenses, Mar. 18, 2023, https://thespouseangle.com/news/its-getting-easier-for-military-spouses-to-transfer-professional-licenses
[9] Smith, Dawn, What to Know About the 2023 Military Spouse Licensing Relief Act, Feb. 3, 2023, https://blog.militarybyowner.com/what-to-know-about-the-2023-military-spouse-licensing-relief-act
[10] Military Spouse Licensure Reports, 2021 Report, https://www.militaryonesource.mil/data-research-and-statistics/reports/military-spouse-licensure-reports/.
[11] Austin, supra n.5.
[12] See License and Certification Reimbursement for Spouses, May 26, 2022, https://www.dcms.uscg.mil/Our-Organization/Assistant-Commandant-for-Human-Resources-CG-1/Director-of-Military-Personnel-CG-13/Military-Personnel-Policy-CG-133-/Spouse-License-Reimbursement/
[13] Transferring Your Professional License; What’s Involved, Military OneSource, Mar. 25, 2022, https://www.militaryonesource.mil/education-employment/seco/transferring-your-professional-license-what-s-involved/
[14] 23 VAC10-110-30. Definitions.
[15] See Residents, State of California Franchise Tax Board, https://www.ftb.ca.gov/file/personal/residency-status/index.html.
[16] Stine v. Moore, 213 F.2d 446, 448 (1954).
[17] See McDonald v. Mabee, 243 U.S. 90 (1917).
[18] Mitchell v. United States, 88 U.S. 350 (1875).
[19] The Military Spouses Residency Relief Act, Military OneSource, Nov. 8, 2021, https://www.militaryonesource.mil/financial-legal/legal/military-spouses-residency-relief-act/
[20] 111 P.L. 97, Military Spouses Residency Relief Act.
[21] P.L. 117-333, Veterans Auto and Education Improvement Act, Section 18.
[22] Austin, supra n. 5.