Under California Legal Ruling 300, how did permanent military orders affect residency, domicile, and the taxation of military families?

Plain-English summary

California Legal Ruling 300 treated a California career servicemember as a nonresident after leaving California under permanent military orders for another duty post.

The ruling did not treat residency and domicile as identical. A servicemember could become a nonresident while retaining California domicile, with consequences for a spouse who remained a California resident and for community income.

For servicemembers arriving from another state, merely serving at a California post did not make their income taxable by California. Under the ruling, California could tax the full income during California service only if the servicemember adopted California domicile.

Why permanent orders mattered

FTB changed its position after the State Board of Equalization's 1963 decision in the Appeal of Harold L. and Miriam Jane Naylor.

According to the ruling, Naylor held that a career servicemember's absence after leaving California to pursue a military career was not temporary or transitory. The federal military-relief statute did not create or freeze California residency when California's own income-tax law did not otherwise do so.

FTB also stated that its regulation 17014-17016(h) had incorrectly interpreted the statute and was not controlling.

California personnel leaving the state

The ruling concluded that California military personnel were nonresidents when they left under permanent military orders to serve at another duty post.

If the servicemember's spouse remained a California resident, the spouse was taxable on one-half of the servicemember's community income provided the servicemember retained California domicile.

That proviso is important: the ruling treated nonresident status for income-tax purposes and domicile as related but distinct concepts.

Out-of-state personnel stationed in California

The ruling said California could not tax out-of-state military personnel merely because they served at California duty posts, unless they adopted California as their domicile of choice.

If they adopted California domicile, FTB said California could tax their entire income during periods of service at California posts.

Declaration of legal residence

The armed services were obtaining declarations of legal residence from personnel. Under the ruling, a declaration naming California was presumptive evidence of California residence.

The presumption was rebuttable: the servicemember could submit proof showing that California was not the person's residence.

What this means for you

Servicemembers changing duty stations

This ruling shows the historical importance of whether an absence was temporary or transitory and whether military orders represented a permanent move. Current federal and California rules must be applied instead of assuming the 1965 result still controls.

Military spouses

The ruling linked the California-resident spouse's taxation of community income to the servicemember's retained domicile. Current military-spouse residency protections and community-property rules require a separate present-day analysis.

Accountants and tax professionals

Document the orders, physical moves, domicile indicators, legal-residence declarations, spouse's residency, and the source and ownership of income. Treat a declaration as evidence rather than automatically conclusive proof.

Common questions

Q: Did permanent military orders automatically preserve California residency?

A: No. Under this historical ruling, a California career servicemember became a nonresident after leaving under permanent orders for another duty post.

Q: Could the servicemember still retain California domicile?

A: Yes. The ruling separately addressed retained domicile when discussing the resident spouse's share of community income.

Q: Was an out-of-state servicemember taxed merely for being stationed in California?

A: No. The ruling required adoption of California domicile before treating the person's entire income during California service as taxable.

Q: Was a California legal-residence declaration conclusive?

A: No. It was presumptive evidence that could be rebutted with proof.

Q: Did the ruling preserve prior Digest No. 236?

A: No. FTB withdrew Digest No. 236 because it was inconsistent with the ruling's conclusions.

Citations and references

• Appeal of Harold L. and Miriam Jane Naylor (Cal. St. Bd. of Equal., December 11, 1963)
• Soldiers' and Sailors' Civil Relief Act (historical federal law)
• Former California regulation 17014-17016(h), previously numbered 17013-17015(h)
• Digest No. 236 (withdrawn by the ruling)

Source

• Landing page: California FTB Legal Rulings
• Official HTML: Legal Ruling 300

Original ruling text

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Legal Ruling 1965-300

California Franchise Tax Board
Legal Ruling No. 300

April 23, 1965

Personal Income: Military Personnel

A career serviceman becomes a nonresident when he leaves California under permanent change status orders.

This Board has been following the principle that under the Soldiers' and Sailors' Civil Relief Act a person entering the Armed Forces from California retains his California residence even though stationed outside the state under military orders.

On December 11, 1963, the Appeal Board entered its decision in the Appeal of Harold L. and Miriam Jane Naylor in which it concluded that a career serviceman became a nonresident when he left California to pursue his military career. In supporting its decision the Board reasoned that the taxpayer’s absence from this state was not temporary or transitory in nature, and since the Legislature has not adopted a specific definition of residence in our Law to include this type of individual, the Soldiers' and Sailors' Civil Relief Act did not cause his residence to be frozen in this state. The Board further concluded that since Reg. 17014-17016(h) (formerly 17013-17015(h)) incorrectly interpreted the provisions of the statute it was not controlling.

In view of the Naylor decision the following conclusions have been reached:

Since the Soldiers' and Sailors' Civil Relief Act will not create a residence which is not otherwise provided for in the Personal Income Tax Law, California military personnel will be treated as nonresidents when they leave this state under permanent military orders to serve at another post of duty. If the wife remains a California resident she is taxable on one half of her husband's community income provided the husband retains his California domicile.

Unless out-of-state military personnel adopt California as their domicile of choice the Board cannot tax them even though they are serving at California posts of duty. If a California domicile is adopted, however, the Board can tax them on their entire income during periods of service at California posts of duty.

Declarations of legal residence are now being obtained by all branches of the service from their personnel. A declaration showing California as the legal residence will be treated as presumptive evidence of California residence unless proof is submitted to dispel the presumption.

Since this memorandum is inconsistent with the principles established in Digest No. 236 that memorandum is hereby withdrawn.

Last updated: 09/24/2025