Are federal military Survivor Benefit Plan payments to a service member's survivors subject to Kansas income tax?

Plain-English summary

This 1993 internal memorandum states the Department's position on how Kansas income tax treats payments from the federal military Survivor Benefit Plan (SBP). The short version: SBP payments to a deceased service member's survivors are treated as ordinary military retirement benefits and are exempt from Kansas income tax.

The memo describes the plan: "The federal government operates a plan for the benefit of survivors of deceased members of the armed forces. The program essentially allows a retired armed services member to elect to receive less in his/her month[ly] retirement pay in order that his/her survivors would receive a monthly income after his/her death."

The Department's conclusion: "[I]t has been determined that funds received by survivors of deceased armed forces members should be treated (for Kansas Income tax purposes) as ordinary military retirement benefits. Thus, said benefits would be exempt from Kansas Income tax under current law."

The memo gives the basis for that treatment:

• The origins of the funds were not spelled out in written law, but "an attorney for the Coast Guard payroll office here in Topeka[] indicated that the benefits are appropriated by Congress, rather than the retirement pay deductions being invested by a private company."
• "[T]he survivor receives a 1099-R from the Department of Defense, Retired Pay Operations."
• The determination rested on "these observations, contacts with surrounding states, and discussions with [the Department's] legal bureau."

What this means for you

Survivors receiving military SBP payments

If you receive Survivor Benefit Plan payments as the survivor of a deceased armed-forces member, this memo treats them as ordinary military retirement benefits for Kansas income tax — which means they were exempt from Kansas income tax under the law in effect when the memo issued.

Why the classification matters

Kansas exempts military retirement benefits from state income tax, so classifying SBP payments as retirement benefits (rather than some other kind of income) is what carries the exemption. The Department leaned on how the benefits are funded (appropriated by Congress) and reported (a DoD Form 1099-R) to reach that classification.

Confirm current law before relying on it

This is a 1993 determination stated to apply "under current law." Income tax rules and the specifics of military-benefit exemptions can change, so verify the present treatment for any current-year return.

Common questions

Q: Does Kansas tax military Survivor Benefit Plan payments to survivors?
A: No. The Department determined they should be treated as ordinary military retirement benefits and are exempt from Kansas income tax under the law in effect at the time.

Q: Why are SBP payments treated as retirement benefits?
A: Because, as the memo explains, the benefits are appropriated by Congress rather than paid from privately invested retirement deductions, and the survivor receives a Form 1099-R from the Department of Defense, Retired Pay Operations.

Q: Who reaches the survivor for these payments?
A: The survivor of a deceased armed-forces member, under the member's election to take reduced monthly retirement pay so survivors receive monthly income after death.

Citations and references

• Federal military Survivor Benefit Plan (SBP) — the federal program under which a retired service member elects reduced retirement pay so survivors receive monthly income; the memo concludes these payments are treated as ordinary military retirement benefits, exempt from Kansas income tax under then-current law, and cites no specific K.S.A. section.
• IRS Form 1099-R (Department of Defense, Retired Pay Operations) — the reporting form survivors receive, cited by the memo as support for treating the payments as retirement benefits.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: MEMO-SurvivorBenefitPlan

Original ruling text

Memorandum

Body:

MEMORANDUM

TO: Bob Clelland

FROM: Ron Grant

RE: Survivor Benefit Plan

DATE: January 11, 1993

The federal government operates a plan for the benefit of survivors of deceased members of the armed forces. The program essentially allows a retired armed services member to elect to receive less in his/her month retirement pay in order that his/her survivors would receive a monthly income after his/her death.

While we have found no written law that indicated the origins of the funds survivors receive, an attorney for the Coast Guard payroll office here in Topeka, indicated that the benefits are appropriated by Congress, rather than the retirement pay deductions being invested by a private company. Additionally, the survivor receives a 1099-R from the Department of Defense, Retired Pay Operations. Based on these observations, contacts with surrounding states, and discussions with our legal bureau, it has been determined that funds received by survivors of deceased armed forces members should be treated (for Kansas Income tax purposes) as ordinary military retirement benefits.. Thus, said benefits would be exempt from Kansas Income tax under current law.

Date Composed: 10/06/1997 Date Modified: 10/09/2001

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