How does the federal Military Spouses Residency Relief Act affect South Carolina income, withholding, and personal property tax for a servicemember's spouse (per SC IL #09-21)?

Plain-English summary

This Information Letter explains how the federal Military Spouses Residency Relief Act applies to South Carolina taxes. President Obama signed the Act (Pub. L. 111-97) on November 11, 2009. It amended the Servicemembers Civil Relief Act so that a servicemember's spouse does not lose or acquire a domicile or residence in a state simply by being present there to accompany the servicemember under military orders — as long as the servicemember and spouse have the same domicile. When the letter was written, a task force of states was still working out common implementation guidelines, and the Department said it might issue more information later.

The letter walks through three taxes:

Income tax. A servicemember's spouse may be exempt from South Carolina income tax on income from services performed in South Carolina if (1) the servicemember is in South Carolina on military orders, (2) the spouse is here solely to be with the servicemember, and (3) the spouse maintains a domicile in another state. The exemption is effective for tax year 2009 and later — it does not affect 2008 or earlier. A spouse who had South Carolina wage withholding for 2009 claims a refund by filing a 2009 Form SC1040 with a Schedule NR, treating the service income the same way the Schedule NR instructions treat a nonresident servicemember's military pay. That return cannot be filed before January 2010.

Withholding tax. A qualifying spouse can stop South Carolina withholding by giving the employer a federal Form W-4 completed for South Carolina purposes only, writing at the top "Nonresident Military Spouse for State Purposes Only." The Department recommends the spouse keep a copy.

Personal property tax. A qualifying spouse's motor vehicles and other tangible personal property get the same tax treatment already allowed for servicemembers — whether the property is owned or titled in the name of the servicemember, the spouse, or both jointly.

What this means for you

If you are married to a servicemember stationed in South Carolina, kept your home-state domicile, and are only in South Carolina to be with your spouse, this letter is how South Carolina first implemented your federal protection: your South Carolina-earned wages can be exempt from South Carolina income tax and withholding, and your car and other personal property are treated like a servicemember's. Practically, tell your employer by filing the specially marked Form W-4, and recover any 2009 South Carolina withholding on a 2009 SC1040 with Schedule NR. Because this was the Department's first, 2009-era guidance and the federal rules for military spouses were later broadened, confirm the current requirements before relying on it.

Common questions

Q: Does the spouse's South Carolina income become tax-free automatically?
A: No. The spouse must meet all three conditions — the servicemember is in South Carolina on orders, the spouse is here solely to accompany the servicemember, and the spouse keeps a domicile in another state — and the exemption applies only for tax year 2009 forward.

Q: How does a qualifying spouse stop South Carolina withholding?
A: By giving the employer a federal Form W-4 marked at the top "Nonresident Military Spouse for State Purposes Only."

Q: How is a 2009 refund of withheld South Carolina tax claimed?
A: On a 2009 Form SC1040 with a Schedule NR, treating the service income as the Schedule NR instructions treat a nonresident servicemember's military compensation; the return cannot be filed before January 2010.

Subject

Federal Military Spouses Residency Relief Act

Source

• Landing page: https://dor.sc.gov/advisory-opinion-search
• Original PDF: https://dor.sc.gov/sites/dor/files/policies/IL09-21.pdf

Original ruling text

State of South Carolina

Department of Revenue
301 Gervais Street, P. O. Box 12265, Columbia, South Carolina 29211
Website Address: http://www.sctax.org

SC INFORMATION LETTER #09-21

SUBJECT:

Federal Military Spouses Residency Relief Act
(Income Tax, Withholding Tax, Personal Property Tax)

DATE:

November 24, 2009

AUTHORITY:

S. C. Code Ann. Section 12-4-320 (2000 and Supp. 2008)
S.C. Code Ann. Section 1-23-10(4) (2005)
SC Revenue Procedure #09-3

SCOPE:

An Information Letter is a written statement issued to the public to
announce general information useful in complying with the laws
administered by the Department. An Information Letter has no precedential
value.

On November 11, 2009, President Obama signed into law the Military Spouses Residency Relief
Act (PL 111-97) (Act). The Act amends the Servicemembers Civil Relief Act to provide that a
spouse shall neither lose nor acquire domicile or residence in a state when the spouse is present
in the state solely to be with the servicemember in compliance with the servicemember’s military
orders if the residence or domicile is the same for both the servicemember and spouse.
There is currently a task force of states collaborating to establish common guidelines for
implementing the Act. Once these guidelines are established, the Department may provide
additional information about implementing this Act in South Carolina. Any additional
information will be published on the Department’s website at www.sctax.org under “What’s
New.”
Income Tax
Under the Act, a spouse of a servicemember may be exempt from South Carolina income tax on
income from services performed in South Carolina if (1) the servicemember is present in South
Carolina in compliance with military orders; (2) the spouse is in South Carolina solely to be with
the servicemember; and (3) the spouse maintains domicile in another state.
The Act is effective for taxable year 2009 and thereafter. It does not affect income taxes
imposed or paid for 2008 and earlier. Any refund of wage withholding for taxable year 2009 as
a result of this Act may be claimed by filing a 2009 South Carolina Individual Income Tax
Return (Form SC 1040) including a Schedule NR. This return cannot be filed prior to January
2010. On the Schedule NR the nonresident spouse’s service income should be treated in the
same manner as provided in the Instructions to the Schedule NR (Nonresident Schedule) for a
nonresident serviceman’s military compensation.
1

Withholding Tax
A servicemember’s spouse whose wages are exempt from South Carolina income tax under the
Act may claim an exemption from South Carolina withholding tax. Spouses that qualify for
South Carolina wage exemption under the Act must complete a federal Form W-4 for South
Carolina purposes only by writing at the top of the form “Nonresident Military Spouse for State
Purposes Only.” This Form W-4 should be provided to the employer and the Department
recommends that the spouse also retain a copy of this Form W-4 for his or her records.
Personal Property Taxes
Motor vehicles and other tangible personal property owned by a spouse of a servicemember will
be subject to the same tax treatment currently allowed for servicemembers whether the property
is owned or titled in the name of the servicemember, spouse, or both names jointly.

2