Did a Public Health Service commissioned officer qualify for Virginia's military-pay subtraction when fewer than 90 active-duty days fell in 2012?

Subject

Department considered any extended active duty period exceeding 90 consecutive days to satisfy the requirement of Va. Code § 58.1-322 C 23, even if the period occurs over two taxable years.

Plain-English summary

Virginia allowed a married couple's 2012 military-pay subtraction for the wife's service as a commissioned officer in the U.S. Public Health Service.

Federal law included the Public Health Service Commissioned Corps among the uniformed services. Her Statement of Service showed extended active duty from January 1, 2009 through March 10, 2012.

Although fewer than 90 active-duty days fell within 2012, Virginia did not require all 90 days to occur in the same tax year. A continuous extended-active-duty period exceeding 90 days satisfied Va. Code § 58.1-322 C 23 even when it crossed tax years. Because her 2012 qualifying pay did not exceed $15,000, the full subtraction applied and the audit adjustment was reversed.

What this means for you

For the law applied in this ruling, the 90-day requirement measured the continuous period of extended active duty, not only service days inside the return year. Public Health Service commissioned officers could qualify as uniformed service personnel.

Citations and references

• Va. Code § 58.1-322 C 23.
• 10 U.S.C. §§ 101(d)(1) and 101(a)(5)(C).

Source

• Landing page: Virginia Laws, Rules & Decisions
• Ruling: P.D. 16-212

Original ruling text

December 14, 2016

Re: § 58.1-1821 Application: Individual Income Tax

Dear *:

This is in response to your letter in which you seek correction of the individual income tax assessment issued to * (the “Taxpayers”) for the taxable year ended December 31, 2012. I apologize for the delay in responding to your appeal.

FACTS

The Taxpayers, a husband and wife, filed a joint 2012 Virginia income tax return and claimed a subtraction for basic military pay. Under review, the Department denied the subtraction and issued an assessment. The Taxpayers appeal the assessment, contending the wife was a commissioned officer with the United States Public Health Service and was entitled to the subtraction.

DETERMINATION

Virginia Code § 58.1-322 C 23 provides military service personnel with a subtraction for up to $15,000 of basic military pay received during a taxable year, provided they are on extended active duty for a period in excess of 90 days. The subtraction, however, is reduced when the amount of military basic pay received by the taxpayer exceeds $15,000 and is fully phased out when basic military pay reaches $30,000.

10 U.S.C. § 101(d)(1) defines the term “active duty” as full time duty in the active military service of the United States. 10 U.S.C. § 101(a)(5)(C) sets forth the term “uniformed services” to include Commissioned Corps of the Public Health Service (USPHS). A member of the USPHS is, therefore, considered an active duty service member when such member is called or ordered to full time duty under the authority of U.S.C. Title 10.

Information provided shows the wife received wages from the Department of Finance Accounting Services (DFAS) and the Department of Health and Human Services (HHS) during the 2012 taxable year. HHS has 11 divisions, one of which includes the USPHS. The Taxpayers furnished a copy of a HHS Statement of Service (Form PHS 1867), which is equivalent to the Department of Defense's Certificate of Release or Discharge from Active Duty (Form DD-214). This document indicates that the service member was on extended active duty from January 1, 2009 through March 10, 2012.

Although the wife was on active duty status for less than 90 days during the 2012 taxable year, the basic military pay subtraction does not require active duty military personnel to serve the required 90 day active duty period within the same taxable year. In P.D. 15-124 (06/24/2015), the Department considered any extended active duty period exceeding 90 consecutive days to satisfy the requirement of Va. Code § 58.1-322 C 23, even if the period occurs over two taxable years.

The evidence indicates the wife was on active duty for more than 90 consecutive days and her active duty pay did not exceed $15,000 for the 2012 taxable year. Therefore, the Taxpayers are eligible for a full subtraction of the income received from HHS. As such, the denial of the subtraction will be reversed, and the case will be returned to the auditor to make the appropriate adjustments.

The Code of Virginia , sections and public documents cited are available on-line at www.tax.virginia.gov , in the Laws, Rules, & Decisions section of the Department's web site. If you have any questions regarding this determination, you may contact * in the Office of Tax Policy, Appeals and Rulings, at ***.

Sincerely,

Craig M. Burns
Tax Commissioner

AR/690.D