| 2005 Legislation: Military FAQ |
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1. I'm a member of the military. Are there any new tax laws that might affect me?
The Legislature passed many new laws this year that affect military personnel. Senate Bill 31 connected us to federal law, and House Bill 2933, which has four major tax-related provisions, provides for:
- Discharge of taxes due to death. A member of the Armed Forces of the United States who has been on active duty for at least 90 consecutive days, or a member of the Oregon National Guard, the military reserve forces, or other organized militia in Title 10 status for at least 90 consecutive days who died during the performance of that service may have his or her debt forgiven. This provision applies to all active-duty deaths that occurred on or after September 11, 2001.
- Collection activity to be placed on hold. A member of the Armed Forces of the United States who has been on active duty for at least 90 consecutive days or a member of the Oregon National Guard (the military reserve forces, or the organized militia of any other state or territory of the United States) in Title 10 status for at least 90 consecutive days who has an outstanding tax debt may request that we stop collection activity until six months after Title 10 status ends. This provision applies to any unpaid tax debt that became due during active duty (Title 10) on or after September 11, 2001.
- A Combat Zone income exclusion. Income earned while serving in a combat zone is excluded from Oregon and federal taxation. Military pay earned outside Oregon has been exempt from taxation since 1991 and has already been excluded from tax on the Oregon return.
- A military pay exclusion due to change in status from Title 32 to Title 10. A member of the Oregon National Guard, the military reserve forces, or the organized militia of any other state or territory of the United States that who performs service after a change in status from Title 32 to Title 10 may subtract from Oregon income the military pay earned inside Oregon. Previously, military pay earned while serving in Oregon was subtracted up to a maximum of $3,000. If you have not changed status from Title 32 to Title 10, you do not qualify for the new exclusion.
In addition, Oregon is now connected to the provisions of the federal Military Family Tax Relief Act (MFTRA) of 2003. MFTRA's most common provisions include the deduction for certain overnight travel expenses of National Guard members, and the increase in the death benefits exclusion amount.
House Bill 2945 provides additional benefits to Oregon residents. If you are a homeowner and performing service after a change in status from Title 32 to Title 10, you may be eligible for a partial property tax exemption. Contact your county assessor's office for more information. The form and instructions for the exemption are available.
2. I'm a National Guard member. I heard that I don't have to pay income tax to Oregon any more. How do I get a refund?
Military pay you earned inside Oregon after you changed from Title 32 to Title 10 status is exempt from income tax in Oregon for tax years beginning on or after January 1, 2001. You may subtract the Title 10 military income you earned in Oregon on your Oregon return. Military pay earned outside Oregon is already exempt from income tax. Oregon will still tax any other income you have and any income your civilian spouse earned. You may file an amended return claiming the subtraction for tax years that are not closed by the statute of limitations (i.e. 2001 and 2002). On your amended return, explain that you have changed status and include a copy of your orders or other documentation that proves the status change (a letter on military letterhead or evidence from your payroll office, for example).
To claim a refund for tax year:
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You have until:
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2003
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April 15, 2007
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2004
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April 15, 2008
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3. I’m Title 10 and have never been Title 32. Is my income exempt from tax?
Yes, but only up to the first $3,000 you earn inside Oregon. Oregon will not tax any military pay you earned outside of Oregon.
4. I’m not Title 10 but I’m Title 32; can I exclude my income and get a refund?
No. If you have not had a change in status from Title 32 to Title 10, you may not subtract more than $3,000 of your military pay earned in Oregon from your Oregon income.
5. How do I notify the Department of Revenue that I have changed from Title 32 status to Title 10 status?
If you are currently working with one of our revenue agents, send that person a copy of your orders or a letter on military letterhead that explains your status change. If you are not working with someone, please send a copy of your orders or a letter on military letterhead to:
Oregon Department of Revenue
ATTN: Military Group/PSU
955 Center Street NE
Salem OR 97301
6. I'm in the National Guard and I heard that there was a deduction for travel expenses for Oregon now. Is this true?
Yes. Before November 5, 2005, Oregon was disconnected from federal law when the federal government passed the law allowing the overnight travel expenses deduction. Senate Bill 31 connected Oregon to the federal law. It is retroactive to 2003 when the federal law was enacted. You may file an amended return within three years from the due date of the return to claim this deduction if you previously included this expense as an addition on your Oregon return.
7. In 2003, my spouse died and I added the death benefit on my Oregon tax return. Is this still correct?
No. Before November 5, 2005, Oregon was disconnected from federal law when the federal government passed the law allowing the death benefit exclusion. Senate Bill 31 connected Oregon to the federal law. It is retroactive to 2003 when the federal law was enacted. You may file an amended return to subtract the amount of death benefit you originally included as an addition on your Oregon return.
8. My spouse was killed in Iraq. I heard my spouse's tax debt could be cancelled. How do I do this?
The Oregon Department of Revenue can cancel Oregon tax debt for servicemembers who died on or after September 11, 2001, as long as they were in Title 10 status for 90 consecutive days or more on the date of death. To cancel your spouse's Oregon tax debt you must:
- File an amended Oregon return (Form 40X) and write "KIA—active duty" on the top of the return and on the line for total tax.
- Attach to your amended return Oregon Form 243, "Claim to Refund Due a Deceased Person."
- Attach a copy of the Report of Casualty certification from the Department of Defense (DoD 1300 Report of Casualty).
- Attach documentation showing that your spouse was active duty (Title 10) for 90 consecutive days or more at the time of death.
- Attach a copy of your spouse's original return behind the amended return.
- If you filed a joint return, you will need to determine the amount to be forgiven. To do this, you must:
- Figure your deceased spouse's share of adjusted gross income.
- Divide your deceased spouse's share of adjusted gross income by the total joint adjusted gross income. This is your spouse's share of the joint adjusted gross income.
- Multiply the joint tax liability by the percentage determined in step 2. This is your deceased spouse's share of the joint tax debt.
If you do not have a copy of the original return, we may be able to provide you with a copy. For more information, please call 503-378-4988 (Salem) or-1-800-356-4222 from an Oregon prefix, or visit www.oregon.gov/DOR.
You may be eligible for a partial property tax exemption on your home if your spouse was killed in Iraq while on active duty. Contact your county assessor's office for more information. The form and instructions for the exemption are available.
You may also be eligible for reduced property taxes if you are a surviving spouse of a war veteran. View the publication to see if you qualify for this program.
9. I am stationed in a combat zone and the IRS has granted me additional time to file and pay. Do I get the same additional time for Oregon?
Yes, Oregon allows the same additional time to file and pay. Write "combat zone" in blue or black ink at the top of the return when you file.
10. I've been in a combat zone and my income is not taxed by the IRS. Is it taxed by Oregon?
No, the military pay you earned outside of Oregon is not taxed by Oregon. Current Oregon law exempts all military pay earned outside of Oregon regardless of whether you were in a combat zone. So, if you are in a combat zone, you are outside Oregon and your military income is not taxed. If the current Oregon law exempting military pay earned outside Oregon is repealed, then Oregon would not tax income earned in a combat zone because the IRS doesn't.
11. What are the military reporting requirements?
Oregon is tied to the federal definition of taxable income. For current information on Oregon military reporting requirements go to Military Personnel Filing Information. For information on federal military reporting requirements see the Internal Revenue Service Web site at www.irs.gov and click on "Individuals" then "Tax Information for Members of the U.S. Armed Forces."
12. I'm from another state, but I'm stationed in Oregon. Do I file an Oregon return?
It depends. Oregon doesn't tax your military pay, but you will need to file an Oregon Form 40N (nonresident) if:
- You or your spouse had income other than military pay from an Oregon source, or
- You plan to claim a refund of Oregon tax withheld.
13. I'm an Oregon resident stationed in another state. What form do I file?
If you don't meet the qualifications to file as a nonresident, file Form 40 in the full-year resident booklet.
If you file Form 40N, write "Military Nonresident" in blue or black ink at the top of the form.
See Military Personnel Filing Information to see if you should use Form 40N.
14. I've heard I can subtract some of my active duty pay. How does that work?
You may qualify for one or more of the following subtractions.
- You can subtract active duty pay earned anywhere in the world outside of Oregon from January 1 until the date the president sets as the end of combat activities in the Persian Gulf. You are not required to be stationed in a designated combat zone to be eligible for this subtraction.
- Whether or not you are eligible for the above military subtraction, you may still subtract up to $3000 of active duty pay.
- Servicemembers who change from Title 32 to Title 10 can subtract active duty pay earned in Oregon.
Your total active duty subtractions can't be more than your total active duty pay included in federal adjusted gross income.
Reserve summer camp is active duty. Drills and weekend meetings of reserve units aren't active duty.
For more information go to Military Personnel Filing Information.
15. Can I file electronically?
Yes, beginning with the 1999 return all Oregon individual returns can be filed electronically. See Electronic Filing.
16. I'm retired military. Is my military retirement income taxable in Oregon?
It depends on when you retired. If you retired before October 1, 1991, Oregon does not tax your military retirement.
If you retired on or after October 1, 1991, some of your retirement income may be taxable. Oregon tax is required on the portion of your pension attributable to federal service after October 1, 1991.See "U.S. Government Pension" for more information.
For additional information see "Military Personnel Filing Information" under Publications.
This information is only for Oregon income taxes. For federal taxes, please contact your tax practitioner, call the IRS at 1-800-829-1040, or visit the IRS web site at www.irs.gov.
17. I heard that I'm getting paid by Oregon instead of the federal government for the duty I performed in the gulf region after the hurricanes. Will I have to pay tax on it?
Compensation received for active service as a member in the Armed Forces of the United States outside of Oregon is excluded from Oregon income. If you are a member of the Oregon National Guard sent to the Gulf Coast for hurricane duty, the pay you received is not taxed by Oregon. Enter the amount of active duty on the "other subtraction" line of the Oregon return.
18. I received a garnishment for my tax debt. I want to challenge it because it is based on income that is no longer taxed. How do I challenge the garnishment?
You may not use the garnishment-challenge process to contest the validity of the debt. By law, the department must deny the challenge. However, you may file an amended return to exempt certain income. See Q1 above for details. If your amended return creates a credit balance on your account, the amount of the credit could be refunded to you or reduce the amount you owe.
19. I'm in the Oregon National Guard and I owe taxes I don't have time to pay right now. Can I pay them later?
Yes, but only if the taxes became due while you were on active duty (Title 10) for 90 consecutive days or more. We will stop all collection activity for taxes that become due while you are active duty (Title 10) for 90 consecutive days or more, and for six months afterward. We will also adjust the interest rate to zero for the same period. We need to know the date your Title 10 status began and the date your Title 10 status ended before we can adjust the interest rate.
NOTE: House Bill 2933 does not affect tax debts that became due before you were activated. We can continue collection activity for these debts. If you think you qualify for protection under the Servicemembers' Civil Relief Act, please contact us, 503-378-4988 (Salem), 1-800-356-4222 from an Oregon prefix, or visit www.oregon.gov/DOR.
20. I'm in the Oregon National Guard and I owe payroll taxes I don't have time to pay right now. Can I pay them later?
Yes, only if you were established as the person liable for the payroll tax debt while you were active duty (Title 10) for 90 consecutive days or more. We will stop all collection actions for taxes that become due while you are active duty (Title 10) for 90 consecutive days or more and for six months afterward. We will also adjust the interest rate to zero for the same period. We need to know the date your Title 10 status began and the date your Title 10 status ended before we can adjust the interest rate. See note on HB 2933.
21. I owe tax but I'm in the military. Why am I being charged interest?
We will adjust the interest rate to zero for tax debts that became due while you were in Title 10 status for 90 consecutive days or more. We need to know the start and end dates of your Title 10 status before we can adjust the interest rate. Taxes that became due before your Title 10 Status began will continue to accrue interest. See note on HB 2933.
22. I'm in the military. Why did I get this distraint warrant for my tax debt?
If the distraint warrant is for a tax that became due while you were in Title 10 status, we will stop all collection activity while you are active duty (Title 10) for 90 consecutive days or more, and for six months afterward.
23. I heard that the property tax on my home may be reduced while I'm on active duty. Is that true?
Oregon residents performing service after a change in status from Title 32 to Title 10 who are homeowners may be eligible for a partial property tax exemption. Contact your county assessor's office for more information. The form and instructions for the exemption are available here.
Some disabled war veterans or surviving spouses of war veterans may also qualify for reduced property taxes. See if you qualify or contact your county assessor's office.
Revised November 9, 2006
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