OAR 150-316-0605: Military Pay Subtraction

(1) Definitions. (a) “Uniformed services” refers only to services under the orders of the President of the United States and means the commissioned corps of the National Oceanic and Atmospheric Administration (i.e., the Coast and Geodetic Survey) and the Public Health Service (regular and reserve), consistent with 10 USC § 101(a)(5)(B) and (5)(C). Other members of the National Oceanic and Atmospheric Administration and the Public Health Service, or members of these organizations not under the orders of the President, are not included in this definition and would not qualify for an Oregon military pay subtraction. (b) “Home of the taxpayer” is where the taxpayer does any of the following: (A) Maintains his or her primary residence; (B) Lives with his or her family; or (C) Incurs continuing living expenses, such as mortgage or rent, utilities, and real and personal property taxes and insurance. (2) Military pay subtraction. A member of the Armed Forces as defined in ORS Chapter 316 and this rule may subtract the following from their taxable military pay: (a) Year of entry-Year of discharge. Military pay earned for services performed outside of Oregon. (A) Year of discharge includes termination of full-time active duty from the Armed Forces of the United States. (B) Year of entry is for initial enlistment or draft and only allowed one time per taxpayer, but the subtraction for year of discharge is allowed each time a taxpayer is discharged. (C) The date of the enlistment order or date of discharge is the applicable tax year. Example 1: Brian is domiciled in Oregon and remains domiciled in Oregon for all years relevant to this example. He enlists in the U.S. Army for the first time in 2004 and is stationed in California. In 2008, he is discharged and moves back to Oregon. The Army offers him a position in Portland, Oregon. He accepts the offer and reenlists shortly after the discharge. In 2012, Brian is reassigned to Florida. He plans to retire from the Army in 2024 and move back to Oregon. Brian will qualify for a subtraction of all military pay earned outside Oregon for tax year 2004 because that is his initial year of enlistment into the Armed Forces. He will also qualify for a subtraction for all of his military pay earned outside Oregon for tax years 2008 and 2024 because both years are treated as a year of discharge. From 2008 to 2012, he will qualify for a subtraction of $6,000 of his military pay while stationed in Oregon. Example 2: Karen is domiciled in Oregon and remains domiciled in Oregon for all years relevant to this example. She enlists in the U.S. Navy in 2000 and is discharged in 2004 and returns to Oregon. Karen decides to reenlist in 2005 at which time she leaves Oregon and is assigned outside Oregon for the rest of her military career. In 2021, she retires from the Navy and returns to Oregon. Karen qualifies for a subtraction of military pay earned outside Oregon for tax year 2000 because that is her initial year of enlistment into the Armed Forces. She will also qualify for a subtraction for her military pay earned outside Oregon for tax years 2004 and 2021 because both years are treated as a year of discharge. Karen does not qualify for a subtraction for her military pay earned outside Oregon in 2005 under the year of entry or year of discharge rules because it was not her initial year of entry. However, she may subtract all of her military pay earned outside Oregon for that year under the subtraction for service performed outside of Oregon discussed in subsection (2)(b) of this rule. (b) Service outside Oregon. Military pay earned for service performed outside of Oregon from August 1, 1990, to the date set by the President as the end of combat activities in the Persian Gulf Desert Shield area can be subtracted (Executive Order 12744). Example 3: Jan enlisted in the Air Force Reserves in 2010. She was called to active duty September 15, 2013, and shipped to Fort Lewis, Washington. She earned a total of $10,000 military pay in 2013. $2,000 was earned in Oregon before September 15. She qualifies to subtract her military pay earned outside Oregon after September 15. Jan also qualifies to subtract the remaining $2,000 because it is less than $6,000. Her military pay subtraction is $10,000. (c) Reserve component members away from home overnight. The taxpayer is “away from home” when the taxpayer is required to stay in a temporary location that is not a home of the taxpayer and is not allowed to go home while at the temporary location. The pay earned while away from home for 21 days or longer may only be subtracted by someone who is a member of a reserve component; reserves or National Guard. Example 4: Hallie is a member of the Army Reserve assigned to her unit in Medford and earned a total of $12,000 for the year. She was required to go on assignment to Umatilla under orders of the President of the United States from April 5 to June 23 and stayed overnight in that area. Hallie wasn’t authorized to go home during this time. She may subtract the $3,000 she earned during her assignment because she was away from home overnight for 21 days or longer. She may also subtract $6,000 of her remaining military pay. (d) Oregon National Guard service. For tax years beginning on or after January 1, 2021, military pay earned by a member of the Oregon National Guard while in active service of the state or on state active duty, as those terms are defined in section 2, chapter 122, Oregon Laws 2023, may be subtracted. Example 5: Elliot is a member of the Oregon National Guard. She was called into active service of the state in 2023 as part of a federal drug interdiction plan approved by the Governor. She earned $20,000 while serving along the Interstate 5 corridor in Oregon. Elliot may subtract the $20,000 she earned while in active service of the state, as well $6,000 of any remaining military pay. (e) Other military pay. Any taxable military pay that is not eligible for one of the above subtractions may be subtracted up to $6,000. The military pay subtraction may not exceed the taxable military pay on the return. If both taxpayers on a joint tax return are eligible for a military pay subtraction, each person’s subtraction is separately figured before adding them together to report on the return. Example 6: Joe is a member of the Marine Corps and on active duty for all of 2013. He is domiciled and stationed in Oregon. He earned $25,000 of military pay during 2013. Joe’s military pay subtraction is $6,000. Example 7: Mary and Clyde are married and both members of the U.S. Army. During 2023, Mary was stationed overseas on active duty for 10 months. She received $1,000 of military pay before she was deployed. During her deployment she received $28,000 and $15,000 of that was excluded from federal taxable income. Of the total $29,000 she made, she’s only reporting $14,000 as taxable income. She qualifies for a military pay subtraction of all $14,000; $13,000 of her taxable military pay was earned outside Oregon and the remaining taxable military pay is eligible as other military pay. Clyde remained in Oregon during 2023 and earned $10,000 of taxable military pay. He isn’t eligible for any of the subtractions allowed for certain situations, but he is eligible to subtract up to $6,000 of his taxable military pay. Together the subtraction on their joint Oregon tax return is $20,000; $14,000 is Mary’s and $6,000 is Clyde’s. (3) Combat zone benefits. (a) Additional time to file and pay. Members of the Armed Forces who served in a combat zone are allowed extra time to take care of their Oregon income tax matters. Taxpayers are allowed the statutory filing period of 3 months and 15 days following the close of the tax year plus at least 180 days after the later of: (A) The last day the person was in a combat zone (or the last day the area qualifies as a combat zone); or (B) The last day of any continuous qualified hospitalization for injury from service in the combat. (b) Eligible actions. The following are some of the income tax actions that can be extended: (A) Filing any return of income tax (except withholding taxes); (B) Paying any income tax (except withholding taxes); (C) Filing a petition with the Tax Court; (D) Filing a refund claim; (E) Collection of any income tax due by the Department of Revenue. (c) For purposes of this subsection (3), “income tax” includes the taxes imposed upon the income of estates and trusts and paid by the fiduciary thereof. Example 8: Margaret entered Saudi Arabia on August 26, 2012. She remained there through March 16, 2013, when she departed for the United States. She was not injured and did not return to the combat zone. She has 285 days (180 plus 105) after her last day in the combat zone, March 16, to file her 2012 income tax return. The 105 additional days are the number of days in the three and a half month filing period that were left when she entered the combat zone (January 1–April 15). Margaret’s return is due by December 26, 2013. Example 9: Leonard’s ship entered the Persian Gulf on January 5, 2013. On February 15, 2013, he was injured and flown to a U.S. hospital. Leonard remained in the hospital through April 21, 2013. He has 281 days (180 plus 101) after April 21, his last day in the hospital, to file his 2012 income tax return. The 101 additional days are the number of days in the three and a half month filing period that were left when he entered the combat zone (January 5–April 15). His 2012 return is due by January 27, 2014.