Originally published on Forbes.com Feb 7th, 2014
The Alaska Supreme Court has been tough on the military recently. Most states strive to hang on to people to get income taxes from them. Alaska hands out money to its residents in the form an annual permanent fund dividend. The amount varies, but has been hovering around $1,000 for the last five years.
States like New York and Massachusetts have figured out a way to make people who are domiciled in other states “statutory resident”. Alaska, on the other hand, will cut you out of the permanent fund dividend, if you go 10 years without a year in which you are physically present in the state for at least 180 days, even though your absence is otherwise an allowable absence.
Lieutenant Colonel Brian Ross USMC was before the Alaska Supreme Court arguing about this rule for the second time and he lost again. LtCol Ross was born and raised in Anchorage and intends to return there after he retires. Apparently, Alaska is not a common way station as you shuttle from the Halls of Montezuma to the shores of Tipoli. It’s not that Marines have never dealt with cold weather consider Chosin
It just seems that nowadays unlike the streets of Heaven, the defense of Alaska has been left mainly to the Army
LtCol Ross argued that it was particularly annoying that the ten-year rule did not apply to Congress critters and their staff. He said that it was a violation of substantive due process that “shocks the universal sense of justice”. Among his varied assignments, which included a couple of tours in Iraq, LtCol Ross recently taught history at his alma mater, the United States Naval Academy.
That “universal sense of justice” is probably the historian coming through. On top of everything else Lt. Col Ross was charged with attorney’s fees as a non-prevailing party.
I asked Rachel Millios, an enrolled agent, with a location independent practice focusing on members of the military and expatriates for her take on the case. Rachel is herself a veteran, a staff sergeant in the 101st Airborne Division with two tours in Iraq. She is currently a military spouse.
I understand his position. He’s a bona fide Alaska resident and intends to return there. Alaska is not denying him (and his children) residency only the PFD which is not a necessity nor a right according to the court. Alaska is paying people to live in the state. No income tax is still pretty good deal. Although if I were him, having been gone so long and served honorably I would feel like Alaska had left me out in the cold (pun maybe intended?). He may have another shot in the court of public opinion or by contacting his legislators (although I would suspect he probably has gone that route). Have you looked into the total amount they’ve denied him and his children since 2008 and the costs of litigation? Unfortunately he is likely in a tiny minority; the majority of military personnel get stationed in Alaska, claim the PFD, then leave and establish residency somewhere else (as they’ve likely abandoned their home of record residency), and still claim an Alaska residency (and PFD) and go largely undetected even without ties to the state.
Applying the ordinary rules of domicile to military people is complex and confusing. Someone who enlists at eighteen and “finds a home in the Army” would likely be considered domiciled in their original home state for the entire period of their service. The taxing states don’t seem to be aggressive in pursuing service members. It would probably be very bad PR for them to do so. Rachel indicates that actual practice tends to be pretty variable
I bet you would find folks in all categories: those who keep their home state residency for 20 years (although they may never “intend” to return to the state, where else will they call home when moving every other year?), people who end up in a no income tax state like AK, TX, TN, FL, WA, etc and then just keep that (because why ruin a good thing?), folks who change residency with every move, and those who just pick a tax free state (regardless of where they actually live), submit the form to the military payroll folks and cross their fingers. Obviously each comes with its own set of issues.
LtCol Ross’s case follows right behind that of Richard Heller who missed out on his initial permanent fund dividend because of an extra-long tour in Iraq with the 172nd Infantry Brigade – the Arctic Wolves.
You can follow me on twitter @peterreillycpa.
Followup
I heard from LtCol Ross and am glad to report that the story has if not a happy ending, at least a happy epilogue.
While my friends in the judiciary did not see my argument, those in the Alaska Legislature did. After a couple years in drafting the right wording, the legislature passed a law in 2013 which repeals the statute in question, otherwise known as the “10-year rule,” and evens the playing field for all of us on allowable absences, including members of Congress and their staff delegation. At a minimum, all of us on allowable absences (Congressmen and military alike) have to return to the state for at least 3 days every two years and for at least 30 days every five years or else lose eligibility for a PFD. In addition, all extended absence PFD applicants must prove to have extensive “paper ties” i.e. driver’s license, voting records, owning property, etc., as well as demonstrate to the State’s satisfaction that he/she has the intent to return to the State. With the change in the law, I once again qualified for the 2013 PFD and received it last fall.
I’m not sure if there is much of a story here anymore, other than that I believed the original statute, which excluded our elected officials, was patently unfair and set out through the judicial process to make my case. Unfortunately, despite two appearances, the Alaska Supreme Court disagreed with my point of view. Fortunately though, the current Legislature sympathized with my position (and the position of other military personnel like me) and changed the law. Alaska Representative Eric Feige, a former US Army officer, sponsored the bill which amended the statute. He and his staff are the real heroes since they kept up the legislative fight for nearly three years.
Ultimately, while we lost some judicial battles, we did “win the war”, if you will, in the legislative arena.
Did I “fight city hall”? I don’t know, but I do know I love our system of government and am proud to swear an oath to protect it! We do have a voice and the process can work!
I’m often reminded of Samuel Johnson’s remark that “Every man thinks meanly of himself for not having been a soldier, or not having been at sea.”, but it is particularly apt when we think about Marines.