New York State Department of Taxation and Finance 	             TSB-M-10(1)I 
                                                                 Income Tax 
Office of Tax Policy Analysis 
                                                                 TSB-M-10(1)MCTMT
 Taxpayer Guidance Division 
                                                                 MCTMT 
                                                                 January 11, 2010 
 
                     Military Spouses Residency Relief Act 
 
    The federal Military Spouses Residency Relief Act (Public Law 111-97) (hereinafter, the 
Act), which amends the Servicemember Civil Relief Act (SCRA), was signed into law on 
November 11, 2009. The Act provides certain tax relief for spouses of servicemembers (military 
spouses) who are present in a state solely to be with the servicemember when the servicemember 
is in that state in compliance with his or her military orders. The application of this Act to the 
New York State, New York City, and Yonkers personal income taxes and the Metropolitan 
Commuter Transportation Mobility tax is explained below. The Act applies to tax years 2009 
and after. 
 
New York State, New York City, and Yonkers personal income taxes 
 
Rules relating to the domicile or residence of a military spouse 
 
    New York Tax Law provides that an individual who is not domiciled in New York State 
can be treated as a resident for income tax purposes if the individual maintains a permanent place 
of abode in New York and spends more than 183 days in the state during the tax year. 
 
    However, the Act provides that a military spouse cannot lose or acquire residence or 
domicile in a state when the military spouse is located in New York State solely to be with the 
servicemember and the servicemember is located in New York State in compliance with his or 
her military orders. The SCRA had previously protected only the servicemember from losing or 
acquiring domicile or residence when the servicemember was in the state solely to comply with 
his or her military orders. 
 
    Accordingly, a military spouse will not be treated as a resident of New York State for tax 
purposes (that is, the spouse will be treated as a nonresident) if the following conditions are met: 
 
    • the military spouse is located in New York State solely to be with the servicemember 
     and the servicemember is located in New York State in compliance with his or her 
     military orders, and 
    • the servicemember and his or her spouse were residents or domiciliaries in a state other 
     than New York State before being located in New York. 
 
    These rules apply regardless of how much time the military spouse spends in New York 
State or whether or not a permanent place of abode is maintained in New York State. However, 
the exclusion from being considered a resident for tax purposes does not apply to a military 
spouse who was domiciled in New York State at the time he or she marries the servicemember. 
 
    Transfers and relocations. If a military spouse has met the conditions for relief under 
these rules, and the servicemember is subsequently assigned outside the United States or to 
another state, and the military spouse remains in New York State, the rules will continue to apply 

W A Harriman Campus, Albany NY 12227 	                            www.nystax.gov 

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 as long as New York State remains the servicemember’s permanent United States duty station. 
 However, the rules will no longer apply if the servicemember’s permanent United States duty 
 station is no longer in New York State and the military spouse remains in New York State. 
  
 Exemption from taxes for certain income of a military spouse 
  
  In general, New York Tax Law provides that a nonresident individual who has New York 
 source income (for example, wages or business income earned in New York) will be subject to 
 personal income tax on that income. 
  
  However, under the Act, a military spouse’s income that is earned in New York State will 
 not be treated as New York source income and will therefore be exempt from any personal 
 income tax if: 
  
  • the military spouse is a nonresident of New York State, and 
  • the military spouse is in New York State solely to be with the servicemember and the 
          servicemember is in New York State in compliance with his or her military orders. 
  
  For purposes of the exemption, income earned in New York State includes: 
  
  • wages, salaries, and other compensation for services performed by a military spouse in 
          New York State as an employee, and 
  • any business income or loss (other than a capital gain or loss from the sale of real 
          property located in New York State) a military spouse has from a sole proprietorship 
          carried on in New York State or from a partnership, including an LLC treated as a 
          partnership, where the partnership or the LLC carries on business in New York State, if 
          the income or loss or any part of the income or loss is required to be included in the 
          computation of net earnings from self-employment for purposes of the federal Self-
          Employment tax (SE tax). 
  
  The income exemption only applies to the military spouse. It does not apply to non­
 military income earned in New York State by a servicemember. 
  
  Transfers and relocations. If a military spouse has met the conditions for the income 
 exemption under these rules, and the servicemember is subsequently assigned outside the United 
 States or to another state, and the military spouse remains in New York State, the income 
 exemption will continue to apply as long as New York State remains the servicemember’s 
 permanent Unites States duty station. However, the income exemption will no longer apply if the 
 servicemember’s permanent United States duty station is no longer in New York State and the 
 military spouse remains in New York State. 
  

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  Exemption from withholding 
  
       For tax years beginning on or after January 1, 2010, a military spouse whose wages, 
  salaries, and other compensation for services performed in New York State as an employee is 
  exempt from New York tax under the Act can present a properly completed Form IT-2104-E, 
  Certificate of Exemption from Withholding, to his or her employer to claim exemption from 
  withholding for New York State personal income tax (and New York City and Yonkers tax, if 
  applicable). 
  
       An employer can accept a completed certificate without requiring any further 
  documentation from the employee. However, the employer must reject a certificate and continue 
  to withhold if the employer has actual knowledge or reason to know that the certificate being 
  presented is not valid because the employee presenting the certificate does not meet the 
  conditions to be exempt. 
  
       Employers may be required to send to the Tax Department a copy of Form IT-2104-E 
  that has been submitted by an employee who is exempt under the Act. The form must be 
  submitted using the same rules and at the same time that the employer is required to submit 
  Forms IT-2104-E filed by other employees. For more information as to which Forms IT-2104-E 
  need to be submitted and on how to submit them, see Publication NYS-50, Employer's Guide to 
  Unemployment Insurance, Wage Reporting, and Withholding Tax. 
   
       A military spouse must submit a written revocation of the exemption certificate to his or 
  her employer if he or she no longer qualifies for exemption under the Act (for example, the 
  military spouse is divorced from the servicemember, but continues to work in New York State). 
   
  Special rules for 2009 tax year 
   
       For tax year 2009, if a nonresident military spouse had New York State, New York City, 
  or Yonkers personal income tax withheld from wages or other compensation and the wages or 
  other compensation are now exempt under the Act, the taxpayer must file a Form IT-203, 
  New York Nonresident and Part-Year Personal Income Tax Return, to claim a refund. In 
  addition, a military spouse who made estimated tax payments because he or she had business 
  income that is now exempt from New York tax must also file Form IT-203 to claim a refund. 
   
       In completing Form IT-203, a military spouse who has income which is exempt under the 
  Act must include the amount of the exempt income in the Federal amount column of 
  Form IT-203. However, the military spouse should not include the exempt income in the New 
  York State amount column of Form IT-203. 
   

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      Note: The military spouse’s exempt income should not be included in the amount of the 
 subtraction for a servicemember’s military income that is made in the Federal amount column of 
 the Form IT-203. 
  
      In addition, a military spouse who is completing Form IT-203 and has income which is 
 exempt under the Act is required to enter the special condition code “M2” in the box at item F on 
 the front of Form IT-203. This will allow the Tax Department to properly process the return. 
 Failure to enter the special condition code on the return could result in unnecessary delays in 
 processing the return and issuing a refund. 
  
      If the servicemember and his or her spouse are filing a joint Form IT-203, 
 Form IT-203-C, Nonresident or Part-Year Resident Spouse’s Certification, should not be 
 completed or attached to Form IT-203 if, as a result of the Act and the SCRA,  neither spouse 
 has any New York source income. 
  
 New York City and Yonkers income taxes 
  
      The rules relating to domicile or residence of a military spouse also apply in determining 
 whether or not a military spouse is a resident of New York City for purposes of the 
 New York City resident income tax or a resident of Yonkers for purposes of the Yonkers resident 
 income tax surcharge. In addition, if the income of a military spouse is exempt from New York 
 State personal income tax, it is also exempt from the Yonkers nonresident earnings tax. 
  
 Special rules for employers in 2010 
  
      Because of the timing of the federal law, it is possible that employers will withhold some 
 New York State, New York City, or Yonkers taxes from a military spouse in 2010 before the 
 spouse can submit Form IT-2104-E to the employer. In this situation, once the employer receives 
 Form IT-2104-E from the military spouse, the employer may refund to the military spouse any 
 New York tax withheld in 2010. For this rule to apply, the tax withheld must be refunded on or 
 before March 31, 2010. 
  
 New York State resident military spouses who are subject to New York income tax 
  
      A military spouse who is a domiciliary or resident of New York State should be aware 
 that the new federal law could affect the amount of New York tax he or she has to pay if he or 
 she: 
      • is required to file a New York State resident personal income tax return; 
      • is in another state solely to be with the servicemember when the servicemember is in                   
        that state in compliance with his or her military orders; and 
      • is employed or operates a business in that state. 
       

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  This is because, under the prior rules, the spouse’s income earned in the other state would 
 be taxed by that state, and the military spouse would receive a credit on his or her New York 
 State return for the taxes paid to that other state. However, under the new rules, the spouse’s 
 income may be exempt under the Act from the other state’s income tax and, accordingly, the 
 credit for taxes paid to that other state will no longer apply. This could result in an increase in the 
 tax owed to New York State. 
  
  Military spouses who are employees and who are in the situation described above should 
 determine whether or not their employer will withhold New York State personal income tax from 
 their wages. If the employer does not withhold New York State taxes, the military spouse may be 
 required to make estimated personal income tax payments to New York State to ensure that they 
 are not underpaid for the year and to avoid being subject to the underpayment penalty. 
  
  Additionally, resident military spouses who are self-employed and who are in the 
 situation described above should also determine if they are required to make or increase the 
 amount of estimated personal income tax payments to New York State to ensure that they are not 
 underpaid for the year and avoid being subject to the underpayment penalty. 
  
 Metropolitan Commuter Transportation Mobility Tax (MCTMT) 
  
 MCTMT for self-employed individuals 
  
  Individuals (including partners in partnerships and members of limited liability 
 companies (LLCs) that are treated as partnerships) who have net earnings from self-employment 
 from a business operated in the Metropolitan Commuter Transportation District (MCTD) may be 
 subject to the MCTMT. However, under the Act, a military spouse’s net earnings from 
 self-employment attributable to a trade or business carried on in the MCTD are exempt from the 
 MCTMT if: 
  
  • the military spouse is a nonresident of New York State, and 
  • the military spouse is located in New York State solely to be with the servicemember 
   and the servicemember is located in New York State in compliance with his or her 
   military orders. 
  
  For 2009, a military spouse who has made an estimated MCTMT payment and who is 
 now exempt under the Act must file Form MTA-6, Metropolitan Commuter Transportation 
 Mobility Tax Return, to request a refund of the estimated tax paid. 
  
 MCTMT for employers 
  
  The Act has no effect on the MCTMT imposed on employers that have payroll expense 
 within the MCTD. The payroll expense of a military spouse who is a covered employee for 

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 purposes of the MCTMT must still be included in the payroll expense for all employees when 
 computing the MCTMT. 
  
  NOTE:	 A TSB-M is an informational statement of existing department policies or of 
         changes to the law, regulations, or department policies. It is accurate on the date 
         issued. Subsequent changes in the law or regulations, judicial decisions, Tax 
         Appeals Tribunal decisions, or changes in department policies could affect the 
         validity of the information presented in a TSB-M.