SCRA Applies to USPHS Officers
By Captain Samuel F. Wright, JAGC, USN (Ret.)
4.5—Protection from State/Local Tax Authorities
Q: I retired from the Public Health Service (PHS) in May 2006, after a 23-year career as a PHS dentist. I was born and raised in California where I also attended college. I moved to Illinois for dental school. In 1979 I signed up for the PHS and spent a year in Arizona assigned to an Indian Health Service (IHS) clinic. Not yet certain about my future career, I left the PHS in 1980. I rejoined the PHS in 1984 while living in Oregon and was assigned to an IHS facility in that state. My wife is from Washington and we requested an assignment there. In 1989 I was reassigned to an Indian reservation in Washington. I established my residency there (voter registration, driver’s license, automobile registration, etc.) and maintained my Washington domicile for the rest of my PHS career.
For the last eight years of my PHS career (May 1998 to May 2006), I was assigned to an IHS clinic at a reservation in Oregon. Realizing that I would likely end my career there, I purchased a house near the reservation. After I retired from PHS, my wife and I remained in the house, and I joined a civilian dental practice.
I was a domiciliary of the State of Washington after I was assigned there in 1989, and I maintained my Washington domicile throughout the rest of my career. I voted in Washington in each major election, usually by absentee ballot. I never registered or voted in any of the places where the PHS assigned me for duty. I registered to vote in Oregon in June 2006, a month after I retired.
I acknowledge that I am an Oregonian as of May 2006, and I have been paying Oregon state income tax since I retired. But the State of Oregon contends that I was an Oregon domiciliary during the last eight years of my active PHS service and that I owe tens of thousands of dollars of Oregon state income tax. I contend that the Servicemembers Civil Relief Act (SCRA) shielded me from having to pay Oregon state income tax while I was in active PHS service. The state tax department contends that the SCRA does not apply to PHS officers like myself. What do you think?
A: I believe that the state tax department is wrong and that it would be unlawful (under federal law) for Oregon to charge you state income tax for the period prior to your retirement from the PHS.
Title 10 of the United States Code, section 101 (the definitions section) defines several terms, including “armed forces” and “uniformed services.” The armed forces are the United States Army, Navy, Marine Corps, Air Force, and Coast Guard. 10 U.S.C. 101(a)(4). The uniformed services are the armed forces plus the commissioned corps of the PHS and the commissioned corps of the National Oceanic and Atmospheric Administration (NOAA). 10 U.S.C. 101(a)(5).
The SCRA is codified in title 50 Appendix of the United States Code, sections 501 through 596 (50 U.S.C. App. 501-596). The SCRA’s definition section makes clear that PHS and NOAA officers are covered while in active service. “The term ‘military service’ means— … (B) in the case of a servicemember who is a commissioned officer of the Public Health Service or the National Oceanic and Atmospheric Administration, active service.” 50 U.S.C. App. 511(2)(B).
“A servicemember shall neither lose nor acquire a residence or domicile for purposes of taxation with respect to the person, personal property, or income of the servicemember by reason of being absent or present in any tax jurisdiction of the United States solely in compliance with military orders.” 50 U.S.C. App. 571(a).
“Compensation of a servicemember for military service shall not be deemed to be income for services performed or from sources within a tax jurisdiction of the United States if the servicemember is not a resident or domiciliary of the jurisdiction in which the servicemember is serving in compliance with military orders.” 50 U.S.C. 571(b).
When you reentered active service in the PHS, in 1984, you were living in and domiciled in Oregon, and for the next five years you were assigned to PHS duty in Oregon. In 1989, the PHS reassigned you to Washington, where you remained for three years. While serving in Washington, you made a bona fide change of your domicile, from Oregon to Washington. You did this right. You simultaneously had a physical presence for a significant time in the state in which you wished to establish your domicile and the intent to make that place your domicile. Having changed your domicile to Washington, the SCRA entitled you to maintain your Washington domicile for the remainder of your PHS career, and that is what you did.
Q: The Oregon tax department’s fallback argument is that I was domiciled in Oregon, not Washington, during the 1998-2006 period, because I purchased a house in Oregon and worked on a part-time basis with the dental practice that I joined on a full-time basis after I retired from the PHS. What do you think?
A: I think that the state’s argument is invalid. Every human being has one and only one domicile at a time. Until your PHS retirement, your domicile was Washington, not Oregon. You came to Oregon because the PHS assigned you to duty in that state. Your decision to remain in Oregon after your PHS retirement is irrelevant.
“For purposes of voting for any Federal office … or a State or local office, a person who is absent from a State in compliance with military or naval orders shall not, solely by reason of that absence—(1) be deemed to have lost a residence or domicile in that State, without regard to whether or not the person intends to return to that State; (2) be deemed to have acquired a residence or domicile in any other State; or (3) be deemed to have become a resident in or a resident of any other State.” 50 U.S.C. App. 595 (emphasis supplied).
Q: The state has also stated that the SCRA is unconstitutional insofar as it is construed to forbid the state from taxing my PHS income. What do you think?
A: The United States Supreme Court rejected a claim by the State of Colorado that the prior version of the SCRA was unconstitutional insofar as it forbade Colorado to tax the personal property of an Air Force officer who physically resided in the state (pursuant to military orders) but was domiciled in Louisiana. See Dameron v. Brodhead, 345 U.S. 322 (1953). I discuss that case and its implications in detail in Law Review 0917 (April 2009). You can find more than 600 Law Review articles at www.roa.org/law_review.
I think that Dameron is right on point to your situation. It would be frivolous for Oregon to argue that the SCRA is unconstitutional or that it does not apply to your situation.
Q: I had an attorney to represent me in this matter. His fee (computed on an hourly basis) had already added up to more than half of the amount of money in controversy, at the time I discharged him. There is an important legal issue involved here, but it makes no sense for me to spend more on attorney fees than I can ever hope to recover, if I win. Help!
A: In Dameron, the amount in controversy was only $23.51. The United States Department of Justice (DOJ) represented Dameron, at no charge, in the state trial court, the state supreme court, and the United States Supreme Court. I will inquire of DOJ as to whether it is willing to represent you.
Under the Uniformed Services Employment and Reemployment Rights Act (USERRA), if you proceed with private counsel and prevail, the court can award you reasonable attorney fees, in addition to back pay and other relief. See 38 U.S.C. 4323(h)(2). We need a similar fee-shifting provision for the SCRA. Please see Law Review 0942 (Sept. 2009).
If you have questions, suggestions, or comments, please contact Captain Samuel F. Wright, JAGC, USN (Ret.) (Director of the Servicemembers’ Law Center) at email@example.com or 800-809-9448, ext. 730.