IP 2006(23)

Connecticut Income Tax Information for Armed Forces Personnel and Veterans

This publication has been superseded by IP 2007(22)

Purpose: This publication:

• Explains how Connecticut income tax laws apply to members of the U.S. armed forces (members) on active duty;
• Defines the requirements for Connecticut residency status for members of the armed forces and their families and the taxability of the types of income they receive;
• Explains how to file a Connecticut income tax return and special conditions that apply to certain types of service;
• Explains the tax liability for year of death; and
• Explains how Connecticut income tax laws apply to veterans of the U.S. armed forces.

Effective Date: Effective for taxable years beginning on or after January 1, 2006.

Definitions: Definitions for Connecticut income tax purposes include:

A combat zone is an area designated by the President of the United States as a combat zone by executive order. A combat zone also includes an area designated by the federal government as a qualified hazardous duty area.

If you served in a combat zone or if you were injured and hospitalized as a result of wounds, disease, or injury incurred while serving in a combat zone, see Page 2 for instructions for filing a Connecticut income tax return.

Resident: You are a resident if you are domiciled in Connecticut (unless you meet the Group A or Group B exceptions or if you are not domiciled in Connecticut, but maintain a permanent place of abode in Connecticut and spend, in the aggregate, more than 183 days of the taxable year in Connecticut.

Nonresident: You are a nonresident if you are not a resident as defined above or if you meet the Group A or Group B exemptions.

Part-Year Resident: You are a part-year resident if you changed your domicile (permanent place of abode) during the taxable year so neither Connecticut nor another jurisdiction was your domicile for the entire taxable year. A part-year resident is subject to tax on all income earned during the residency portion of his or her taxable year and on income from Connecticut sources during the nonresident portion of the taxable year.

Domicile and permanent place of abode: To determine your resident status for Connecticut income tax purposes, you must consider where your domicile was before you entered the armed forces and where you maintained a permanent place of abode during the taxable year.

Your domicile (permanent legal residence) is the place you intend to have as your permanent home. It is the place you intend to return to whenever you are away. You can have only one domicile although you may have more than one place to live. This also applies if you are working in a foreign country.

Your domicile does not change until you move to a new location and definitely intend to make your permanent home there. If you move to a new location but intend to stay there only for a limited period of time (no matter how long), your domicile does not change. Armed forces assignments do not generally affect your domicile.

A permanent place of abode is a residence (a building or structure where a person can live) that you permanently maintain, whether or not you own it, and generally includes a residence owned by or leased to your spouse. A place of abode is not considered permanent if you maintain it only during a temporary stay for the accomplishment of a particular purpose.

The determination of whether an individual in the armed forces maintains a permanent place of abode outside Connecticut does not depend solely upon whether the individual lives on or off base. Other factors include the type and location of quarters occupied by the individual and how and by whom the quarters are maintained.

A temporary duty assignment does not change your permanent place of abode.

Barracks, bachelor officer’s quarters, quarters on a ship, or any structure that contains only dormitory-type quarters and not facilities ordinarily found in a dwelling, such as facilities for cooking and bathing, generally do not qualify as a permanent place of abode.

Veterans: Disability pensions and any other benefits granted for relief of injuries or disabled veterans, as well as tuition payments, subsistence allowances, and any other benefits paid to or on account of a veteran or beneficiary under the laws relating to veterans are treated the same for Connecticut income tax purposes as for federal income tax purposes. If these amounts are excludable from gross income for federal income tax purposes, they are not subject to Connecticut income tax.

If you are a Connecticut resident, your armed forces pension is subject to Connecticut income tax to the same extent it is taxable for federal income tax purposes. If you are a nonresident of Connecticut, your armed forces pension is not Connecticut-sourced income.

Serving in a Combat Zone or in a Contingency Operation: An area generally becomes a combat zone and ceases to be a combat zone on the dates the President of the United States designates by Executive Order. A contingency operation is an armed forces operation generally designated by the Secretary of Defense as an operation in which members of the armed forces are or may become involved in military actions, operations, or hostilities against an enemy of the United States or against an opposing force. A contingency operation exists if the military operation results in the call-up to, or retention on, active duty of members of the uniformed services during a war or national emergency declared by the President or Congress.

If you are a member of the armed forces or support personnel who served or are currently serving in a combat zone or qualified hazardous duty area (combat zone) as designated by the President of the United States by executive order, or are serving in contingency operation as designated by the Secretary of Defense, or are injured and hospitalized as a result of wounds, disease, or injury incurred while serving in a combat zone, or contingency operation, the following tax relief provisions apply to you.

Extension of time to file return: Your Connecticut income tax return is due 180 days after the later of:

• The last day of service in a combat zone or contingency operation (or the last day the area is designated as a combat zone or contingency operation); or
• The last day of continuous hospitalization inside or outside the state as a result of wounds, disease or injury incurred while serving in a combat zone or contingency operation.

Spouses of armed forces personnel and civilians supporting the armed forces in these regions who are away from their permanent duty stations but are not within the designated combat zone or contingency operations are also eligible for the extension. Individuals requesting an extension under combat zone or contingency operations provisions should print both the name of the combat zone or contingency operation and the operation they served with at the top of their Connecticut return. This is the same combat zone or contingency operation name that they were instructed to print on their federal income tax return.

The same time extensions that apply to filing your return also extend the date for you and for the Department of Revenue Services (DRS) to perform the following acts:

• Pay Connecticut income tax and any use tax reportable on your Connecticut income tax return. (See Informational Publication 2005(17), Q & A on the Connecticut Individual Use Tax.);
• File a written protest with the Appellate Division of DRS for a proposed assessment or proposed disallowance;
• Take an appeal to the Superior Court for the Judicial District of New Britain from any final determination or disallowance by the Commissioner of Revenue Services;
• File an amended Connecticut income tax return reporting an overpayment to be refunded or credited to you;
• Conduct an audit and make an assessment of any income tax by DRS;
• Give or make any notice or demand by DRS for payment of any income tax; and
• Collection by DRS of any tax due.

If DRS is unaware that you are entitled to an extension due to military service in a combat zone or contingency operation and you receive a notice of examination or of any action covered by these provisions, contact DRS or your Legal Assistance Office. No penalties or interest will be imposed for failure to file a return or pay taxes during the extension period.

Special Pay: Because combat pay and hostile fire or imminent danger special pay are not taxable for federal income tax purposes, they are not subject to Connecticut income tax.

Decedents: For any individual who dies while on active duty in a combat zone or as a result of injuries received in a combat zone:

• No income tax or return is due for the year of death.
• Any tax due for the year of death which is unpaid at the date of death, including interest, additions to tax, and penalties, if any, will not be assessed; and if assessed, the assessment will be abated, and if collected, it will be refunded to the legal representative of the estate.
• If any tax was previously paid for the year of death, the tax will be refunded to the legal representative of the estate or to the surviving spouse upon the filing of a return on behalf of the decedent.

In filing the return on behalf of the decedent, the legal representative or the surviving spouse should enter zero tax due and attach a statement to the return along with a copy of the death certificate. If the surviving spouse and the decedent filed a joint return for the year of death, only the decedent’s part of the tax liability is eligible for the refund. To determine the decedent’s portion of the joint liability, the surviving spouse must allocate income, deductions and Connecticut additions and subtraction modifications in the same manner they would have been allocated if the spouses had filed separate returns.

Nonresident Members Whose Armed Forces Pay Is Their Only Source of Income: If your permanent legal residence (domicile) was outside Connecticut when you entered the armed forces, you do not become a Connecticut resident because you are stationed and live in Connecticut.

If you (or, if married, you and your spouse) have no income other than your armed forces pay, you (and, if applicable, your spouse) are not subject to Connecticut income tax and are not required to file a Connecticut income tax return because you have no Connecticut-sourced income. (See Examples 4A and 5A.)

Nonresident Members with Connecticut Source Income: If you have other income, in addition to your armed forces pay, and that income is Connecticut-sourced, the rate at which your other income is taxed for Connecticut income tax purposes has been affected by the enactment by Congress of the Servicemembers Civil Relief Act, Pub. L. No. 109-189. To benefit from this enactment, you compute your Connecticut adjusted gross income by subtracting your armed forces pay, to the extent includible in your federal adjusted gross income, from your federal adjusted gross income. This benefit is available only if you are a nonresident of Connecticut or if, under either the Group A or Group B Exception, you are treated as a nonresident of Connecticut (although domiciled in Connecticut).

However, other income you (or your spouse) receive from Connecticut sources while you are a nonresident, including your (or your spouse’s) non-armed forces income, is subject to Connecticut income tax. For example, if you are employed in Connecticut during your off-duty hours, your non-armed forces wages are subject to Connecticut income tax. If you have income or gain from property located in Connecticut or from a business, trade, or profession carried on in Connecticut, this income or gain is also subject to Connecticut income tax.

Spouses of armed forces personnel who are stationed in Connecticut may be considered residents of this state even if their domicile is elsewhere. If your spouse has a permanent place of abode in Connecticut and spends more than 183 days in the state in the taxable year, he or she is a resident for Connecticut income tax purposes and must file Form CT-1040EZ or Form CT-1040, or electronically file his or her Connecticut income tax return. See Special Rules on Filing Status for Spouses and Examples 4B and 5B.

Special Rules on Filing Status for Spouses

Your civilian spouse’s residency or nonresidency may be affected by where you, the armed forces spouse, are stationed if you reside together. Generally, your spouse will be considered a resident of Connecticut if:

• Connecticut was your spouse’s domicile for the entire taxable year; or
• Your spouse was domiciled elsewhere during the taxable year but maintained a permanent place of abode in Connecticut, spent in the aggregate more than 183 days in Connecticut during the taxable year, and your spouse was not a part-year resident.

Your spouse is considered a nonresident if your spouse’s domicile was in a jurisdiction other than Connecticut:

• For the entire taxable year and your spouse did not maintain a permanent place of abode in Connecticut; or
• During the entire taxable year and, if your spouse maintained a permanent place of abode in Connecticut, your spouse did not spend in the aggregate more than 183 days in Connecticut during the taxable year.

Your spouse is considered a part-year resident if your spouse changed his or her domicile (permanent legal residence) during the taxable year so that neither Connecticut nor another jurisdiction was your spouse’s domicile for the entire year.

If you and your spouse are both Connecticut residents, your Connecticut filing status must match your filing status reported on your federal income tax return for the taxable year.

If you and your spouse are both nonresidents of Connecticut and both of you have income derived from Connecticut sources, your Connecticut filing status must match your filing status reported on your federal income tax return for the taxable year. However, if only one spouse has Connecticut source income, the Connecticut filing status of the spouse who is required to file a Connecticut income tax return is married filing separately unless:

• Your filing status reported on your federal income tax return is married filing jointly; and
• You both elect to be treated as if you both had Connecticut source income for the taxable year.

If both conditions are met, you and your spouse will file a joint Form CT-1040NR/PY.

If either you or your spouse is a Connecticut resident and the other spouse is a nonresident, the Connecticut filing status of each spouse who is required to file a Connecticut income tax return is married filing separately unless:

• Your filing status reported on your federal income tax return is married filing jointly; and
• You both elect to be treated as if you both were Connecticut resident for the taxable year.

If both conditions are met, you and your spouse will file a joint Form CT-1040.

If you or your spouse is a Connecticut resident or a nonresident and the other spouse is a part-year resident, the Connecticut filing status of each spouse who is required to file a Connecticut income tax return is married filing separately.

If both you and your spouse are part-year residents and your change of domicile occurs on the same day during the taxable year, your Connecticut filing status must match your filing status reported on your federal income tax return for the taxable year.

If both you and your spouse are part-year residents, and your change of domicile does not occur on the same day during the taxable year, the Connecticut filing status of each spouse who is required to file a Connecticut income tax return is married filing separately. See Examples 4 and 5.

Part-Year Resident Members: If you have no income other than your armed forces pay, whether you are required to file a Connecticut income tax return will depend on how much of your armed forces pay is received during the residency portion of the taxable year. If you have other income, however, the rate at which your other income is taxed for Connecticut income tax purposes has been affected by the enactment by Congress of the Servicemembers Civil Relief Act, Pub. L. No. 108-189. To benefit from this enactment, you compute your Connecticut adjusted gross income by subtracting your armed forces pay, to the extent includible in your federal adjusted gross income and to the extent received during the nonresidency portion of your taxable year, from your federal adjusted gross income.

Residents: If you are a Connecticut resident in the armed forces (and not treated as a nonresident under either the Group A Exception or Group B Exception) and you meet either of the following conditions for the taxable year, you must file a resident return if:

• You had Connecticut income tax withheld or made estimated Connecticut income tax payments; or
• Your federal gross income (plus any income that is federally exempt, but subject to Connecticut income tax) exceeds:
  • $12,625 if your filing status is single;
  • $12,000 if your filing status is married filing separately;
  • $19,000 if your filing status is head of household; or
  • $24,000 if your filing status is married filing jointly, or qualifying widow(er) with dependent child.

If your permanent residence (domicile) was Connecticut when you entered the Armed Forces, but you were later assigned to another state or country, your domicile does not change. You are still a Connecticut resident, and you are required to file Form CT-1040EZ or Form CT-1040 and pay any tax due, unless you meet all three conditions under either the group A or Group B Exceptions.

Group A Exceptions

1. You did not maintain a permanent place of abode in Connecticut for the entire taxable year;
2. You maintained a permanent place of abode outside Connecticut for the entire taxable year; and
3. You spent a total of 30 days or less in the aggregate in Connecticut during the taxable year.

If you are domiciled in Connecticut and meet all three conditions in Group A, you are treated as a nonresident and, to claim a refund of any Connecticut income tax withheld in error, you must file Form CT-1040NR/PY and attach an explanation that contains all of the following:

1. A statement that you did not maintain a permanent place of abode in Connecticut during the taxable year;
2. The location and a description of the permanent place of abode you maintained outside Connecticut and the beginning and ending dates of your stay there; and
3. The exact number of days you spent in Connecticut during the taxable year.

Group B Exception

1. Within any period of 548 consecutive days (the 548-day period), you are present in a foreign country (or countries) for at least 450 days;
2. During the 548-day period, you are not present in Connecticut for more than 90 days and you do not maintain a permanent place of abode in Connecticut at which your spouse (unless the spouse is legally separated) or minor children are present for more than 90 days; and
3. During the nonresident portion of the taxable year in which the 548-day period begins and during the nonresident portion of the taxable year in which the 548-day period ends, you are present in Connecticut for a number of days which does not exceed an amount that bears the same ratio to 90 as the number of days contained in the nonresident portion of the taxable year bears to 548.

If you are domiciled in Connecticut, but meet all three conditions in Group B, you are treated as a nonresident. To claim a refund of any Connecticut income tax withheld in error, you must file Form CT-1040NR/PY (for each taxable year within the 548-day period) and attach a statement that explains how you met each of the Group B exceptions listed.

See Special Notice 2000(17), 2000 Legislation Affecting the Connecticut Income Tax ("548-Day Rule" and Claim of Right Credit).

The following calculation illustrates the Group B Exception:

Number of days in the nonresident portion
                   548                                      x 90  =  Maximum days allowed in Connecticut

Examples for Group A Exception

Example 1: Steve was a resident of Connecticut when he joined the Army and has not established a new domicile. He does not maintain a permanent place of abode in Connecticut. He visited his parents’ home in Connecticut for only two weeks during the taxable year. He lives in dormitory-type housing at his permanent duty assignment in Texas.

Steve did not meet all three conditions under the Group A Exception to be treated as a nonresident because dormitory-type housing does not qualify as a permanent place of abode. Therefore, Steve is a resident of Connecticut for income tax purposes and must file a Connecticut resident income tax return.

Example 2: Moira was a Connecticut resident when she entered the Navy and has not established a new domicile. Her permanent duty assignment is San Diego, California, where she rented an apartment for the entire taxable year.

She did not visit Connecticut during the taxable year and she does not have a permanent place of abode in Connecticut.

Renting or owning an apartment or house for the entire taxable year at a permanent duty assignment qualifies as maintaining a permanent place of abode outside Connecticut. Additionally, Moira did not maintain a permanent place of abode in Connecticut or spend more than 30 days in Connecticut during the taxable year.

Therefore, although Moira is still domiciled in Connecticut, she meets all three conditions under the Group A Exception for being treated as a nonresident for the taxable year.

Example for Group B Exception