State Update: Retiree Taxes, Education Benefits Remain in Play

State Update: Retiree Taxes, Education Benefits Remain in Play
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By MOAA Staff


MOAA National serves in an advisory capacity for state-specific issues such as income tax exemption and state-level education benefits. Please contact your local MOAA council as state legislation must originate at the state level.  


Of the 15 states that tax at least some amount of military retirement pay or survivor benefits (according to MOAA’s Military State Report Card and Tax Guide), only three have legislatures still in session as of June 1. And legislators in one of those states, Virginia, won’t be addressing taxes in their special session, but will be considering adjustments to the recently passed state budget that could reverse changes to a state-level education benefit for military families.


Here’s a look at where these sessions stand:



The Schedule: The legislative session officially ends Nov. 30, but bills must be passed by Aug. 31.


The Bill: AB 46, which would exempt uniformed services retirement pay (to include Coast Guard, U.S. Public Health Service, and NOAA recipients) and survivor benefits from state taxes.


The Story So Far: Introduced by Assemblymember James Ramos in December 2022, the bill cleared a series of votes without a “nay,” including unanimous passage on the assembly floor. The Senate Appropriations Committee placed the bill into the “suspense file” in August, preventing it from moving to the Senate floor. Because the bill passed the Assembly in 2023, it remains active throughout the two-year session, which ends this summer. Veterans groups held a May 16 rally to support the legislation, but with another round of bills entering the suspense file in May amid growing concerns over the state budget, the path forward appears uncertain.


From the Council: MOAA’s California Council of Chapters (CALMOAA) has supported the legislation from the beginning, joined by dozens of other veterans groups, local chambers of commerce, and the state’s largest law enforcement organization.


“All the state legislators I have personally spoken with understand the economic benefits of retaining military retirees in California,” said Lt. Cmdr. Jeff Breiten, USN (Ret), CALMOAA vice president of legislative affairs. “In light of California's recent budget deficit and the continued decline in the state's military retiree population, Governor [Gavin] Newsom must become proactive in ensuring AB 46 is signed into law this year.  California's military retirees provide billions of dollars to the state's economy each year, along with Department of Defense spending, which has decreased, as California's military retiree population continues to decline.”


Breiten said CALMOAA and the California State Commanders Veterans Council, a group of veterans organizations which includes CALMOAA, have implored Newsom to work with Ramos to ensure AB 46 is signed into law this year.



The Schedule: The state’s House of Delegates will hold a special June 28 session to consider legislation reversing changes to the Virginia Military Survivor and Dependent Education Program (VMSDEP) included in the state budget. The meeting will come 10 days after the Virginia Senate gathered for the same purpose, but closed its session without passing any proposed changes to the budget.


The Story So Far: VMSDEP provides education benefits to spouses and children of qualifying veterans up to eight semesters. As costs of the program have increased and the state has wrestled with budget concerns, tougher requirements were implemented, raising alarm bells from military advocates. Gov. Glenn Youngkin established a task force to identify potential solutions, and the Senate has its own working group.


From the Council: MOAA’s Virginia Council of Chapters has been involved in the VMSDEP fix since the beginning. Col. Monti Zimmerman, USA (Ret), the council’s vice president of legislative affairs, co-authored an opinion piece in May on the topic (registration required). He also serves on Youngkin's VMSDEP task force.


The Virginia council “is optimistic a solution can be reached in time,” Zimmerman said. “We are grateful the Virginia House, Senate, and governor continue to seek a solution to this unfortunate situation affecting military families.”



The Schedule: The legislative session ends June 30.


The Bill: SB 201, which would expand existing uniformed services pension exclusions (to include Coast Guard, USPHS, and NOAA, thanks to a recent amendment) and survivor benefits over a three-year span:

  • 2024 Tax Year: Up to $15,000
  • 2025 Tax Year: Up to $20,000
  • 2026 Tax Year and thereafter: Up to $25,000


The Story So Far: Delaware increased its military pension exclusion in 2022, ensuring that retirees under age 60 would receive the same $12,500 exclusion offered to all retirees (not just military) age 60 or above. The new law would expand this benefit. It was moved to the Senate Executive Committee after its Jan. 4 introduction and has yet to emerge.


From the Chapter: MOAA's Dover Chapter supports the legislation as a step toward full exemption for uniformed services retired pay.


“Our goal is 100% deductible uniform service retired pay,” said Col. Eugenia “Gene” Thornton, USA (Ret), Dover Chapter president. “Delaware’s legislature and governor routinely point to Delaware’s other great tax benefits for seniors. But they miss the point that military retirees are 38 years old and ready to embark on a second career, which in all likelihood will yield more in fully taxable income than the military retired pay.”


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