BISMARCK — Tax year 2023 may be the first that military members do not have to pay income taxes on their military earnings under bill on its way to the governor’s office.
Senate Bill 2293, which eliminates income tax on military pay, is one of two military-related bills passed by the North Dakota House of Representatives on Monday, March 20. The other, Senate Bill 2223, expands the pool of potential members for school boards on military bases. Both were introduced by Sen. Scott Meyer, R-Grand Forks. The House passed Senate Bill 2293 passed in an 89-3 vote and Senate Bill 2223 in a 91-1 vote.
Meyer said the issue of taxing military pay came up when developing a tax proposal during the interim session. While under the proposed flat tax plan, House Bill 1158, many serving in the military would not have to pay income taxes, some higher-ranking members of the military would still be taxed.
Presently, military pay is taxed at the same rate as other income tax in North Dakota. Under North Dakota’s current income tax structure, the change would cut about $4 million of revenue for the state, Meyer said, and likely less if North Dakota adopts a flat tax policy.
In Grand Forks, airmen stationed at the Grand Forks Air Force Base often do not register as residents of North Dakota if they were transferred from a state without an income tax like Texas, Alaska, Florida or South Dakota, Meyer said.
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“Hopefully they’ll set residency (in North Dakota) and then once they eventually separate from the military, they'll remember that we have no state income tax on military retirement benefits and hopefully they’ll come back to North Dakota,” he said.
Meyer said the Grand Forks Air Force Base is the first station for 40% of airmen stationed there, so removing the tax on military pay in North Dakota could result in airmen setting their residency in the state for the duration of their military careers. For the North Dakota National Guard, he says the change could help make it more competitive when recruiting against the Minnesota National Guard.
North Dakota Gov. Doug Burgum voiced his support for Meyer's bill in his Jan. 3 State of the State Address
Meyer’s other military-related bill, Senate Bill 2223, could help the Grand Forks Air Force Base School Board fill an ongoing vacancy on its school board. According to testimony from School Board President Michelle Shepperd, the board has had at least one mid-term vacancy per year for the last seven years.
The base, along with the Minot Air Force Base, has a five-member school board, but at present, school board members are required to live on-base. This results in frequent vacancies on the boards as members are transferred or move off-base.
“As base housing has become less and less, as more and more people are living in town, they’re having issues finding people willing to serve on school boards,” said Meyer.
The bill changes residency requirements, allowing a school board member to live off-base within a 20-mile radius of the base if they are an active member, spouse of an active member, retired member or spouse of a retired member that served the military installation.
School board members will only be able to serve on one school board, so they could not, for example, serve on the Grand Forks School Board and the Grand Forks Air Force Base school board at the same time.
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The bill also contains an emergency clause, which allows it to go into effect immediately after it is signed into law by Gov. Doug Burgum. Without the emergency clause, the Grand Forks Air Force Base School Board would have to wait until July to fill its vacant spot with a member that lives off-base.
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