North Dakota Income Tax Exemption for Military Pay

Subdivision (g) of section 57-38-30.3(2) reduces North Dakota taxable income by the military pay received by a taxpayer as a member of the armed forces on federal active duty, as a member of the national guard, or as a reserve member of the armed forces, to the extent that pay is in North Dakota taxable income. The definition attached to it is what makes this worth an entry of its own. "Military pay" is defined in the subdivision to include "all federal pay for training, education, mobilization, and bonuses and state pay when called to support an emergency on state active duty". Five things are named that a taxpayer would not assume were covered: Drill and annual training pay is federal pay for training, and it is in. Pay received for military education is named. Enlistment and reenlistment bonuses are named. A bonus is ordinary taxable income federally and it comes out of the North Dakota base. Mobilization pay is named, so there is no need to distinguish Title 10 from Title 32, or a contingency operation from anything else. Some states in this catalog draw exactly that line and exclude ordinary Guard duty; North Dakota does not. And state pay for emergency state active duty, which is the Governor's call-out for a flood or a blizzard, is subtracted even though it is state rather than federal money. There is no length-of-service condition, no requirement about where the member entered service from, and no residency window. Compare Montana, where the active duty salary subtraction reaches only a resident who entered active duty from Montana. Two related provisions. A taxpayer actively serving in the armed forces or the merchant marine outside the boundaries of the United States may defer filing and payment of North Dakota income tax until the federal return is due, with no interest or penalty accruing to that date, under 57-38-34(5). Merchant mariners are named alongside the armed forces there, which is rare. And the compensation paid under the state adjusted compensation chapters is exempt from all state and local taxes by its own terms, including expressly from tax determined under 57-38-30.3.