Does compensation paid to an Illinois National Guard member who is also a dual-status federal military technician qualify for Illinois' military pay subtraction modification?

Plain-English summary

A tax preparer wrote to the Illinois Department of Revenue about several clients, including her own husband, who are members of the Illinois National Guard and who also hold federal "dual-status" military technician jobs. To hold that federal technician position, a person must be a military technician (dual status) under 10 U.S.C. §10216(a), remain a member of the National Guard, hold the military grade specified for the position, and wear the appropriate uniform while performing technician duties. The preparer had received inconsistent answers from different Department agents about whether the W-2 income from this federal technician job could be subtracted on the Illinois return, the same way ordinary National Guard pay is subtracted.

The Department answered as a General Information Letter (GIL) rather than a private letter ruling, because of the nature of the letter and the information provided. It explained that Section 203(a)(2)(E) of the Illinois Income Tax Act (35 ILCS 5/203) allows a subtraction from base income for compensation paid to a resident by reason of being a member of the Illinois National Guard (or, for tax years ending on or after December 31, 2007, the National Guard of any other state).

The Department then addressed the specific dual-status technician question: compensation paid to National Guard members pursuant to employment under 32 U.S.C. §709(a) — the federal statute that authorizes the Secretary of the Army or Secretary of the Air Force to employ dual-status military technicians — qualifies for the IITA Section 203(a)(2)(E) subtraction modification. In other words, because the technician position requires the person to remain a National Guard member, hold National Guard grade, and wear the National Guard uniform, the pay tied to that dual-status technician role is treated the same as other National Guard compensation for Illinois subtraction purposes.

The letter notes that the subtraction should be shown on Schedule M, Other Additions and Subtractions for Individuals, Line 19, and then carried to Form IL-1040, Line 7. As with all GILs, the Department reiterated that this letter is general information only, is not a statement of Department policy, and is not binding on the Department.

What this means for you

If you are a dual-status National Guard technician

If your federal technician position requires you to remain a National Guard member, hold a National Guard military grade, and wear the National Guard uniform while performing your duties — consistent with 32 U.S.C. §709(a) and 10 U.S.C. §10216(a) — this letter indicates that compensation from that position can be treated as Illinois National Guard pay for purposes of the IITA Section 203(a)(2)(E) subtraction modification, reported on Schedule M, Line 19, and Form IL-1040, Line 7.

If you are a tax preparer with National Guard clients

The letter distinguishes dual-status technician pay from ordinary civilian military pay. The Department states that "military pay received as a civilian is not an income that can be subtracted," so the subtraction described here turns specifically on the dual-status nature of the technician job (i.e., the requirement to remain a National Guard member in grade and uniform), not simply on working for a military-related employer.

Common questions

Is this letter legally binding on the Department of Revenue?
No. It is a General Information Letter (GIL) issued under 86 Ill. Adm. Code 1200.120(b) and (c). A GIL provides general information, is not a statement of Department policy, and is not binding on the Department.

What Illinois form and line is used to claim this subtraction?
The letter states the subtraction should be shown on Schedule M, Other Additions and Subtractions for Individuals, Line 19, and Form IL-1040, Line 7.

Does all National Guard-related pay qualify for the subtraction?
Not necessarily. The letter notes that military pay received purely as a civilian is not subtractable. The favorable conclusion here applies to compensation paid pursuant to employment under 32 U.S.C. §709(a), where the technician must remain a National Guard member holding National Guard grade and wearing the uniform.

What is the underlying statute allowing the subtraction?
Section 203(a)(2)(E) of the Illinois Income Tax Act (35 ILCS 5/203), which allows a subtraction from base income for compensation paid to a resident by reason of being a member of the Illinois National Guard (or, for tax years ending on or after December 31, 2007, the National Guard of any other state).

Citations and references

• 35 ILCS 5/203(a)(2)(E) — Illinois Income Tax Act subtraction modification for National Guard compensation
• 86 Ill. Adm. Code 1200.120(b) and (c) — governs the nature and non-binding effect of General Information Letters
• 32 U.S.C. §709(a) — federal authority for the Secretary of the Army or Secretary of the Air Force to employ National Guard dual-status military technicians
• 10 U.S.C. §10216(a) — federal definition of "military technician (dual status)"

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/income-tax/2016.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/income-tax/2016/it-16-0003-gil.pdf

Original ruling text

IT 16-0003-GIL 07/12/2016

SUBTRACTION MODIFICATIONS-MILITARY

Compensation paid to members of the National Guard qualifies for the subtraction
modification under IITA Section 203(a)(2)(E)
July 12, 2016

Re:

Illinois income tax

Dear Xxxxx:
This is in response to your letter dated June 16, 2016. The nature of your letter and the
information provided require that we respond with a General Information Letter (GIL). A GIL is
designed to provide general information, is not a statement of Department policy and is not
binding on the Department. See 86 Ill. Adm. Code 1200.120(b) and (c), which may be accessed
from the Department’s web site at www.tax.illinois.gov.
Your letter states as follows:
I have been instructed to contact the Legal Services Department to request a private letter
ruling on a question where we have been given multiple answers by various agents at
the Department of Revenue.
I have several clients, including myself (my husband actually), who are members of the
Illinois National Guard. Over time, these individuals in question have become TITLE as
well.
The TITLE is a federal job however, the requirements to hold this federal position are that
the individual must 1) “be a military technician (dual status) as defined in section 10216(a)
of title 10,” 2) “be a member of the National Guard,” 3) “hold the military grade specified
by the Secretary concerned for that position,” and 4) “while performing duties as a military
technician (dual status), wear the uniform appropriate for the member’s grade and
component of the armed forces.”
The question that has been coming up repeatedly with varying answers each time is the
treatment of the W-2 from the US Army on the Illinois return. I know that the law states
that the Illinois National Guard income is exempt, or able to be subtracted, in Illinois. The
question is whether or not the federal technician job, for which dual-status is required, is
also exempt in Illinois?
I am enclosing page 41 of Title 31 from the Illinois National Guard, Section 709.
Technicians: employment, use, status. Subsection (b)(2) explains that these federal
technicians must be members of the National Guard. Subsection (e) also explains that as
technicians these individuals are employed by the Department of the Army.

I am also enclosing a military document called the TRP 303. Chapter 2, page 4. Section
2-1 Position assignments subsections (a) and (b) also explains the dual status
requirement.
I do understand that military pay received as a civilian is not an income that can be
subtracted but again, the question is whether or not the military pay received as a dualstatus technician is income that should be subtracted.
The final enclosures are redacted copies of the email sent to me with a list of required
attachments if an amended return were to be filed per an agent of the Illinois Department
of Revenue. That list contained in the email requests copies of the W-2s received so you
can see that they are both military W-2; redacted copies are enclosed. The list also
requests a memorandum stating the dual status held by an individual; a friend of one of
my clients has provided his letter as an example. Other items in the list are already
included.

RULING
Section 203(a)(2)(E) of the Illinois Income Tax Act (“IITA” 35 ILCS 5/203) provides the following
subtraction modification in the computation of base income:
For taxable years ending before December 31, 2001, any amount included in such total
in respect of any compensation (including but not limited to any compensation paid or accrued
to a serviceman while a prisoner of war or missing in action) paid to a resident by reason of
being on active duty in the Armed Forces of the United States and in respect of any
compensation paid or accrued to a resident who as a governmental employee was a prisoner of
war or missing in action, and in respect of any compensation paid to a resident in 1971 or
thereafter for annual training performed pursuant to Sections 502 and 503, Title 32, United
States Code as a member of the Illinois National Guard or, beginning with taxable years ending
on or after December 31,2007, the National Guard of any other state. For taxable years ending
on or after December 31,2001, any amount included in such total in respect of any compensation
(including but not limited to any compensation paid or accrued to a serviceman while a prisoner
of war or missing in action) paid to a resident by reason of being a member of any component
of the Armed Forces of the United States and in respect of any compensation paid or accrued
to a resident who as a governmental employee was a prisoner of war or missing in action, and
in respect of any compensation paid to a resident in 2001 or thereafter by reason of being a
member of the Illinois National Guard or, beginning with taxable years ending on or after
December 31, 2007, the National Guard of any other state. The provisions of this subparagraph
(E) are exempt from the provisions of Section 250.
Your letter states that under 32 U.S.C. §709(a), the Secretary of the Army or Secretary of the
Air Force may employ certain TITLE. Employment under Section 709(a) is generally limited to
persons that meet all of the following requirements: (i) a military TITLE (dual status) under 10
U.S.C. §10216(a), (ii) a member of the National Guard, (iii) hold the specified military grade, and
(iv) wear the specified uniform.
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Compensation paid to members of the National Guard pursuant to employment under 32 U.S.C.
§709(a) qualifies for the subtraction modification under IITA Section 203(a)(2)(E). Such
compensation should be shown as a subtraction modification on the Schedule M, Other
Additions and Subtractions for Individuals, Line 19, and Form IL-1040, Line 7.
As stated above, this is a GIL. A GIL does not constitute a statement of policy that applies,
interprets or prescribes the tax laws, and it is not binding on the Department.

Sincerely,

Brian L. Stocker
Associate Counsel (Income Tax)

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