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Senate committee votes to prevent automatic withholding from exempt military pay
Summary
The Senate Finance and Tax Committee advanced Senate Bill 2047 to the floor after hearing from the state tax commissioner. The bill would prevent income tax withholding from military pay that is exempt under a prior law unless the service member requests withholding.
Senate Bill 2047, a proposal to stop automatic state income tax withholding from military pay that is already exempt, received a favorable committee recommendation from the Senate Finance and Tax Committee on Jan. 8, 2025.
Tax Commissioner Brian Krasches told the committee the bill amends North Dakota withholding law to “avoid tax being unnecessarily withheld from military pay earned by service members in North Dakota.” He said the change stems from 2023 legislation that exempted certain military pay from state income tax but left the withholding requirement in place, producing unnecessary withholdings and refund processing for service members.
The bill would make withholding inapplicable to exempt military pay unless a service member specifically requests it. Krasches told the committee the proposal would ensure “service members receive all of their exempt military pay as quickly as they earn it” and that the change would be effective for taxable years beginning after Dec. 31, 2025, as drafted. He also said the tax department would work with military payroll specialists to provide outreach and a form for service members who do want withholding.
Committee members asked for clarifications about who qualifies as “active duty” and whether part‑time Guard or reserve pay would be covered; the commissioner said he would follow up with specifics if needed. Senators also asked whether the effective date could be moved earlier; Krasches said it could be possible and he would not be opposed.
Senator Dale Patton moved that the committee give the bill a “do pass” recommendation; Senator Dean Rummel seconded. The clerk recorded the following roll call: Chairman Mark Weber — Aye; Vice Chairman Dean Rummel — Aye; (other voting members listed on the roll call recorded their votes in favor). The bill passed committee by voice/roll call and Senator Michelle Powers volunteered to carry the bill to the floor.
The committee closed the hearing after receiving no public opposition and after brief technical questions were answered by the tax commissioner. The bill as drafted includes an effective date for taxable years beginning after Dec. 31, 2025.
