1. (1) Compensation paid from federal appropriations, including retirement benefits, for military services in the armed forces is exempt from Michigan income tax, and is deductible from adjusted gross income by the recipient to the extent it is included in federal adjusted gross income.

   1. (a) Example 1. Active duty personnel All military compensation is exempt.
   2. (b) Exampe 2. Reservist Figure for 206.10 The guardsman was federalized during the 2 weeks at camp and at the monthly military drills. The pay for these came from federal appropriations. The $250.00 paid for riot duty came from state funds and is subject to Michigan income tax.
   3. (d) Example 4. National guard technicians National guard technicians, although paid from federal funds, are full-time civilian employees. Their civilian pay is subject to Michigan income tax. They are members of the national guard, however, and compensation paid for the 2 weeks' encampment and the monthly drills is military pay and is exempt from Michigan income tax as in example 3.
   4. (e) Example 5. Armory board of control Compensation for serving as a member of an armory board of control is subject to Michigan income tax.
   5. (f) Example 6. Retirement benefits Retirement benefits paid to retirees of the armed forces for services performed while a member of the armed forces are exempt from Michigan income tax.
2. (2) Employee business expenses attributable to military income shall reduce the subtraction for military income. If the expenses exceed the military income, there can be no subtraction for military income.

History: 1979 AC.