Income tax; certain compensation of civilian employees of Armed Forces, exempt

This bill would change state law to exempt certain pay for civilian employees of the U.S. Department of Defense and Armed Forces from state income tax. Currently, only active service members' pay is exempt under specific conditions. If passed, this bill would apply to tax years starting on or after January 1, 2027, and would mean these civilian employees would not pay state income tax on compensation earned while in a combat zone, deployed outside the U.S., or activated for emergency response.

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