New Year, New Laws: SCRA Changes
1. As is often the case, the new year brought with it a great deal of federal legislation. These new laws included significant changes to the Servicemember Civil Relief Act (SCRA).
2. The Veterans Auto and Education Improvement Act of 2022, (HR 7939, PL 117-333, signed by the President January 5, 2023) changed the SCRA in three areas. In general, the Act (a) expanded the right to terminate certain types of service contracts, (b) clarified options for tax residence for the servicemember (SM) and spouse, and (c) authorized the SM and spouse, under certain circumstances, to retain the use of a professional license when, due to miliary orders, they move outside the jurisdiction that issued the license.
3. Contract Cancellation. Section 17 of the Veterans Auto and Education Improvement Act amended the SCRA with respect to cancellation of certain service contracts (50 U.S.C. 3956). Previously, the SCRA authorized servicemembers (SMs) to terminate cell phone, telephone, cable, and internet contracts when ordered to relocate for 90 days or more to a location that “does not support the contract.” The amendment extends this right to additional contract types, and to a new occasion. The SCRA also contains separate provisions concerning the termination of residential and motor vehicle leases which were not affected by these SCRA amendments.
a. New Contract Types Covered. The previous law authorized the SM to terminate contracts for:
- Commercial mobile service,
- Telephone exchange service,
- Internet access service, and
- Multichannel video programming service.
The new law adds the following contract types to the list:
- Gym membership or fitness program, and
- Home security services.
b. New Circumstance Covered. The prior law authorized termination of a covered contract in the following circumstances:
-SM right to terminate when SM executes a contract and thereafter receives orders to a
location that does not support the contract,
-Spouse / dependent right to terminate contract upon death of SM, and
-Spouse / dependent right to terminate contract when SM becomes catastrophically ill or injured.
The new law authorizes the SM to terminate a covered contract when the SM receives permanent change of station orders (PCSO), thereafter executes a covered contract, and then receives a stop movement order issued by the Secretary of Defense or the Secretary of Homeland Security for an indefinite period or a period of at least 30 days, that prevents the SM from using the services provided under the contract.
It appears that the spouse / dependent also has a right to terminate a covered contract in the stop movement situation. The amended law provides that certain people will have the same contract termination rights as the SM, including:
“The spouse or dependent of a servicemember described in paragraph (1) (B) [the paragraph concerning stop movement orders] who accompanies such servicemember during the period of relocation.”
The above quoted statutory language, describing the spouse / dependent right to stop movement related contract termination is exceedingly odd though, since there is no “relocation” in the stop movement situation. Nonetheless, it appears to me that the spouse/dependent has such termination right because the language refers so specifically to the paragraph relating to stop movement, because no other construction of the language makes any sense at all, and because the U.S. Supreme Court has long held that an ambiguity of the SCRA “is always to be liberally construed to protect those who have been obliged to drop their own affairs to take up the burdens of the nation.” Boone v Lightener, 319 U.S. 561, 575 (1943).
4. Residence for Tax Purposes. Section 18 of the Veterans Auto and Education Improvement Act amended the SCRA with respect to residence for tax purposes (50 U.S.C. 4001). As before, the new law provides that the SM shall neither gain nor lose tax residence or domicile due to travel pursuant to military orders. Nor shall the SM’s spouse gain or lose tax domicile or residence by accompanying the SM on such travel. The amendment adds a provision with respect to election, provided below:
ELECTION. For any taxable year of the marriage, a servicemember and the spouse of such servicemember may elect to use for the purposes of taxation, regardless of the date on which the marriage of the servicemember and the spouse occurred, any of the following:
(A) The residence or domicile of the servicemember;
(B) The residence or domicile of the spouse;
(C) The permanent duty station of the servicemember.
5. Portability of Professional Licenses. Section 19 of the Veterans Auto and Education Improvement Act amended the SCRA (50 U.S.C. 4025) by adding a new section concerning professional licenses. This amendment authorizes a SM or spouse with a professional license to retain the use of that license when military orders result in moving outside of the jurisdiction covered by the license. They will need to provide a copy of the orders to the licensing authority in the new jurisdiction, remain in good standing with the authority that issued the license, and follow the standards and continuing education requirements of the new jurisdiction. The individual must have actively used the license within the last two years to make use of this provision. If the license of the SM or spouse is covered by an interstate compact, use of the license shall be governed by such compact or applicable state law and not the new SCRA provision. The statute specifically excludes licenses to practice law from its coverage.
6. SCRA Amendments that didn’t quite make it. The U.S. House of Representatives version of the National Defense Authorization Act (NDAA) for 2023 contained proposed amendments to the SCRA that would have (a) provided the SM spouse with a right to reduce interest on pre-service obligations to 6%, (b) prohibited contractual provisions for pre-dispute arbitration of any controversy subject to the SCRA, (c) prohibited contractual, pre-dispute waiver of SCRA rights, and (d) preserved the right of any person aggrieved by an SCRA violation to seek private redress in court for such violation, or to be a member of a class action lawsuit, notwithstanding any previous agreement to the contrary. These provisions were stripped from the final bill and did not become part of NDAA for 2023 (HR 7776, PL 117-263).
Michael S. Archer
Legal Assistance Director
Marine Corps Installations East
Rev. 10 February 2023