Military Exemptions Businesses

🧠 Deep Dive: Ownership and Military Spouse Businesses

🏛️ SEAL SD Explores the Nuances of Ownership Changes

At SealSD.com, we’re committed to supporting military families through the Core GRT Plan, which offers a 100% GRT exemption on business income for active-duty military members and their immediate families, costing $4.78 million for 18,000 households. A great question came up: how does majority ownership work for a business started by a group of military spouses, initially 100% owned by them, when some spouses’ husbands leave active duty (AD)? Specifically, if Spouse A has 20% ownership and is still married to an active-duty spouse, but the other women’s husbands have separated from the military, what are the implications? Let’s dive into this scenario with deep thoughts, considering ownership, military spouse status, tax benefits, and more.

🔍 Understanding the Scenario: Ownership and Military Spouse Status

Let’s break down the situation:

Initial Setup: A group of military spouses starts a business, with 100% ownership among them. All are married to active-duty (AD) military members at the outset.
Ownership Structure: Spouse A holds 20% ownership and remains married to an AD spouse. The other women, who collectively hold 80% ownership, are no longer military spouses as their husbands have separated from the military.
Core GRT Plan Context: Under the Core GRT Plan, active-duty military members and their immediate families (spouses and dependent children under 21) are exempt from the 5% GRT on business income, costing $4.78 million for 18,000 households.

Analogy for Clarity: Think of this business as a picnic lemonade stand started by a team of military spouse picnic friends. At first, all the friends’ picnic heroes are active-duty, so the stand gets a free pass on the picnic fee. But when some heroes retire, only Spouse A’s hero stays active—how does this change the lemonade stand’s picnic fee?

💰 Ownership and GRT Exemption: Who Qualifies?

The Core GRT Plan’s military exemption applies to business income for active-duty military members and their immediate families. Let’s explore how this impacts the business:

Spouse A (20% Ownership): Since Spouse A is still married to an active-duty spouse, their 20% share of the business income qualifies for the 100% GRT exemption. For example, if the business generates $100,000 in annual revenue, Spouse A’s $20,000 share is exempt from the 5% GRT, saving $1,000 annually.
Other Owners (80% Ownership): The other women, whose husbands are no longer active-duty, do not qualify for the exemption. Their 80% share of the business income—$80,000 in this example—is subject to the 5% GRT, costing $4,000 annually.
Total GRT Impact: For the $100,000 revenue, the business pays $4,000 in GRT, but Spouse A’s share is exempt, reducing the overall tax burden compared to a fully taxable business.

Analogy for Clarity: At our picnic lemonade stand, Spouse A’s picnic hero keeps their free pass, so their 20% of the lemonade sales skips the $5 picnic fee. The other picnic friends pay the fee on their 80%, but the stand still saves a bit because of Spouse A’s hero status!

📊 Majority Ownership: Does It Matter?

The question of majority ownership by an individual doesn’t directly impact the GRT exemption under the Core GRT Plan, as the exemption is applied based on each owner’s military spouse status, not the overall ownership structure:

No Majority Owner: In this scenario, no single individual has majority ownership (over 50%). Spouse A’s 20% is significant but not controlling, and the other women’s 80% is split among them.
Exemption Application: The GRT exemption is calculated per owner based on their eligibility. Even if Spouse A had 51% ownership, the exemption would still apply only to their share, not the entire business, unless all owners were eligible.
Business Structure Implications: If the business is an LLC or partnership, taxes are typically passed through to individual owners, so each owner’s tax liability reflects their personal status. If it’s a corporation, the business itself pays the GRT, and exemptions may depend on how income is distributed.

Analogy for Clarity: Our picnic lemonade stand doesn’t care who owns the most slices of the picnic pie—the picnic fee is calculated for each friend based on their picnic hero’s status, not who has the biggest share!

🧠 Deep Thoughts: Implications and Future Considerations

This scenario raises broader questions about supporting military families while maintaining the integrity of the Core GRT Plan:

Changing Ownership Dynamics: As more spouses’ husbands leave active duty, the business may lose a larger portion of its GRT exemption. If Spouse A remains the only military spouse, only 20% of the income stays exempt. This could prompt the business to adjust its ownership structure—perhaps by buying out non-exempt owners or restructuring to minimize tax liability.
Emotional and Community Impact: Military spouse businesses often thrive on community support and shared experiences. The transition of some owners out of military spouse status might create tension, but it also highlights the resilience of military families adapting to change.
Policy Advocacy: SEAL SD could advocate for extended benefits for former military spouses, ensuring they aren’t penalized as their circumstances change, while maintaining safeguards against exploitation, as discussed in our safeguards deep dive [Page 10: Deep Dive: Safeguards Against Exploitation of Military Exemptions].

Analogy for Clarity: As our picnic lemonade stand grows, some picnic friends lose their free passes, but Spouse A keeps hers—making the stand think about sharing the picnic pie differently, while SEAL SD works to get more passes for picnic friends in transition!

🚀 Join the Movement

The Core GRT Plan supports military families and small businesses, but we’re always listening to your stories to make it even better. Join our movement to share your experiences, volunteer, and ensure tax freedom for all South Dakotans.

Learn More: /core-grt-plan | Join Us: /join-the-movement

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📂 Learn More:

🌄 Our Vision for South Dakota: The future we’re building — bold, free, and family-first. /why-south-dakota-is-awesome
📊 End Property Tax: GRT Plan: How the 5% Gross Receipts Tax will replace property taxes — and why it works. /core-grt-plan
📈 Revenue Verification: Ensuring every dollar is accounted for — transparency you can trust. /revenue-verification
🛡️ Safeguards to Protect Homes: No tricks, no traps — just locked-in protections you can count on. /doge-oversight
🕵️ SD-DOGE: Our Government Watchdog: Efficiency, oversight, and a watchdog that works for the people. /doge-oversight
✊ Join the Movement: Your voice. Your state. Your moment. Get involved today. /join-the-movement

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