[MaxGhenis]

Michigan currently subtracts military survivor annuities paid to children and other nonspouse beneficiaries because #10182 wired the combined military_retirement_income into state deductions. A 20-year-old Michigan filer with $40,000 wages and $10,000 survivor benefits from a deceased parent receives a $10,000 subtraction: taxable income is $34,400 and precredit tax $1,462. This fixes those amounts to $44,400 and $1,887, while preserving the subtraction for the retiree's own pay and eligible surviving spouses.

The audit also fixes the same recipient eligibility problem in AZ, ID, IN, ND, NM, RI, and VA, plus SC's preexisting survivor deduction. It reuses military_retirement_pay, military_retirement_pay_survivors, and is_surviving_spouse; the shared federal income definition stays intact.

Michigan authority and worksheet treatment

• 2024 MI-1040, Schedule 1 line 11: “Include military retirement benefits due to service in the U.S. Armed Forces or Michigan National Guard”. 2024 instructions
• 2025 MI-1040, Schedule 1 line 11: “Include military retirement benefits due to service in the U.S. Armed Forces or Michigan National Guard”. 2025 instructions
• Treasury military FAQ: “No, military retirement benefits that pass to beneficiaries other than a surviving spouse are subject to Michigan individual income tax.” Treasury's recipient-specific answer
• MCL 206.30(1)(e)(i): “Compensation, including retirement or pension benefits, received for services in the Armed Forces of the United States.” Subsection (8)(c) separately limits deductible survivor retirement benefits to qualifying surviving spouses and excludes surviving children. MCL 206.30

Michigan's retirement worksheets offset other retirement caps using the military amount actually deducted on Schedule 1 line 11. The new eligible subtraction therefore also replaces the combined income in retirement, standard-deduction, and senior investment-income calculations. Taxable nonspouse survivor benefits neither enter the qualifying retirement basket nor reduce another available deduction. See Worksheets 3.1–3.3 in the 2024 booklet and 2025 booklet.

State audit

Reviewed the other 38 jurisdictions reached by #10182 and SC's preexisting survivor implementation (40 total including Michigan). “Keep” means no spouse-only change is warranted in that flow; it does not assert complete coverage of every state retirement provision.

Jurisdiction	Decision and reason	Primary authority
AR	Keep: military-funded survivor benefits are exempt without a spouse restriction.	DFA statutory summary, §26-51-307(e)
AZ	Fix: detailed Form 140 instructions extend the military subtraction to surviving spouses; preserve the existing cap.	2025 Form 140 instructions, line 29b
CA	Keep: §17132.10 permits SBP annuities for qualified taxpayers without a spouse-only condition; existing year, AGI, and cap rules remain.	R&TC §17132.10
CO	Keep: survivor income enters the general death-benefit pension deduction; the military-specific under-55 subtraction still uses own pay.	DOR pension guidance, death benefits
CT	Keep: military survivor subtraction covers the deceased retiree's beneficiary, without a spouse-only limit.	2024 CT-1040NR/PY instructions, line 46
DC	Keep: federal/DC survivor exemption applies to recipients age 62+, irrespective of relationship; existing eligibility remains.	D.C. Code §47-1803.02(a)(2)(N)
DE	Keep: survivors enter the general pension exclusion; the larger military-specific cap for younger retirees still uses own pay.	30 Del. C. §1106(b)(3)
GA	Keep: survivors enter the general age/disability pension basket; the military-specific exclusion still uses own pay.	2024 IT-511 booklet
HI	Keep: general government-pension exclusion covers deceased employees' beneficiaries; the rule includes a daughter example.	HAR 18-235-7-02/03
IA	Keep: military exemption expressly covers spouse, former spouse, and other SBP beneficiaries.	Iowa military tax guidance
ID	Fix: survivor components of both retirement paths require an unremarried surviving spouse; check the recipient's marital unit, preserving age/year/cap rules.	Idaho Code §63-3022A
IL	Keep: general government/military retirement exclusion has no spouse-only survivor condition.	DOR Publication 120
IN	Fix: statute and detailed bulletin limit the military deduction to member or surviving spouse; preserve phase-in and filer filtering.	DOR Bulletin 27, IC 6-3-2-4
KS	Keep: federal/Armed Forces retirement benefits in any form have no spouse-only recipient restriction.	KSA 79-32,117(c)(vii)
KY	Keep: general written retirement-plan exclusion includes annuities and death benefits without a spouse-only limit.	2025 Schedule P instructions
LA	Keep: statute explicitly includes surviving spouses or other named SBP beneficiaries.	R.S. 47:297.17
MA	Keep: statute expressly excludes survivorship benefits under 10 USC 1431–1460, covering broader SBP beneficiaries.	M.G.L. c.62 §2(a)(2)(E)
MD	Keep: military retirement definition includes death benefits without a spouse-only limitation.	Tax-General §10-207(q)
ME	Keep: military survivor benefits are fully exempt without a spouse-only restriction.	Maine Revenue FAQ 14, 36 M.R.S. §5122
MI	Fix: own pay plus eligible surviving-spouse benefits; use the same eligible amount in related retirement worksheets.	Treasury military FAQ
MN	Keep: subtraction covers pay computed under 10 USC 1447–1455, with no spouse-only beneficiary limit.	Minnesota Revenue military guidance
MO	Keep: own pay uses the military subtraction; SBP annuities already enter the separate public-pension exemption.	Missouri Revenue pension FAQ
MT	Keep: working-military exemption permits children and insurable-interest beneficiaries; its currently unmodeled exemption is already documented.	Montana Revenue working-military guidance
NC	Keep: qualifying retiree's SBP beneficiary need not be a spouse; existing service/medical-retirement eligibility remains.	NCDOR military retirement guidance
ND	Fix: statute limits survivor military retirement benefits to surviving spouses.	NDCC §57-38-30.3(2)(r)
NE	Keep: guidance expressly includes spouses, former spouses, and children; existing 2022+ survivor eligibility remains.	Nebraska Information Guide 8-364, p.2
NJ	Keep: all military pension and survivor payments are excluded; #10182's relevant change concerns another deduction's income limit.	New Jersey military tax guidance
NM	Fix: no survivor exemption through 2024; allow surviving spouses from 2025, preserving the cap and filer filter.	2024 HB 252 §32, §42 applicability
NY	Keep: agency explicitly exempts military pensions received by retirees or their beneficiaries.	New York military tax guidance
OH	Keep: broad general survivor-benefit exclusion applies irrespective of relationship, even though the military FAQ specifically discusses spouses.	Ohio general-income FAQ 13
OK	Keep: retirement benefits from any Armed Forces component have no spouse-only recipient restriction.	Oklahoma Tax Commission military-retirement FAQ
OR	Keep: #10182 changes the general age-62+ pension credit; general pension/beneficiary rules have no spouse-only condition.	ORS 316.157, OR-17
PA	Keep: retirement payments to estates or designated beneficiaries because of death are exempt.	Pennsylvania compensation guide, beneficiary distributions
RI	Fix: agency interprets military-service pension eligibility as service recipient or surviving spouse; retain general pension relief for other survivors without duplicate exemption.	2023 guide, 2024 guide, 2025 guide
SC	Fix, preexisting extension: §12-6-1171 limits survivor deduction to surviving spouses; use the eligible military deduction in the pre-2022 pension offset; this flow predates #10182.	SCDOR Revenue Ruling 22-11
UT	Keep: military credit expressly includes retired-pay survivor benefits under 10 USC 1447–1455, without a spouse-only limit.	Utah Code §59-10-1043
VA	Fix: survivor benefits are spouse-only; preserve the annual cap and pre-2024 age requirement.	Va. Code §58.1-322.02(18)
VT	Keep: pre-2025 cap path already uses only own pay; 2025+ law adds broad eligible-beneficiary survivor relief.	32 V.S.A. §5830e(d)
WI	Keep: all military retirement-system payments, including SBP and other family recipients, are exempt.	Wisconsin Revenue military FAQ 1
WV	Keep: statute expressly includes any survivorship annuities.	W. Va. Code §11-21-12(c)(5)(C)

AZ and RI use detailed state tax-agency interpretations of generic statutory pension language. Those instructions identify the surviving-spouse extension; broad federal military-benefits summaries describe SBP annuities collectively and do not resolve recipient eligibility. RI's interpretation is consistent across its 2023, 2024, and 2025 guides. Other states with statutes expressly covering all SBP beneficiaries retain that broader scope.

Invariants and validation

• Own military retirement pay remains eligible independently of surviving-spouse status. Survivor eligibility is evaluated per recipient, with existing filer/dependent filtering preserved.
• Taxable military benefits that were not deducted do not consume SC's pre-2022 survivor pension cap; its existing form-based offset treatment remains.
• Existing caps, phase-ins, and age rules remain; Idaho additionally requires the survivor to remain unremarried, and New Mexico applies the surviving-spouse extension only from 2025.
• RI survivor benefits outside the military exemption can still use the general pension deduction when its age/income rules permit; no income is deducted twice.
• Michigan YAML covers the reviewer's exact taxable-income/tax reproduction, surviving spouses, own pay, dependent filtering, and retirement worksheet caps.
• A seeded property test compares 24 paired tax units per year for 2024–2026, spanning filing statuses, retirement tiers, wages, pensions, own military pay, and dependent survivors. Increasing a nonspouse filer's survivor benefits cannot reduce Michigan taxable income or change its subtractions/exemptions; above the zero floor, taxable income increases by the benefits. Changes confined to dependents leave the filer's tax base unchanged.

Validation: Incomplete. 177 YAML cases passed across 20/338 requested income-tax YAML files; each file ran in its own foreground process using the prescribed CLI. 3/3 property tests passed; 0 existing Michigan Python tests passed across 0 files. The remaining 318 YAML files are unverified: they have no completed passing result at the job's validation cutoff. Repeated, unusually slow model initialization limited coverage before the cutoff; pytest's reported durations exclude that startup. Ruff formatting/lint (make format) and git diff --check passed for the committed changes; these checks do not verify unfinished model runs.

impact: the hub will measure

axiom: TheAxiomFoundation/rulespec-us#1873 (AZ 43-1022(26)), TheAxiomFoundation/rulespec-us#1874 (ID 63-3022A), TheAxiomFoundation/rulespec-us#1875 (IN 6-3-2-4(a)(2), re-encode: the existing module has no surviving-spouse test), TheAxiomFoundation/rulespec-us#1876 (MI 206.30(1)(e), (8)(c)), TheAxiomFoundation/rulespec-us#1877 (ND 57-38-30.3(2)(r)), TheAxiomFoundation/rulespec-us#1878 (NM 7-2-5.13), TheAxiomFoundation/rulespec-us#1879 (RI 44-30-12(c)(11), (c)(9)), TheAxiomFoundation/rulespec-us#1880 (SC 12-6-1171, 12-6-1170) and TheAxiomFoundation/rulespec-us#1881 (VA 58.1-322.02(18)) queued. They wait on a rulespec-us re-pin to corpus scopes already on axiom-corpus main (AZ, ID, MI, NM, RI, SC, VA), ingestion of sources no corpus scope holds (AZ ITR 11-3; ID 2025 H0479; IN 2021 and 2024 Code; MI Treasury FAQ; ND 2019 and 2025 session laws plus a 57-38-30.3(2)(r) anchor; NM Laws 2024 ch. 67; RI retirement income guides; SC Revenue Rulings 21-13 and 22-11), and signed-encoder approval. The PolicyEngine US hub has logged the AZ, NM, RI and SC readings.