"The extensive evidence ... demonstrates that the mission-critical, risk-based decisions surrounding the use and operation of open burn pits ... were made by the military as a matter of military wartime judgment," Titus wrote in an 81-page opinion.

The dismissal -- the second by Titus in the case -- deals a major blow to the more than 700 veterans, family members and former KBR employees who brought the suit.

Related content:

• Veterans Exposed to Burn Pits Wait for Lawsuit Decision
• Contractors Sickened by Military Burn Pits Left to Fend for Themselves
• Hundreds Mourn Veteran Who Warned of Burn Pit Hazards

Plaintiffs were disappointed, and some were furious.

"My husband is DEAD because of burn pits," Dina McKenna, whose husband, former Army Sgt. William McKenna, died in 2010 from a rare form of T-cell lymphoma after serving in Iraq, told McClatchy in an email. "I want someone to be held accountable."

Susan Burke, a Baltimore-based attorney who represents the plaintiffs, told McClatchy that her clients will file an appeal to the 4th Circuit.

The litigation, which consolidates cases across the country, contains 63 complaints, including 44 national class action suits.

The plaintiffs charged that KBR, a government contractor and former Halliburton subsidiary, operated the burn pits in Iraq and Afghanistan irresponsibly, running them in locations near U.S. troops' living quarters and work spaces, and burning items that were not intended for the pits, including paint, batteries, computers, fuel, plastic water bottles and human medical waste.

The plaintiffs say they suffer from a range of diseases resulting from exposure: respiratory illnesses such as life-threatening constrictive bronchiolitis, gastrointestinal disorders, neurological problems and cancers. In one Washington, D.C.-based class action, a dozen of the plaintiffs have died since the cases were consolidated.

Titus said in his decision that he had no doubt that "many of (plaintiffs) have been harmed, at least, by some extent by the use of open burn pits or by the water they drank in Iraq or Afghanistan."

But, he added, the military recognized there were certain health risks associated with the use of burn pits but balanced those risks against the greater risk of harm to military personnel if another method of waste management -- such as removing trash to an off-base landfill or shipping it elsewhere -- was used.

"The decision to use the burn pits was not made by the contractors but rather than by the military," he wrote.

He added that at no point was KBR in charge of deciding what to burn in the pits or where to place them. He did not question or explore the Defense Department's choice to use burn pits, adding that the wartime choice by an executive branch entity was outside his jurisdiction, not appropriate for judicial review.

Titus made a similar argument in 2013 when he first moved to dismiss the case. He agreed that the company should not be held accountable because the decision was a military one.

The plaintiffs appealed, arguing that KBR operated on a contract that gave company employees leeway in managing waste treatment in the combat zones. Attorneys for the plaintiffs said information was needed before a final ruling could be made.

The 4th Circuit Court of Appeals agreed and returned the case to Titus' Maryland courtroom in 2014.

Titus said he is "sympathetic to the claims of the plaintiffs" but added that the resolution to their issues "is through the military and legislative process, not through the judiciary."

He also pointed out in his opinion that troops who were harmed by their military service are not without "significant remedies," citing veterans compensation benefits as well as legislation introduced this year in the House and Senate that is designed to support veterans exposed to burn pits.

A spokeswoman for KBR released a statement saying the company's employees operated the burn pits "safely and effectively at the direction and under control of the U.S. military" and are satisfied with Titus' decision.

"KBR believes the court made the correct decision, and we are pleased that this legacy case is one step closer to final resolution," the statement read.

Foreign Earned Income Exclusion

One of the key tax issues facing military contractors is their eligibility for the Foreign Earned Income Exclusion (FEIE). Being eligible for the FEIE allows a US taxpayer to exclude up to $102,100 of foreign earned income from their US expat taxes for the 2017 tax year, and that figure is increased to $104,100 for the 2018 tax year. The FEIE is claimed by filing Form 2555 with your US expat taxes. However, to qualify you must have a “tax home” in a foreign country and meet one of following two tests:

• Physical Presence Test: You must be abroad for at least 330 days within a 365-day period. The 330 days must be full, 24-hour days, and not partial days. Also, the 365-day period can be any period prior to the filing date of your tax return. This means that additional extension(s) to file your tax return can be requested in order to help you qualify for this test. As always, an extension of time to file is not an extension of time to pay. You need to make sure at least 90% of your taxes are paid by April 15th (April 17th, in 2018) to avoid interest and a late payment penalty. If your 330-day period includes only a portion of the tax year, then your FEIE will be prorated according to a ratio of the number of days in the qualifying period divided by 365.
• Bona Fide Residence Test: To qualify for bona fide residence, you must establish a permanent residence in a foreign country and maintain it for at least a full calendar year. Your intention must be to reside in the foreign country for an indefinite period of time.

Alternatively, you can establish a “tax home” by having a primary place of business in a foreign country and by intending to keep that place of business for at least a year. This means that going overseas on a temporary assignment expected to last less than a year would preclude you from qualifying for the FEIE. In the event you do not qualify for FEIE, all of your income will continue to be taxable in the US. Please keep in mind that if you do not qualify for the FEIE but are required to pay tax to the foreign country in which you work, you will be able to take a foreign tax credit on the income earned and taxed in the foreign country.

Status of Forces Agreements (SOFA)

Status of Forces Agreements exist between some host and foreign countries that provide military support for those stationed in the host country. Some of these SOFA agreements provide visiting US citizens exclusion from taxation in the host countries. By qualifying for exclusion of host country taxation under a SOFA agreement, you are saying that you are “visiting,” thus telling the IRS that you do not have a “tax home” in the foreign country. Consequently, you cannot qualify for both an exclusion from host country taxation and the FEIE on your US expat taxes.

Independent Contractor Versus Employee

Whether you are self-employed (an independent contractor) or an employee of a civilian business under contract with the military, you will still be eligible to qualify for the FEIE. If you are an employee of the military, you will not be eligible for the FEIE, but your pay may be excludable under other tax rules (see Combat Zone Exclusion, below). As an independent contractor, you will receive a Form 1099 at the end of the year, and the income reflected on this statement will be subject to self-employment tax. Self-employment tax is not reduced by the FEIE. However, you will be eligible to deduct business expenses from the 1099 income.

Due Date of Tax Return

If you are working overseas on April 15th (April 17th in 2018), you will be eligible for an automatic two-month extension to file your tax return. As mentioned above, this is not an extension of time to pay, only an extension of time to file. You must prepare an estimate of your tax liability and pay the balance by the deadline, even though your final return need not be completed at that time. If you need help preparing an estimate of your US expat taxes, please contact one of our tax professionals. However, if you do not pay your tax liability by April 15th (April 17th in 2018), you will only be liable for the interest charged on the outstanding US expat tax liability. As long as you have paid at least 90% of your tax liability, you will not be charged any penalties. You can also request an additional four-month extension (for a total of six months from the April deadline) by filing Form 4868. This will extend your tax filing date to Oct. 15th.

If you need an additional time to meet the Physical Presence Test, you can request a special extension via Form 2350. This request is not automatic and must be approved by the IRS.

Combat/War Zone Exclusion

The IRS has regulations in place that allow enlisted military personnel to exclude income earned in a “combat zone” from US expat taxation. As mentioned above, military personnel differ from military contractors. As such, military contractors are not eligible to exclude income earned in a combat zone from their US expat taxes. The IRS lists designated combat zones on their website, for your reference.

State Filing Requirements

When you work abroad as a military contractor, you might continue to have a state filing requirement depending on your individual state’s rules and whether you have retained ties to that state. If you left the US for an assignment of longer than one year and did not have any source income to a US state during the tax year, you may not have a filing requirement. However, if you have retained a home, family, or driver’s license in the state, you may continue to have filing requirements.

FOR MORE INFO