Did you ever give up your Colorado residency and then reacquire it through HOME? If not, you still have to pay Colorado Income tax (not NC income tax) - the Military exemption only applies to "repatriated" Coloradans.
Going forward, you would have to establish residency in another state, pay that state's income tax and then reacquire CO residency. As long as DFAS has you in CO, you are a CO resident (I also consider where you vote and own homestead property.)
Not sure what you mean by "proceed", other than go to your pay office and start the "change residency" process ASAP.
