The United States Secretary of War from 1899 to 1904, Elihu Root, is primarily responsible for this change. His changes are often called the "Root Reforms."

Prior to the early 1900s, the Army of the United States (this term was first used as early as 1841) had two parts, the permanent Regular Army and the militia of the several States when called into the service of the United States. The militia consisted of all able-bodied males aged 17 to 45; the Militia Act of 1792 directed that the states form "divisions, brigades, regiments, battalions, and companies, as the legislature of each state shall direct." Before the formation of the National Guard as we know it today in 1903, the status of the militia was complicated; many state officials let their militia fall into disrepair, or when the government asked for it, refused to send it outside the state's borders or to the aid of other states. The Militia Clause of the Constitution said that "The Congress shall have Power To...provide for calling forth the Militia to execute the Laws of the Union, suppress Insurrections and repel Invasions."

Per the Militia Act of 1795 (an amendment to the Militia Act of 1792), the state militias could only serve for a period of 30 days after Congress assembled, or for a maximum period of 90 days. The militia also could not be used outside the United States. The act also said that;

[W]henever the United States shall be invaded, or be in imminent danger of invasion from any foreign nation or Indian tribe, it shall be lawful for the president to call forth such number of the militia of the state, or states most convenient to the place of danger, or scene of action, as he may judge necessary to repel such invasion, and to issue his orders for that purpose to such officer or officers of the militia, as he shall think proper.

In an attempt to get around individual states' militia laws, and to use "militia" members outside the United States, the federal government used the authority of the Constitution to levy additional forces for war via volunteering, as early as the War of 1812. These federally-controlled, nominally non-militia forces raised at the request of the president, were first given a name in 1861; the Volunteer Army of the United States (also known as the Volunteer Army or United States Volunteers). The president would put out a call for volunteers in case of an emergency, and the quota was divided up by state based on population. Existing militia units were mustered into federal service, and enterprising men often chose to recruit units of their own, making numbered state regiments. During the American Civil War, the federal government also raised units of United States Volunteers directly, the most famous probably being the two U.S. Sharpshooter regiments.

Immediately after the beginning of the Spanish-American War, it was decided that state militiamen volunteering for service would need to be accepted as whole units into the Volunteer Army, rather than as individuals. The volunteer law also was the first time that the term "Volunteer Army of the United States" was codified. Many units made up of militiamen performed poorly during the Spanish-American War, hobbled by disease and low-quality food. Elihu Root noticed this, and eventually implemented or provided influence on several radical reforms;

• Expanded the U.S. Military Academy at West Point, New York

• Expanded the Infantry and Cavalry School at Fort Leavenworth, Kansas, into the School of the Line, which would eventually become the Command and General Staff College

• Created a network of post and service schools for newly-commissioned officers

• Created the Army War College, which provides graduate leadership instruction in military doctrine and planning to military members and civilians

• Created the position of Chief of Staff of the Army, as well as an Army General Staff, that exercised final jurisdiction over every element of the Army

• Reorganized the separate Quartermaster, Supply, and Pay Departments into the Quartermaster Corps

• Made the Army Nurse Corps a permanent corps of the Medical Department

• Separated the Artillery branch into Coast Artillery and Field Artillery, and established the Field Artillery School at Fort Sill, Oklahoma

• Reorganized the state militia units along the lines of the Regular Army

The Army Appropriations Act of 1901, prodded by Root, reorganized the structure of the Army.

The Militia Act of 1903 established the National Guard of each State, or the organized militia, and the reserve militia. When the National Guard of each state was formed into units, they would need to be organized along the lines of units of the Regular Army and submit themselves to the federal government if they wanted to receive funding. The Militia Act also set the number of yearly exercises, and codified the circumstances under which the National Guard of each state could be federalized; by the president, and for a maximum period of nine months and not outside the United States. In 1908, the Militia Act was amended to allow the president to set the term limit for federal service as he saw fit, and allow the National Guard to serve outside the United States.

The Militia Act resulted in a gradual mass renaming of units over time due to various subsequent laws and rules. For example, the Fifth Maryland Infantry Regiment became the Fifth Regiment, Maryland National Guard. Then, it was combined under War Department regulation governing the numbering of infantry, cavalry, and field artillery divisions, brigades, and regiments (still somewhat in force today) with the First Regiment, Maryland National Guard to form the 115th Infantry Regiment, 29th Division, for service in World War I. After World War I, the Fifth Regiment reverted to its National Guard status; it was re-designated the 175th Infantry Regiment in January 1941 to avoid confusion with the Regular Army 5th Infantry Regiment.

Exactly how the National Guard fit into the structure of the Army in war was not really considered until the National Defense Act of 1916. The Act provided that the Army of the United States would consist of the Regular Army, the Volunteer Army, the Officers' Reserve Corps, the Enlisted Reserve Corps, the National Guard while in the service of the United States, and such other land forces as are now or may hereafter be authorized by law. The Act said that members of the National Guard, when called into the service of the United States, would lose their militia status and become members of the Volunteer Army. The National Defense Act of 1916 also established the Reserve Officers' Training Corps (ROTC).

The 1920 amendments to the National Defense Act of 1916 provided that the Army of the United States would consist of the Regular Army, the National Guard while in the service of the United States, and the Organized Reserve Corps, which included the Officers' Reserve Corps and the Enlisted Reserve Corps.

In 1933, another amendment to the Act established the National Guard of the United States and provided that federally recognized National Guard enlisted men and officers of each state take a dual oath, and be considered members of the Army of the United States at all times. Officer commissions into the National Guard of the United States were technically considered reserve commissions under the amendment. This established the National Guard as the federal reserve component we know today. You will notice that the 1920 amendments to the National Defense Act got rid of the “Volunteer Army.” Its equivalent, first codified in 1940, was that any enlistments into the Army during a time of national emergency or war as declared by Congress would just be in the “Army of the United States,” and would be for the duration of the emergency or war plus six months. Later, in 1941, the status of personnel who were drafted into the Army under the Selective Training and Service Act of 1940 was clarified.

Sources:

U.S. Constitution

Legislation

Modernization in the Root Reform Era, by L. Martin Kaplan

The U.S. Army in the Root Reform Era, 1899-1917, by James L. Yarrison

The Root Reforms and Command, by Terrence J. Gough

The Root Reforms and the National Guard, by William M. Donnelly

The Root Reforms and Army Schools and Branches, by William J. Webb

Wilson, John B. Maneuver and Firepower: The Evolution of Divisions and Separate Brigades. Washington: United States Army Center of Military History, 1998.