(Posted
on September 17, 2013 by
The Internal Revenue Service has now announced that same-sex couples married in a jurisdiction that permits such marriages will be treated as married for federal tax purposes, even if they live in a jurisdiction that does not recognize such marriages. But what about such couples’ recognition as married for purposes of state income taxes? The question is of concern not only to individuals, but to their employers which must determine proper state income tax withholding. In addition, employers which are in many instances expanding spousal coverage for same-sex partners under employee benefit plans will need to know the characterization of such coverage for purposes of state taxes. Many would no doubt assume that whether a state will treat couples as married for tax purposes depends on whether it would recognize their marriages generally. However, that may not necessarily be the case.
The issue arises because most states use a federal definition of income (either federal adjusted gross income or federal taxable income) for purposes of calculating state income taxes. Before the Supreme Court struck down the Defense of Marriage Act, this raised the issue of whether same-sex spouses would be barred from filing joint state income tax returns, even in states that recognized their marriage, due to the fact that federal law precluded them from filing joint federal income tax returns and state law required conformity between state tax law and federal tax law. The Comptroller of Maryland followed this reasoning in asserting that married same-sex couples in Maryland would need to file state income tax returns as single (before the Defense of Marriage was struck down), even after Maryland recognized their marriages. Similarly, even after New York recognized same-sex marriages, New York married same-sex couples had to file their New York state taxes as if they were single, until the problem was corrected by statute. And even after New Mexico began recognizing same-sex marriages, the instructions for the New Mexico personal income tax return stated, “Use the same filing status on your state return that you used on your federal return,” without providing any exception for same-sex married couples.
Legally married same-sex couples will now file federal returns (and calculate federal adjusted gross income and federal taxable income) using either joint filing status or married filing separately status. Thus, the question arises whether married same-sex couples may use such status at the state level, even in states that do not otherwise recognize their marriages.
The chart below shows the extent of the potential issues. In the following states (Group 1), the issue of treating same-sex couples as married for state income tax purposes does not arise, either because the state has no income tax or because the state does not provide a separate rate structure for single and married taxpayers:
In the following states (Group 2), same-sex married couples will now file state taxes as married, either due to interpretations of specific state statutes or constitutional provisions, or due to conformity with federal filing status:
In the following states (Group 3), same-sex marriage is not recognized and there is no conformity between federal and state taxes, so same-sex married couples will have to file as if they were single:
The following states (Group 4) do not recognize same-sex marriage, civil unions, or domestic partnerships, but conform to federal tax law, and thus will arguably need to allow same-sex married couples to file joint state income tax returns:
Obviously, the situation in this last group of states is the most fluid. In some of them (shown as “fixed date” in the chart below), only provisions in the Internal Revenue Code as of a specific date are incorporated into state tax law. Frequently, the state legislature in such states annually amends its laws to incorporate a new date. It remains to be seen whether the next such legislation will explicitly carve out an exception under which same-sex married couples will be required to file state tax returns as single. (Of course, such legislation could also be enacted in states that provide for automatic incorporation of Internal Revenue Code provisions, but there is not such an obvious vehicle for it.) It is also possible that in some states, regulatory authorities will take the position that state constitutional or statutory provisions precluding recognition of same-sex marriage will override the normal conformity between federal and state tax laws.
Clearly, it is critical that same-sex married couples and their tax advisers keep abreast of developments in their state tax law. It would be a mistake either to assume that all states will automatically follow federal law in permitting same-sex married couples to file as married, or to assume that such filing status will be available only in those states that recognize same-sex marriage generally.
| State Tax Rules for Same-Sex Couples | ||
| STATE | Conformity With Internal Revenue Code | Recognition of Same-Sex Relationships |
| ALABAMA | no conformity | none |
| ALASKA | no state income tax | none |
| ARIZONA | fixed date | none |
| ARKANSAS | no conformity | none |
| CALIFORNIA | fixed date | same-sex marriage |
| COLORADO | no separate rates for couples | civil unions |
| CONNECTICUT | rolling | same-sex marriage |
| DELAWARE | rolling | same-sex marriage |
| DISTRICT OF COLUMBIA | rolling | same-sex marriage |
| FLORIDA | no state income tax | none |
| GEORGIA | fixed date | none |
| HAWAII | fixed date | civil unions |
| IDAHO | fixed date | none |
| ILLINOIS | no separate rates for couples | civil unions |
| INDIANA | no separate rates for couples | none |
| IOWA | fixed date | same-sex marriage |
| KANSAS | rolling | none |
| KENTUCKY | fixed date | none |
| LOUISIANA | rolling | none |
| MAINE | fixed date | same-sex marriage |
| MARYLAND | rolling | same-sex marriage |
| MASSACHUSETTS | no separate rates for couples | same-sex marriage |
| MICHIGAN | no separate rates for couples | none |
| MINNESOTA | fixed date | same-sex marriage |
| MISSISSIPPI | no conformity | none |
| MISSOURI | rolling | none |
| MONTANA | rolling | none |
| NEBRASKA | fixed date | none |
| NEVADA | no state income tax | domestic partnerships |
| NEW HAMPSHIRE | tax imposed on interest & dividends only; no separate rates for couples | same-sex marriage |
| NEW JERSEY | no conformity | civil unions |
| NEW MEXICO | rolling | unclear whether same-sex marriage can be performed in New Mexico; opinion of Attorney General states that New Mexico will recognize same-sex marriages from other states |
| NEW YORK | rolling | same-sex marriage |
| NORTH CAROLINA | fixed date | none |
| NORTH DAKOTA | rolling | none |
| OHIO | rolling | not permitted in Ohio; some court decisions have recognized same-sex marriages from other states |
| OKLAHOMA | rolling | none |
| OREGON | rolling | domestic partnerships |
| PENNSYLVANIA | no separate rates for couples | none |
| RHODE ISLAND | rolling | same-sex marriage |
| SOUTH CAROLINA | fixed date | none |
| SOUTH DAKOTA | no state income tax | none |
| TENNESSEE | tax imposed on interest & dividends only; no separate rates for couples | none |
| TEXAS | no state income tax | none |
| UTAH | no separate rates for couples | none |
| VERMONT | fixed date | same-sex marriage |
| VIRGINIA | fixed date | none |
| WASHINGTON | no state income tax | same-sex marriage |
| WEST VIRGINIA | fixed date | none |
| WISCONSIN | fixed date | limited domestic partnerships, which do not include right to file taxes as married |
| WYOMING | no state income tax | none |
Taxpayers who are husband and wife and who file a joint federal income tax return pursuant to the internal revenue code shall file a joint return.
Since the statute requires that taxpayers be husband and wife under Michigan law, as well as filing a joint federal return, it appears that same-sex married couples will be precluded from filing a joint Michigan state income tax return.
Taxpayers who are husband and wife and who file a joint federal income tax return pursuant to the internal revenue code shall file a joint return.
Since the statute requires that taxpayers be husband and wife under Michigan law, as well as filing a joint federal return, it appears that same-sex married couples will be precluded from filing a joint Michigan state income tax return.