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The chart, State Taxes and Married Same-Sex Couples, has been updated to reflect the fact 35 states plus the District of Columbia now allow same-sex marriage. One state (Missouri) recognizes same-sex marriages from other states. Missouri state and federal courts have both now ruled that it must allow such marriages in the state, and some jurisdictions in Missouri are allowing same-sex couples to get married there. And in one state (Kansas), many counties are issuing marriage licenses to same-sex couples, but the state is still refusing to recognize such marriages for state law purposes.
The pace of change became much more rapid after the Supreme Court denied certiorari in (refused to consider) any of the Circuit Court decisions striking down bans on same-sex marriage on October 6, and the Ninth Circuit struck down bans in Nevada and Idaho on October 7. On November 6, the Sixth Circuit upheld bans on same-sex marriage from four states, creating a conflict among the Circuits. On January 16, 2015, the Supreme Court granted certiorari in the case.
Taxing authorities in all of the states that continue to have bans on same-sex marriage have announced their interpretation of the filing status that married same-sex couples must use for state income tax purposes. Moreover, there is now at least one challenge to the same-sex marriage ban in every state that has such a ban, and almost all of the decisions that have so far been issued have struck down the bans. Read more.
Carol V. Calhoun was interviewed for a piece on National Public Radio’s “Here and Now” program called, “State Tax Laws ‘A Mess,’ For Same Sex-Couples and Employers,” which aired today. You can listen to the segment at this link, a summary and transcript can be found here, and the chart referenced in the story is available at this link..
Carol V. Calhoun‘s article, “State Taxes and Married Same-Sex Couples,” has now been published in Baltimore OUTloud. This article discusses the different approaches that each of the states has taken for state tax purposes, in the wake of the federal government’s decision to treat same-sex married couples are married for federal tax purposes.
On June 26, 2013, the Supreme Court issued the Windsor decision, striking down a provision in the federal Defense of Marriage Act which had precluded recognition of same-sex marriages. In September, the Internal Revenue Service (“IRS”) announced that same-sex couples legally married in a state that recognized such marriages would now be treated as married for purposes of federal taxation, regardless of whether their marriages were recognized by their state of residence. The IRS announcement was made retroactive, meaning that such marriages will be recognized back to their inception.
The IRS has issued Notice 2014-1, which provides guidance on the application of the new rules to cafeteria plans. However, in many instances employers will need to move quickly to take advantage of relief granted.
Judge Steven W. Rhodes of the U.S. Bankruptcy Court for the Eastern District of Michigan had now issued an opinion stating that the bankruptcy proceedings for the City of Detroit can go forward. The opinion provided no special protections for as yet unfunded pension benefits (although benefits already in the pension funds were protected). The judge rejected a contention that Michigan constitutional provisions prohibiting impairment of pensions would provide protection to promised but unfunded benefits.
“The accrued financial benefits of each pension plan and retirement system of the state and its political subdivisions shall be a contractual obligation thereof which shall not be diminished or impaired thereby.” [Article IX, Section 24, Michigan Constitution]
As discussed in the chart, “State Taxes and Married Same-Sex Couples,” most states that do not recognize same-sex marriage are requiring same-sex married couples to file their tax returns as single (or head of household, if they qualify for that status). However, Virginia has now gone further, denying certain Virginia businesses state income tax deductions for fringe benefits they provide to same-sex spouses. As discussed below, the language used is muddy, and the holding is probably considerably less broad than it appears. However, businesses in Virginia need to be aware of its potential effect on them. And to the extent that other states take the same route, businesses in states other than Virginia would also be affected.
In the wake of negative publicity about individuals and small businesses losing their existing health insurance due to the Affordable Care Act, the Department of Health & Human Services, in consultation with the Treasury Department and the Department of Labor, has provided transitional relief. The transitional relief applies only if certain conditions are met, as follows: