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The chart, State Taxes and Married Same-Sex Couples, has now been updated to reflect the fact that taxing authorities in the following states have announced their interpretation of the filing status that married same-sex couples must use for state income tax purposes:
- North Carolina
- North Dakota
- South Carolina
- West Virginia
In addition, Hawaii, New Jersey, New Mexico, and some counties in Illinois now allow same-sex marriage and Oregon now recognizes same-sex marriages from other states. Moreover, there are now challenges to same-sex marriage bans in all but five of the states that have them, and all the decisions that have so far been issued have struck down the bans. In Oklahoma, Virginia, Michigan, and Texas, federal District Court judges have struck down the state Constitutional ban on same-sex marriages, but the decision in each case was stayed pending appeal. In Kentucky, a federal District Court judge has struck down the ban on recognition of out-of-state marriages of same-sex couples, but the decision has been stayed pending appeal. In Tennessee, a federal District Court judge has struck down the ban on recognition of out-of-state marriages of three named same-sex couples, although the decision does not by its terms apply to other couples. In Ohio, a District Court struck down the ban on recognition of same-sex marriages from other states, although the decision has been stayed pending appeal with respect to all couples other than the named plaintiffs. In Indiana, a District Court has required the state to recognize one same-sex couple’s out-of-state marriage.
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:
The Social Security Administration has now announced that the wage base (the maximum amount subject to Social Security taxes) for 2014 will be $117,000. A chart of the limits for 1996 through 2014 can be found at this link.