Various states now recognize relationships between people of the same sex, but due to the Defense of Marriage Act, the federal government does not. In the context of income taxes, this combination of state recognition and federal non-recognition of same-sex relationships produces a significant problem for many same-sex couples and some state taxing authorities. Most states have income tax and, typically, state income tax laws "piggyback" on federal income tax laws. Depending on the state, same-sex couples in legally-recognized relationships must file their state income tax returns as married (either "filing jointly" or "filing separately"), as domestic partners, or as parties to a civil union. Such same-sex couples cannot, however, file their federal income tax returns as a couple. For same-sex couples, this situation creates uncertainty and complications and probably increases the risk of audit. It is also an unfair affront to the dignity of lesbians, gay men, and bisexuals. The Article examines this problem by surveying the guidance from thirteen states and the District of Columbia with respect to the taxation of same-sex relationships and by considering each jurisdiction's actual income tax practices. The Article also recommends best practices for state taxing authorities, including: (1) amending state tax laws to specifically allow joint filing by same-sex couples; (2) issuing more guidance to same-sex couples on specific relevant issues; (3) adding boxes to state tax returns to indicate that these returns will involve nonconformity with federal filing status; and (4) not requiring same-sex couples who file state joint income tax returns to also complete "pro forma" federal "married" income tax returns.
Starting in 2000, some states began to legally recognize same-sex relationships. (1) This legal recognition sometimes takes the form of marriage and sometimes takes the form of a relationship identical to or nearly identical to marriage for purposes of state law. However, due to the Defense of Marriage Act (DOMA), (2) the federal government has refused to recognize these relationships in most circumstances. (Some states have enacted laws or constitutional amendments that have a similar effect in the respective states.) (3) This non-recognition produces a peculiar state of affairs: a same-sex couple with a legally-recognized relationship from one state will find that their relationship has no legal status in other states, a different legal status in still other states, and only a limited status in the eyes of the federal government. (4) This patchwork of recognition and non-recognition cuts across a variety of contexts related to family law. While this situation is not unprecedented in U.S. history (for example, until 1967, a similar patchwork of legal recognition and non-recognition existed for interracial marriages) (5), the situation is both peculiar and problematic.
This problematic state of affairs is made possible partly by the federalist form of government in the United States and can be analyzed generally as a conflict of laws issue. There are virtues and vices to federalism and the patchwork of state laws it can potentially produce. In this paper, rather than critique the patchwork that exists today, we take it as a given for the time being and focus on one particular locus of law affected by the varied landscape for same-sex relationships, namely income tax. Looking at state income taxes in light of the federal government's refusal to recognize legally-sanctioned same-sex relationships provides a unique lens into the patchwork of recognition and non-recognition for same-sex relationships. The existence of this patchwork has been frequently discussed by commentators, but here we offer a detailed case study of the phenomenon in the distinctive context of state income taxes.
In a state with an income tax, when a same-sex couple marries, enters a civil union, or enters a certain type of domestic partnership, both the couple and the state taxing authority will have to deal with an assortment of distinctive tax-related issues because the federal government does not recognize same-sex relationships for tax purposes. …