After the IRS decision to allow gay and lesbian married couples we successfully communicated with officials in the 22 states where this was an issue, urging them to provide clarifying guidance to same-sex couple taxpayers. We also urged states not to “decouple” from the federal taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. system as a measure of defiance, as doing so would impose huge compliance costs on nearly all state taxpayers and would be disproportionate since other viable options are available. These other options, which all the states adopted, include allowing joint filing, providing a worksheet to allocate income and deductions from the joint federal return to two single state returns, instructing taxpayers to prepare “pro forma” or dummy single federal tax returns to use for state filing, or instructing taxpayers to divide their deductions in half or by their income ratio.
This year, because many more states this year recognize same-sex marriage, the number of states that present this dilemma to taxpayers has dwindled to 10 states. (The legality of same-sex marriage in Alabama, Kansas, and Missouri is currently legally complicated, so we include these three states in our list.) Consequently, revenue officials in these states have a responsibility to provide guidance of some kind to taxpayers. Here is the current guidance provided to taxpayers in those ten states:
- Alabama: This is the tricky one. A federal court legalized same-sex marriage and licenses were issued for a time, but the state supreme court has issued a conflicting order, causing uncertainty. Last year, Alabama taxpayers were instructed to apportion federal tax onto two single returns, using the ratio of each taxpayer’s federal AGI to the couple’s federal AGI. However, that guidance has been removed from the Alabama Department of Revenue website. There is no guidance in the individual income taxAn individual income tax (or personal income tax) is levied on the wages, salaries, investments, or other forms of income an individual or household earns. The U.S. imposes a progressive income tax where rates increase with income. The Federal Income Tax was established in 1913 with the ratification of the 16th Amendment. Though barely 100 years old, individual income taxes are the largest source of tax revenue in the U.S. instruction booklet nor on the Department’s website. We reached out to the Department of Revenue, who explained that the guidance from last year is still valid, and that they “took it down because it was generating more questions than it was answering.” [Archived version of Alabama Department of Revenue guidance from 2014]
- Georgia: Same-sex taxpayers must complete pro forma federal single returns and use that information for the state returns. [Georgia Department of Revenue]
- Kansas: While Kansas jurisdictions are issuing marriage licenses, the state government does not recognize same-sex marriage. Same-sex taxpayers must allocate income to two single returns using a state-provided worksheet (Kansas Allocation of Income Worksheet). [Kansas Department of Revenue]
- Kentucky: Same-sex taxpayers must complete pro forma federal single returns and use that information for the state returns. [Kentucky Department of Revenue]
- Louisiana: Same-sex taxpayers must complete pro forma federal single returns and use that information for the state returns. [Louisiana Department of Revenue]
- Michigan: Same-sex taxpayers must complete pro forma federal single returns and use that information for the state returns. [Michigan Department of Treasury]
- Missouri: Same-sex couples may file jointly. [Office of the Governor of Missouri]
- Nebraska: Same-sex taxpayers must complete pro forma federal single returns and use that information for the state returns. [Nebraska Department of Revenue]
- North Dakota: Same-sex taxpayers must allocate income to two single returns using a state-provided schedule (ND-1S). [North Dakota State Tax Commissioner]
- Ohio: Same-sex taxpayers must allocate income to two single returns using a state-provided schedule (Schedule IT S). [Ohio Department of Taxation]
Additionally, 5 other states do not recognize same-sex marriage but either have no income tax (South Dakota and Texas) or do not require taxpayers to follow federal rules when filing (Arkansas, Mississippi, Tennessee).
In the remaining 35 states and the District of Columbia, the state currently recognizes same-sex marriage and couples are able to file joint state tax returns (if the state has an income tax, that is). The states where same-sex marriage is currently legal are Alaska, Arizona, California, Colorado, Connecticut, Delaware, Florida, Hawaii, Idaho, Illinois, Indiana, Iowa, Maine, Maryland, Massachusetts, Minnesota, Montana, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, Wyoming, and the District of Columbia.
While tax administration is not at the forefront of those advocating for or against same-sex marriage, it is of crucial importance to taxpayers who need to file their taxes in a way that conforms to state law. In these ten states where state law directs taxpayers to do two contradictory things, it is incumbent on tax and revenue officials to provide guidance on resolving that contradiction. We acknowledge this may put tax administrators in awkward positions with respect to their state’s public policy, but the options outlined here address compliance issues without violating state statutory or constitutional provisions on same-sex marriage. We further acknowledge the hard work of tax administrators in every state in providing exactly that guidance to their taxpayers.
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