Louisiana Revenue Department Guidance Fails Taxpayers

September 17, 2013

As we’ve covered, last month the IRS announced that married same-sex couples can begin filing joint federal tax returns next year, even if they live in a state that does not recognize the marriage. This sets up a conflict for 24 states where taxpayers are required to use information from their federal tax return but the state constitution or state law prohibits recognizing same-sex marriage. Two single state returns aren't set up to reference one joint federal return, so some action is necessary to resolve the conflict.

This problem has easy solutions. We outlined some options in our memo on the topic (instruct taxpayers to apportion income, instruct taxpayers to split joint income 50-50, or create a special filing status). Wisconsin recently implemented the apportion approach, and will provide taxpayers with a Schedule to help them divide income between the two spouses.

Louisiana Revenue Secretary Tim Barfield yesterday released his state’s guidance, if it can be called that. Here’s the operative section from Revenue Information Bulletin 13-024:

The taxpayer(s) who filed a federal return pursuant to IRS Revenue Ruling 2013-17 may not file a Louisiana state income tax return as married filing jointly, married filing separately or qualifying widow. The taxpayer must provide the same federal income tax information on the Louisiana State Return that would have been provided prior to the issuance of Internal Revenue Service Revenue Ruling 2013-17.

Reading between the lines, Louisiana seems to be encouraging taxpayers to do the same as Wisconsin: apportion the income by using a “dummy” federal return. But that’s not clear, because there’s no instruction on how the taxpayer should do that. The reference to doing the same thing taxpayers did (use information from the single filer federal return) before is unworkable because the taxpayers will no longer be filing a single federal return.

Should the taxpayer enclose an explanation as to why their state income is half that on their federal return? Should the taxpayer enclose a “dummy” federal return rather than the one they actually filed? Should the two taxpayers just fill out one single state return? Must the taxpayer choose between violating federal law by filing a single return and violating state law by filing a joint return? All these are obvious questions that taxpayers will have, but the department’s bulletin fails to give any meaningful guidance. The department makes no mention that future guidance will provide further details; the tone screams that this is their last and final discussion on the subject. I get that the state has public policy about the definition of marriage. But that neither excuses nor prevents the DOR from coming up with something workable. (It also doesn't help that lower-level DOR officials are giving contradictory advice to tax preparers.)

Filing taxes is difficult and stressful for most Americans. Revenue departments should recognize this and be as helpful as possible, especially for taxpayers caught between two conflicting sets of rules, as here. I have sent a letter to Secretary Barfield asking for more detailed guidance for taxpayers on this matter, and have also sent similar letters to tax officials in the other 22 states facing the issue. (I included the Wisconsin guidance with my letter.) I’ll continue to report here as I hear back.

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