Same-Sex Couples & Taxation: With and Without DOMA

• In Event: Taxation Policy and Perspectives

Abstract

Under the current federal and state statutory tax schemes, tax inequities exist between same-sex and heterosexual married couples. Same-sex married couples are precluded from using the filing statuses of married filing joint or married filing separately on their federal tax returns because Section Three of the Defense of Marriage Act (DOMA) precludes the United States from recognizing same-sex marriage. Twelve states, plus the District of Columbia recognize same-sex marriage, thus these states may allow the use of these filing status on their respective state returns. Additionally, numerous federal tax provisions, and by extension state tax provisions, are based upon the federal status used; therefore, the taxable income and resulting liabilities are different for same-sex married couples than for those married heterosexual couples.
This paper discusses the current taxing schemes, federal and state, for all married individuals. Then this paper discusses the effect of the DOMA on these schemes as they relate to same-sex married couples. This includes a discussion of additional compliance requirements and the tax inequities resulting from the difference in required filing status. Lastly, the paper makes an assumption that the DOMA is either repealed by Congress or overturned by the Supreme Court. It then discusses how this would change the taxing schemes as related to same-sex couples. This is not an easy question to answer as it would not automatically result in same-sex married couples using a joint filing status. Currently, there is no definition of marriage in within the Internal Revenue Code (IRC). Many states, who do not allow for same-sex marriage, do have civil unions and domestic partnerships which have the same rights and benefits as a heterosexual married couple. Would these relationships be considered marriages under the IRC? Additionally, what happens to those same-sex married couples who moved from a state which allows for same-sex marriage to a state that does not? Under current policies, the IRC would treat these couples as unmarried, even though the only change in status is a change in domicile. This paper ultimately concludes that if DOMA is no longer exists, the Internal Revenue Service (IRS) should recognize all relationships that have the same rights and privileges as marriages. Additionally, the IRS should recognize the marriage based on the state of solemnization rather than the state of domicile. The paper also recommends how states should adjust their taxing schemes as a result of the IRS recognizing these marriages.

Author

• Gretchen Guenther, The College of Saint Rose