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July 8, 2015
5 States Yet to Recognize Same-Sex Marriages for Tax Purposes
by Brian Bardwell

Full Text Published by Tax Analysts®

Nearly two weeks after same-sex couples won the right to marry nationwide, Kansas and a handful of other states have yet to acknowledge those unions as legitimate for tax purposes.

The U.S. Supreme Court's June 26 ruling in Obergefell v. Hodges seemed to be the last word on the topic, with Justice Anthony Kennedy penning an opinion that specifically included tax treatment as a dimension of the relationships that the Court was endorsing.

But that decision, which came after an October 2014 Kansas Supreme Court decision allowing gay marriage, has still not done anything to change the state's official position on tax benefits for same-sex couples, who the Department of Revenue says must still submit returns as single filers.

Attorney David Brown of Lawrence is representing a pair of couples in a case against the DOR focused specifically on their right to file joint returns, but a local judge put the case on hold last year to wait for rulings from other courts.

But it has now been more than nine months since Kansas first allowed same-sex marriages, and although the state is now recognizing those marriages when dealing with name changes and employee benefits, it has not yet followed suit in its tax cases.

"You would think that after that decision, the state would then allow same-sex couples to file their taxes for 2014 as married persons," Brown said. "But no, the state did not, and when April came around, they were still saying that . . . you must file your taxes as single persons."

Brown said that part of the problem appears to be Gov. Sam Brownback (R), who is still relying on the state's constitutional amendment banning same-sex marriage as a justification.

DOR spokeswoman Jeannine Koranda said the department "will comply" with the ruling. But she could not elaborate on when or what the department thinks compliance would entail, and she referred questions about the ongoing litigation to the attorney general's office, which also refused to answer questions about the case.

Karen Loewy of Lambda Legal, which represented one of the petitioners in the consolidated Obergefell case, said that the situation in Kansas is more likely "foot-dragging" than "outright resistance" and not yet a cause for alarm.

Other States Still Can't Commit to Same-Sex Marriage

The situation in Kansas is somewhat similar to those in four other states -- Georgia, Mississippi, Nebraska, and North Dakota -- which have yet to acknowledge same-sex couples' equal rights as taxpayers.

A notice from the Nebraska DOR said only that the department had rescinded previous guidance on the topic, but did not say how same-sex couples would be treated for purposes of the state income tax laws, which still allow joint returns only in the case of "a husband and wife."

Since then, the department has been offering mixed signals as to its intentions.

The Property Assessment Division, for example, sent out a reminder telling taxpayers "to ensure that you have used the proper filing status" in light of Obergefell. On the individual income tax side, though, the department said that executives "haven't had time" to decide whether to recognize those marriages.

And the North Dakota Office of the State Tax Commissioner said it will at least allow joint returns by same-sex spouses, though any other changes are still up in the air.

"We're kind of still looking at it," said Legal Division Director Donnita Wald, "so we'll be coming out in the next few weeks with something."

Although it will allow joint returns for 2015, Wald said the agency was not yet willing to make any commitment to recognize same-sex marriages for purposes of amending prior returns, the homestead exemption, or any other tax matter.

In Mississippi, the DOR said that it still bars joint filing by same-sex spouses, though it suggested that it may publish new forms to reflect the change in the law.

And Georgia has issued guidance acknowledging the ruling, but it has not yet agreed to let same-sex spouses file joint returns, saying only that its DOR is "reviewing its current practices to ensure that they conform to the current state of the law."

Loewy said she suspects that most cases such as these are not indicative of rebellion against the Supreme Court's decision.

"Unless and until the state issues something that says, 'No we're not going to equally recognize these marriages,'" she said, "it's just unnecessary and unfortunate foot-dragging."

With a few exceptions -- such as Louisiana and Texas, where state attorneys general continued to resist it -- Loewy said that the states have generally been quick to accept the decision in Obergefell.

"I think for the most part, things are being implemented appropriately," Loewy said.

Quick Compliance in Most States

Indeed, most states wasted little time implementing Obergefell, issuing statements within days confirming that they were not looking to continue litigating the issue or otherwise circumvent the Court's order.

In Ohio, for example, Tax Commissioner Joe Testa issued an information release rescinding previous guidance -- issued after the Court's 2013 decision in United States v. Windsor -- that had directed couples filing as married for federal tax purposes to complete additional paperwork and use a different status for their state returns.

A similar piece of post-Windsor guidance from Kentucky was superseded by a notice clarifying that same-sex couples would be treated the same as opposite-sex couples for purposes of income and inheritance taxes.

And several other states have issued equally clear pronouncements that all legal marriages would be recognized for tax purposes, including Alabama, Arkansas, Louisiana, Michigan, Montana, South Carolina, and Tennessee.

Loewy noted that Texas Attorney General Ken Paxton (R) had formally endorsed county clerks' and judges' religiously informed refusals to facilitate same-sex marriages, but even in his state, tax officials are apparently less interested in questioning their new duties.

Texas does not impose an income tax for which filing status is a question, but it does treat married couples differently under several programs administered by the Office of the Comptroller of Public Accounts, according to spokesman Chris Bryan.

He said the office's review of programs such as homestead exemptions and gift taxes has so far turned up no instances where any formal changes will need to be made.

Bryan said the comptroller has made those changes without issuing any formal notices, and several other states -- Missouri, South Dakota, and Wyoming -- confirmed they had done the same in interviews with Tax Analysts.

"Because we're not an income tax state, the big stuff is not there for us," Bryan said. "In most cases, it's not even requiring a rule change. It's just that there will be a whole new set of taxpayers eligible to receive those benefits."

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