A State of Celebration, Almost
By Ali Mickelson
Same-sex couples and allies across America were overjoyed with the long-awaited Supreme Court decision to overturn the Defense of Marriage Act (DOMA) in June of 2013. Yet with this landmark decision came new questions regarding shared benefits and financial planning. One of the big questions centered on tax planning and how same-sex married couples would file their taxes in the post-DOMA era.
After much speculation, on August 29, the Internal Revenue Service (IRS) announced that beginning in 2014, same-sex married couples will be permitted to file as married on their tax returns and receive the same benefits (and penalties) of any other married couple. The IRS also clarified that as long as same-sex couples were married, it doesn’t matter which state they reside in, nor does it matter if that state recognizes same-sex marriages. Calling this the “state of celebration” standard, the IRS determined that any couple who has a marriage license in the United States can file as a married couple for federal tax purposes. However, those with a civil union or domestic partnership who are not married will not be able to file as married on their returns.
While this decision by the IRS brought clarity to federal filings, questions still remain regarding state filings. Colorado does not recognize same sex marriage, only civil unions. If someone who resides in Colorado is married in a state that does recognize same-sex marriage, they can file as married on their federal return, but they won’t be able to file as married on their state return.
To remedy this discrepancy, the Colorado Legislature could choose to “couple” or simply follow the federal regulations for same sex couple, as they do with most income tax changes. Then married, same-sex couples in the state will be able to file as they do at the federal level. This would be the simplest and most convenient way for Colorado taxpayers to compete their returns, especially since the Colorado income tax form begins with federal taxable income.
With the DOMA decision, the IRS “celebration state” announcement and the increasing number of states allowing same-sex marriage, same-sex families made a huge leap forward in 2013. However, state tax laws, like Colorado’s, are lagging behind. With the passage of civil unions and the increasing support for same-sex marriage, Colorado has been moving towards equality for all families. It is time that we update our tax laws to reflect this progress.
We would like to dedicate this blog to Mike Brewer and congratulate him on his October 29th marriage!
