Tuesday, March 11, 2014
Ind. Gov't. - "Conflicting state and federal policies will likely cost Indiana same-sex couples more when they file their tax returns this year, experts say"
This AP story today by Summer Ballentine reports that it will cost more to file your tax returns this year if you are an Indiana same-sex couple legally married by another state, because filling out your Indiana tax return will be more complex. But the second part of the story is based on a false premise ...
A federal revenue ruling issued (Revnue Ruling 2013-17), issued Sept. 16, 2013, "clarified that a same-sex couple’s marital status for federal tax purposes is determined by the laws of the state where they got married — not the state where they reside," as explained in this release by the Boulay accounting firm, that continues:
Revenue Ruling 2013-17 addresses only the federal tax treatment of same-sex spouses. States that don’t recognize same-sex marriages aren’t required to permit same-sex spouses to file jointly or to extend to them any benefits of married status. But the ruling will have an indirect impact in states that don’t recognize same-sex marriages but require taxpayers to calculate their state tax liability based on information from their federal returns.That is the case in Indiana. Rather than simply filing a federal joint return as a married couple, and a state joint return based on the adjusted gross income (AGI) calculated in the federal return, Indiana's Department of Revenue (IDOR) requires the same-sex couple to prepare and submit individual State of Indiana returns as though they were not married. To derive the AGI to use in the individual Indiana returns, each partner must first fill out a token federal individual return.*
But officials stopped short of creating a tax worksheet to help married same-sex couples recalculate their joint income before they file separate state tax forms, as Wisconsin and Michigan have done. That is the approach recommended by the nonpartisan Tax Foundation to help reduce confusion.Theoretically, Indiana could have gone much further than Wisconsin and Michigan and elected to allow same-sex Indiana couples filing joint federal returns to also file joint state returns, but that would seem very unlikely. The Governor of Missouri, for example, attempted to allow that by executive order, as this Jan. 10, 2014 story by the Baptist Press news service reports:
[Governor] Nixon's executive order was issued last November and directed the Department of Revenue to accept combined returns from same-sex couples who properly filed a federal joint return with the IRS. The IRS has decided to permit same-sex couples to file a joint federal return if the parties were married in a state that permits same-sex marriage. The IRS decision did not bind state governments and did not mandate that states like Missouri, where same-sex marriage is unlawful, permit joint returns under state law.It seems totally improbable that either Governor Pence or his IDOR would take this step. Rather, the IDOR issued the guidance cited above, requiring the preparation of individual Indiana returns. And, as the AP story reports, that means that same-sex Indiana couples who are eligible to file joint federal returns have to go through additional steps in Indiana.
But then the remainder of the AP story is based on the same false premise the ILB wrote about at length in this March 5, 2014 post. From the AP story:
Indiana was on track to match IRS tax policies this year until Sen. Brandt Hershman, R-Buck Creek, made a late-session change that would prevent the state from adopting the same-sex marriage provision. Indiana does not recognize gay marriage.What does that mean?
- Does it mean Gov. Pence, or his IDOR, was about to write a new guidance permitting same sex Indiana couples filing joint federal returns to also file joint state returns?
- Or does it mean that by updating the references in IC 6-3-1-11 to "Jan. 1, 2014" via SECTION 8 in HB 1380 (discussed at length in the March 5th ILB post), Indiana, per the AP story, would have been "adopting the same-sex marriage provision."
*Or, to look at it another way, this year Indiana same-sex couples legally married in another state may file joint federal tax returns, but must file individual Indiana tax returns as they have in prior years.
Posted by Marcia Oddi on March 11, 2014 09:39 AM
Posted to Indiana Law