Weekly Round-Up: Restrictions on Marriage Create a Cumbersome Tax Filing Environment for Same-Sex Couples [Free Access to BNA Premium Content]

The Supreme Court will enter the debate over same-sex marriage, having agreed to hear two cases challenging state and federal laws that define marriage to include only unions of a man and a woman according to a new article in this week's edition of the Weekly State Tax Report.

Oral arguments in Hollingsworth v. Perry, 184 L. Ed. 2d 526 (2012), expected to begin March 26, will address the constitutionality of California's Proposition 8, a ballot initiative that amended the state's constitution to limit marriage within California to a man and a woman.

The following day, on March 27, oral arguments will begin in United States v. Windsor , 184 L. Ed. 2d 526 (2012), questioning whether the definition of marriage as a legal union between one man and one woman, as set forth in the Defense of Marriage Act (DOMA), is constitutional.  These battleground cases may decide an equality issue that affects many aspects of life, including tax.

With respect to federal taxation, there are five possible choices of tax filing status a taxpayer may claim: Single individual, married person filing jointly or surviving spouse, married person filing separately, head of household, and a qualifying widower with dependent children. However, because the federal government does not recognize same-sex marriage, the married filing jointly and married filing separately tax categories are not options for same-sex married couples filing their federal return. Consequently, these same-sex couples are not able to combine their incomes and deductions in an effort to take advantage of some credits and lower tax rates.

Today the United States is at a critical crossroad. Were the Supreme Court to strike down DOMA and martial limitations, there could be a ground swell of same-sex married couples, previously forced to file in the above limited categories, who might be entitled to claim a refund. However, while the United States Supreme Court will begin to hear arguments in the cases in March, the date on which the Court will render its final decision is unknown. In light of this uncertainty, same-sex married couples may wish to preserve and maximize their refund options by filing a "protective claim" with the Internal Revenue Service.

For a breakdown of the states' current approaches to same sex marriages for tax filing purposes, presenting the possible ramifications awaiting married same-sex couples when the U.S. Supreme Court decides the aforementioned cases, check out the article by Bloomberg BNA State Tax Law Editors Jéanne Rauch-Zender and Jessica Lechuga   [which can be read in its entirety here].

In other developments…

Morrison & Foerster issues its February 2013 issue of New York Tax Insights , which contains a look at how a divided Appellate Division affirms the Gaied "Permanent Place of Abode" decision.

Weekly Map: Sources of State and Local Tax Revenue: Sales, Excise, and Gross Receipts Tax , by 

Nick Kasprak of the Tax Foundation.

The Downside of States as Laboratories for Tax Reform , by the Tax Policy Center.

State Tax Revenues Continue Slow Rebound , a new report by the Nelson A. Rockefeller Institute of Government.

Compiled by Priya D. Nair
Follow us on Twitter at: @SALTax
Join BNA's State Tax Group on LinkedIn here.