Lambda Legal has released a short guide aimed at tax professionals and California's registered domestic partners explaining the consequences of a significant shift in federal tax policy as they file their tax returns for 2010.
The change, announced earlier this year by the Internal Revenue Service, applies to California's registered domestic partners (RDPs) and also may apply to the state's estimated 18,000 legally married same-sex couples, as well as registered domestic partners in Nevada and Washington.
In a change from the approach taken by the Bush Administration, the IRS will now recognize the jointly owned community property income earned by California RDPs, the same way it long has done for different-sex married couples who file separate federal income tax returns. Recognition of "community income" means couples each will report half of their combined income on their separate returns - called "income-splitting" - which can mean big savings for couples with wide disparities in income.
"This change represents one more good step in the direction of treating same-sex couples who have formalized their relationship under state law the same as married different-sex couples are treated," said Jennifer C. Pizer, National Marriage Project director for Lambda Legal.
"The problem addressed by this new policy highlights what marriage discrimination means - an endless stream of sometimes small inequalities that often end up costing same-sex couples real dollars as well as their dignity," Pizer said. "But let's be clear - while this is welcome progress towards our community's goal of full legal equality for same-sex couples, the IRS still won't allow us to file a joint tax return or otherwise respect our family relationships, and federal law as a whole still discriminates against us in countless serious ways. This is a small step, but it's a good one."
The document is entitled "The IRS Applies 'Income-Splitting' Community Property Treatment to California's Registered Domestic Partners: Preliminary Answers to Some Frequently Asked Questions." It was prepared by Pizer, Lambda Legal Staff Attorney Peter C. Renn, and tax attorneys at the prestigious Irell & Manella law firm in Los Angeles, with consultation by Wendy E. Hartmann of the Bennett & Erdman law firm, also in Los Angeles, who specializes in estate planning for same-sex couples.
To download Lambda Legal's FAQ explaining the new IRS position about registered domestic partners' community property rights, please go to: www.lambdalegal.org/ttp-community-property.