In the 2013 case of United States v. Windsor, the Supreme Court declared parts of the Defense of Marriage Act (“DOMA”) to be unconstitutional, holding that states have the authority to define marital relationships and that DOMA undermined that authority. The result is an expansion of rights—but also confusion regarding state and federal taxes—for same-sex couples who are married or in civil unions. The attorneys at Sullivan Taylor & Gumina, P.C. can help same-sex couples navigate the changing tax landscape in Illinois in the wake of the Windsor decision.
Federal Tax Law Post-Windsor
Until Windsor, the Internal Revenue Service (“IRS”) did not recognize joint federal returns for married same-sex couples. Then, in August of 2013, the U.S. Department of the Treasury and the IRS issued a ruling, stating that same-sex couples who are married legally in areas that recognize this process will be treated as married for the purpose of federal taxes. This ruling applies to any same-sex marriage legally entered into in a U.S. territory, a foreign country, the District of Columbia, or any one of the 50 states, and applies even if the married same-sex couple lives in a jurisdiction that does not recognize same-sex marriage. It is important to note, however, that domestic partnerships and civil unions, though recognized by many states, including Illinois, do not qualify as marriages for federal tax purposes.
State Tax Law Post-Windsor
The new federal income tax laws for married same-sex couples are relatively straightforward; however, the state income tax laws for married same-sex couples are exceedingly complex because of states’ variable marriage and tax laws. Some states allow same-sex marriage. Therefore, married same-sex couples in those states file state tax returns as married. Other states do not themselves recognize same-sex marriage but conform to federal tax law. Some states do not recognize same-sex marriage or conform to federal tax law. This means that married same-sex couples in those states must file state tax returns as if they were single. Other states do not have income tax at all, so the issue of treating same-sex couples as married for the purpose of state income tax does not come up.
Illinois Tax Law for Same-Sex Married or Civil-Union Couples
By statute, same-sex marriage went into effect in Illinois on June 1, 2014, generating important changes for state tax returns filed in 2015; namely, married same-sex couples will now file their Illinois state tax returns jointly. A marital status as of December 31, 2014 will determine his or her status for filing purposes.
An added wrinkle is the fact that the state of Illinois, unlike the federal government, does recognize civil-union couples as married for state tax purposes. Thus, a civil-union couple—whether same-sex or opposite-sex—may choose to file as “married filing jointly” or “married filing separately” in Illinois. Neither partner may file as “single” or “head of household.” All civil-union couples must also include a completed Schedule CU (Civil Union Income Report). Remember, however, that civil unions, despite being recognized by the state of Illinois for state tax purposes, are not recognized by the IRS for federal tax purposes.
Additionally, same-sex civil-union couples in Illinois can, if they so choose, convert their civil unions to marriages within one year of the law recognizing same-sex marriage going into effect. Those marriages will be retroactive to the date of the civil union.
This is a year of great change for same-sex couples across the United States and in Illinois. If you are part of a same-sex married or civil-union couple in Illinois and have questions about the changing tax landscape, contact the experienced domestic partnership attorneys at Sullivan Taylor & Gumina, P.C. in Wheaton, Illinois.