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Proposed state tax ruling unfair, says LGBT advocacy group

The state Dept. of Revenue proposes oversight of a U.S. Supreme Court decision regarding state income tax, affecting legally married same-sex couples.
The state Dept. of Revenue proposes oversight of a U.S. Supreme Court decision regarding state income tax, affecting legally married same-sex couples. South Carolina Equality

A court decision that benefits same-sex married couples regarding federal taxes might not have the same effect on the state level in South Carolina. On January 9, an advocacy group called for the public to do something about it.

The June 2013 ruling by the U.S. Supreme Court allows same-sex married couples to file with a married deduction on federal income tax, removing previous denial of that right from Section 3 of the Defense of Marriage Act.

A recent proposal from South Carolina’s Dept. of Revenue would specifically deny that same benefit from its own income tax, however, requiring gay and lesbian married couples to continue filing state tax returns as “single” or “head of household.”

The result won’t be just high state taxes for gay spouses, though, says South Carolina Equality, a non-profit advocacy group for LGBT rights. It will also require longer filing times and higher costs to prepare returns, the organization says.

In a January 9 press release, SC Equality encourages the public to contact SCDOR, which is accepting comments on the proposal until January 17.

SC Equality’s website also has a page listing arguments, as well as an email that visitors can send to SCDOR directly from its site.

Ryan Wilson, executive director of SC Equality, offers a personal example of the inconvenience.

“This ruling will directly impact me and my husband because we use a tax preparer -- costing us more time to separate our finances and more money to have our taxes prepared than our straight friends or neighbors. SCDOR should have a tax policy that is clear and uniform for all legally married couples.”

Filed on Jan. 2, 2014, SCDOR’s proposal for Revenue Ruling #13 states:

“Since South Carolina does not recognize same-sex marriage, same-sex couples that file as married for federal income tax purposes must file separate from South Carolina income tax purposes(.)”

To correctly complete state tax returns, then, partners of a gay or lesbian marriage would each have to recalculate personal net income from federal tax forms using a “single” or “head of household” personal deduction. Thus, their net income levels would appear larger on state returns, subjecting them to higher state taxes, which would also have to be filed separately.

Notes Wilson: “This is where the extra time and costs for tax preparer will come in. SCDOR is telling gay couples they don’t care how much work or cost it takes; they cannot accept their married federal return, even to use it to calculate tax rates. They will continue to accept straight couples’ returns no matter what, though. There are now two separate systems for dealing with legally-married South Carolinians.”

The proposal does not intend to discriminate, SCDOR says. Instead, according to spokesperson Samantha Creek, it’s simply to recognize SCDOR’s obligation to state law.

Article XVII, Section 15 of the South Carolina Constitution says the state will only recognize “marriage between one man and one woman(.)”

Because some who are eligible for the new federal ruling might assume that it’s also applicable to state taxes, leading to filings that will need correction, Cheek implies that SCDOR hopes the proposed ruling would avoid difficulties for itself and taxpayers while its office simply operates according to the state constitution.

Cheek also points out that the Revenue Ruling is only a draft and can still be changed.

“We encourage persons to read the proposal and provide their feedback and comments.”

The advocacy group contests that SCDOR is obligated to seek or incorporate this ruling, however, offering recent example from another state in comparison.

Missouri also has restrictive definition of marriage in its laws and state constitution, but in November 2013 Gov. Jay Nixon issued executive order allowing same-sex couples to file joint state tax returns.

Wilson of SC Equality notes, “If Missouri could find a way to make it work, so could South Carolina.”

Not allowing joint filings would also impose “undue hardship” on SCDOR itself, he says.

“This will make the return more difficult to audit and require manual processing of the return.”

Wilson also questions the true intentions of the proposal.

“(SCDOR’s) ruling is one that is purposely intended to reject federal definition of ‘married spouse,’ and South Carolina’s same-sex couples (will) pay the price.”

SCDOR is accepting comments on the proposal by email to majorsg@sctax.org through January 17.

Public meeting on the issue begins at 9 a.m. on January 22 in conference room MPC02 of SCDOR’s office building (300-A Outlet Pointe Blvd. in Columbia).

South Carolina has approximately 1,600 households with same-sex partners who were legally married in other states.