Wednesday, January 1, 2014

Same-sex married couples file lawsuit against state over tax treatment

By SCOTT ROTHSCHILD, The Lawrence Journal-World

TOPEKA, KAN. — Two legally married same-sex couples, including one in Lawrence, have filed a lawsuit against the Kansas Department of Revenue, which won’t allow them to file as married on their state taxes.

“My clients are asking the court to order the Department of Revenue to follow the law,” said David J. Brown, the Lawrence attorney who filed the lawsuit in state district court in Shawnee County. The Revenue Department says it is following the law.

Following a U.S. Supreme Court ruling earlier this year, the Internal Revenue Service announced that it will recognize all legally performed marriages for federal tax purposes even if the taxpayers live in a state, such as Kansas, where their marriages aren’t recognized.

Under the IRS rules, all legally married same-sex couples must file tax returns as “married.”

But because of the constitutional ban against same-sex marriage in Kansas, the state Revenue Department has established regulations requiring same-sex couples to file as single persons and say they are not married.

In implementing the regulations, the plaintiffs say that the state failed to follow statutory requirements for adopting the new rules. And they say that if they can’t use their “married” status they believe they would be filing a fraudulent tax return and be committing a felony. It also puts them in a position of having a “second-tier” marriage, which is demeaning, they argue.

In addition, the state agency is requiring same-sex couples who file as married for federal tax purposes to complete separate worksheets and file separate Kansas returns using the filing status of single, or head of household. This will require additional accounting expenses that opposite-sex married couples will not have to pay, they say.

Ultimately, the plaintiffs say, the Revenue Department rules are denying the state additional taxes that they would have to pay as married persons.

The lawsuit seeks a court order requiring the Revenue Department to allow the couples to file joint income tax returns as married.

The plaintiffs in the case are Roberta and Julia Woodrick of Lawrence, and Michael Nelson and Charles Dedmon of Alma. Both couples were legally married in California. Eighteen states and the District of Columbia permit gay marriage.

In June, the U.S. Supreme Court ruled that legal marriages of same-sex couples must be recognized by the federal government, including couples who live in states that ban gay marriage.

But the decision left it up to states on how to treat same-sex couples on state taxes.

The state Revenue Department said the approach it has put in place is recommended by the Federation of Tax Administrators, adheres to the Kansas Constitution’s definition of marriage as being between one man and one woman, and complies with the Supreme Court’s decision.

Thomas Witt, executive director of Equality Kansas, said the state regulations unfairly treated same-sex couples differently.

“By requiring legally married same-sex couples to file additional tax forms and say they are not married on those tax forms, Kansas is penalizing and stigmatizing gay and lesbian Kansans,” Witt said.