Virginia’s tax department, in consultation with outgoing Attorney General Ken Cuccinelli II (R), has issued guidance stating that married same-sex couples cannot file their state taxes jointly, nor can small businesses claim deductions on benefits that they provide to same-sex spouses of their employees. This year, the federal government will recognize same-sex couples for tax benefits for the first time thanks to the Supreme Court overturning the Defense of Marriage Act, but Virginia’s state constitution creates a big conflict.
Tax attorney and LGBT advocate Kate Fletcher spoke with GayRVA about the “hateful” new policy:
“Virginia has by far the most hateful and stringent guidelines for married same-sex couples,” said Kate Fletcher, a local tax attorney and LGBT advocate. “Far more than any other non-recognition state.”
Fletcher described some of the ways the new code will affect same-sex couples in VA. If you have student loan interest deductions if you file single, you might not qualify because you make too much. But if you aggregate between you and your spouse, with one high earner and one low earner, you might qualify. But when you go to file at the state level, you have to back out that deduction, according to Fletcher.
“You have to recalculate everything.”
Virginia is one of 29 states with constitutional amendments prohibiting the recognition of same-sex marriages. While some of those states, like Missouri, are finding ways to allow same-sex couples to file jointly, Virginia’s amendment has some of the most stringent language. The tax policy reflects the uniqueness of its text, which specifically identifies benefits that cannot be recognized in addition to the unions themselves:
Only a union between one man and one woman may be a marriage valid in or recognized by this Commonwealth and its political subdivisions. This Commonwealth and its political subdivisions shall not create or recognize a legal status for relationships of unmarried individuals that intends to approximate the design, qualities, significance, or effects of marriage. Nor shall this Commonwealth or its political subdivisions create or recognize another union, partnership, or other legal status to which is assigned the rights, benefits, obligations, qualities, or effects of marriage.
This is the first time Virginia has strayed from federal tax law since 1972. Claire Gastanaga, executive director of the Virginia ACLU and former chief deputy attorney general of Virginia, points out that this conflicts with both state and federal laws requiring conformity with federal tax rules. Couples will thus have to file their federal taxes jointly, then generate fake federal tax forms in order to calculate what their state taxes would be if they filed as “single.” Likewise, businesses will have to pay state taxes on the benefits they provide to employees’ same-sex spouses even if they can deduct them as business expenditures from their federal filings.
This interpretation of the law reflects what is probably the final anti-gay act by the most homophobic attorney general and governor in the state’s history. Governor-elect Terry McAuliffe’s (D) transition team told the Washington Post that they are aware of the issue, but have not yet reached a formal conclusion for how they might change the current policy.