BILL ANALYSIS SENATE REVENUE & TAXATION COMMITTEE Senator Gilbert Cedillo, Chair AB 205 - Goldberg Amended: As Proposed To Be Amended Hearing: July 9, 2003 Fiscal: Yes SUBJECT: Changes the tax filing allowances for domestic partners. EXISTING LAW Existing federal and state tax laws provide guidelines for determining a taxpayer's filing status when filing an income tax return. For example, federal law states a husband and wife can file a joint income tax return even though one of the spouses has no gross income or deductions, except in certain cases. Generally, under state law an individual must use the same filing status for their California income tax return that was used on their federal income tax return filed for the same taxable year. Under federal and state income tax law, spouses who file a joint tax return are each responsible for the accuracy of the return and for the full tax liability for that tax year. These obligations apply regardless of which spouse earns the income. The concept of obligating each spouse separately for all of the tax liability reflected on the joint return is called joint and several liability. Under certain circumstances individuals who file joint returns may be eligible for relief from joint and several liability. Existing state and federal laws provide various tax credits designed to provide tax relief for taxpayers who incur AB 205-Goldberg Page certain expenses (e.g., child adoption) or to influence behavior, including business practices and decisions. The terms taxpayer, individual, person, husband, and wife, and the determination of marital status are defined within the state income tax law. In addition, the term domestic partner is defined by reference to Family Code Section 297, which states that California recognizes a domestic partnership as being established when specified requirements are met. State tax law provides that the taxpayer's domestic partner be treated as the spouse of the taxpayer for purposes of determining various tax benefits relating to medical expenses, such as: medical expenses deductible as an itemized deduction, medical expenses deductible as an adjustment to gross income for self-employed individual health insurance, an exclusion from gross income for employer-provided accident and health insurance, an exclusion from gross income for medical expense reimbursement if the expense was not previously deducted, and long-term health care insurance deductible as a medical expense. State law, under the Family Code, defines marriage as a personal relation that arises out of a civil contract between a man and a woman. All real or personal property, wherever situated, that is acquired by a married person during the marriage while living in California is considered community property. THIS BILL This bill would allow domestic partners to file personal income tax returns as either 1) married filing joint, or 2) AB 205-Goldberg Page married filing separate. In addition, this bill would make changes to various California laws regarding domestic partners, including the creation of community property rights. This subject matter was discussed in the Senate Judiciary Committee and is not addressed in this analysis-this analysis is limited to the tax implications. FISCAL EFFECT: According to the FTB: ------------------------------------------------------------ | Revenue Impact | | | | Beginning on or After January 1, 2005 | | | | ($ Millions) | | | ------------------------------------------------------------ |-------------+---------------+--------------+---------------| | Fiscal Year | 2004-05 | 2005-06 | 2006-07 | | | | | | |-------------+---------------+--------------+---------------| |Revenue Loss | -1.0 | -5.0 |-7.5 | | | | | | ------------------------------------------------------------ Note: It is assumed for the second full fiscal year (2006-07) that there would be a significant increase in impact due to the incentive effect of potentially large tax savings for those households not currently registered. This analysis does not consider the possible changes in employment, personal income, or gross state product that could result from this measure. COMMENTS: AB 205-Goldberg Page A. Author's Amendments The author plans to take technical amendments suggested by FTB to clarify specific tax related terms and to clarify that domestic partners cannot file income taxes as "head of household." B. Purpose of the bill The author notes the following purposes of the bill: This bill will provide more equity to registered domestic partners. It does not provide complete equality because heterosexual couples are institutionally and legally recognized by marriage while gay and lesbian couples are not and will not under this bill. Registered domestic partners are currently afforded approximately fifteen rights under law, while married couples are provided hundreds of rights and responsibilities. This bill will expand rights, responsibilities, duties and obligations to registered domestic partners and their families. While marriage is the only way we will provide full equality, Proposition 22 prohibits us from pursuing a marriage bill at this time. There is no reason not to expand the number of rights and responsibilities. These legal protections and responsibilities guide couples through nearly every complex legal situation faced by families, such as death, custody disputes, illness, childbirth and adoption. These laws regulate such diverse areas as: ? Financial support during and after the relationship, and community property ownership protections ? Protection from threats and crimes against the families of public officials ? Child custody, visitation, and duties of financial support of children ? Anatomical gifts, consent to autopsy and disposition of AB 205-Goldberg Page remains, and burial in family cemeteries ? Bereavement leave, family care and medical leave, coverage of partners under medical, dental, life, and disability insurance, pension rights, and death benefits for surviving partners of firefighters and police officers ? Mutual responsibility for debts to third parties ? Obligations to make disclosures regarding family relationships and to take other steps to avoid nepotism, conflicts of interest and self-dealing ? Housing protections, including access to family student housing, senior citizen housing, and rent control protections ? Government-regulated benefits, including workers compensation, public assistance, transfer of licenses upon death, and the ability to apply for absentee ballots for a partner ? Communication privileges, including the right not to be forced to testify against a partner ? Legal claims dependent upon family status, including claims for victim's compensation There is simply no good reason to deny additional rights and duties. Granting these rights and responsibilities will further the State's interest in promoting stable and lasting family relationships, and will protect family members from the economic and social consequences of abandonment, separation, the death of loved ones, and other life crises. It will also protect couples, the children they are raising, third parties, and the State from numerous harms and costs. B. Proposition 22: California's Defense of Marriage Act (DOMA) In 2000, California joined a number of other states in enacting a "mini-DOMA" when voters passed Proposition 22, AB 205-Goldberg Page the California Defense of Marriage Act. Proposition 22 stated "Only marriage between a man and a woman is valid or recognized in California." Passage of the initiative means that if a same-sex couple, legally married in another state, moves to California, their valid marriage will not be recognized in California. Opponents to this measure note that it violates Proposition 22 and state that "AB 205 is an in-your-face bill, letting the voters know that politicians do not value the input of constituents." The opponents of the measure further note that tax filing privileges should specifically be provided to married couples made up of a man and woman only. The Committee on Moral Concerns argues that "California voters decided against gay and lesbian marriages [and therefore] equalizing domestic partnerships violates the will of the people." On this same point, the Campaign for California Families states that the "people of California have spoken loud and clear that they want marriage protected. In March 2000, more than 61 percent of the voters voted to protect marriage rights for only a man and a woman." The California Catholic Conference states that this bill "is a veiled attempt to change the definition of marriage in our state." Support and Opposition Support: AIDS Legal Referral Panel AIDS Project Los Angeles Alianza Network Services (Tustin) All Saints Church, Pasadena American Association of University Women American Civil Liberties Union American Federation of State, County, and Municipal Employees Anti-Defamation League Asian Law Caucus Attorney General Bill Lockyer Bay Area Lawyers for Individual Freedom Being Alive Los Angeles, Inc. AB 205-Goldberg Page Billy DeFrank LGBT Community Center (San Jose) California Capital Political Action Committee (Sacramento) California Commission on the Status of Women California Conference of Local AIDS Directors California Faculty Association California Independent Public Employees Legislative Council California Labor Federation, AFL-CIO California National Organization for Women California Nurses Association California School Employees Association California State Employees Association California State Teachers' Retirement System California STD Controllers Association California Teachers Association California Women's Agenda CalPERS (support if amended) Central American Resource Center Chinese for Affirmative Action City and County of San Francisco City Council Member Dave Jones (Sacramento) City Council Member Jeffrey Prang (West Hollywood) City of Los Angeles City of West Hollywood Claremont United Church of Christ, Congregational Coalition California Welfare Rights Organizations, Inc. Coalition LA Conference of Delegates of California Bar Associations Congregational Church of Belmont Congregation Kol Ami (West Hollywood) Congregation Sha'ar Zahav (San Francisco) Consumer Attorneys of California Eleanor Roosevelt Democratic Club of Orange County Elections Committee of the County of Orange Equality California Equal Rights Advocates (San Francisco) Family Builders by Adoption First Congregational Church, UCC (Pasadena) First Congregational Church of Long Beach First Congregational United Church of Christ (San Bernardino) First Presbyterian Church (Baldwin Park) First Presbyterian Church (Palo Alto) Gay & Lesbian Community Services Center of Orange County Gray Panthers AB 205-Goldberg Page Holy Redeemer Lutheran Church (San Jose) Human Rights Campaign Human Rights Watch Human Rights/Fair Housing Commission (Sacramento) Irvine United Congregational Church Japanese American Citizens League La Mesa Community Church (Santa Barbara) Lambda Legal Defense and Education Fund, Inc. Lawyers' Committee for Civil Rights of the SF Bay Area Legal Aid Society - Employment Law Center Legal Services for Children, Inc. Lieutenant Governor Cruz Bustamante Little Brown Church of Sunol Los Angeles Gay & Lesbian Center Love Sees No Borders (Sunnyvale) Lutheran Church of the Master (West Los Angeles) Metropolitan Community Church Los Angeles Metropolitan Community Church in the Valley (North Hollywood) Metropolitan Community Church of the Coachella Valley Metropolitan Community Church of San Francisco Mexican American Legal Defense and Educational Fund Mira Vista United Church of Christ (El Cerrito) National Association of Social Workers National Conference for Community and Justice (Santa Barbara) National Conference for Lesbian Rights National Gay and Lesbian Task Force National Latina/Lesbian, Gay, Bisexual & Transgender Organization National Organization for Women (San Fernando Valley - Northeast LA Chapter) Niles Congregational Church Northminster Presbyterian Church of El Cerrito Older Women's League of California Our Family Coalition (San Francisco) Out & Equal Workplace Advocates Pacific Pride Foundation Parkside Community Church (Sacramento) People for the American Way Pioneer Congregational Church (Sacramento) PFLAG-San Francisco PFLAG-San Jose/Peninsula Chapter PFLAG-Ventura County AB 205-Goldberg Page Planned Parenthood Affiliates of California Redwoods Presbyterian Church (Larkspur) San Diego Democratic Club San Francisco City Attorney Dennis Herrera Santa Barbara County Democratic Central Committee Secretary of State Kevin Shelley Southern CA HIV Advocacy Coalition Southern CA Nevada Conference United Church of Christ St. Paul Lutheran Church (Oakland) Stonewall Democratic Club of Los Angeles Stonewall Democratic Club of Greater Sacramento Tenderloin Housing Clinic (San Francisco) The Center of San Diego County The Lambda Letters Project The Sexual Orientation Bias Committee of the LA County Bar Association The Tom Homann Law Association (San Diego) Transgender Law Center Trinity Lutheran Church (Alameda) United Church of Christ, San Francisco University Lutheran Chapel (Berkeley) Wesley United Methodist Church (Fresno) West Hollywood Democratic Club West Hollywood Presbyterian Church Zuna Institute 900 Individuals Oppose: California Catholic Conference California Federation of Republican Women Campaign for California Families Committee on Moral Concerns Eagle Forum of California 1 Individual ------------------------------ Consultant: Gayle Miller 07/07/:3 16:44