BILL ANALYSIS
SB 1827
Page 1
SENATE THIRD READING
SB 1827 (Migden)
As Amended June 14, 2006
Majority vote
SENATE VOTE :25-13
REVENUE & TAXATION 5-2 APPROPRIATIONS 13-5
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|Ayes:|Klehs, Canciamilla, Chu, |Ayes:|Chu, Bass, Berg, |
| |Jones, Lieber | |Calderon, |
| | | |De La Torre, Karnette, |
| | | |Klehs, Leno, |
| | | |Nation, Laird, |
| | | |Ridley-Thomas, |
| | | |Saldana, Yee |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Walters, DeVore |Nays:|Sharon Runner, Emmerson, |
| | | |Haynes, |
| | | |Nakanishi, Walters |
| | | | |
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SUMMARY : Requires registered domestic partners to file either
joint or separate state income tax returns, as specified.
Specifically, this bill :
1)Contains legislative declarations and findings on the
treatment of registered domestic partners with respect to
state income taxes.
2)Requires registered domestic partners to file either a joint
state income tax return, or a separate state income tax
return, applying the standards applicable to spouses under
federal income tax law.
3)Provides a rule to determine the application of limits based
on adjusted gross income for domestic partners by combining
the amounts reflected as adjusted gross income on the federal
income tax return of each domestic partner.
4)Revises existing provisions of law to treat registered
domestic partners as spouses for purposes of filing status as
SB 1827
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follows: a) If couples were registered as domestic partners
as of the close of the taxable year, they may file separate
returns if either partner was either an active member of the
Armed Forces or any auxiliary branch thereof, or was a
nonresident for the entire taxable year who had no income from
a California source; b) Domestic partners may not file
separate returns for any taxable year where a joint return has
already been filed after the original filing period to file a
return has expired; c) No joint return can be made if the
domestic partners have different taxable years, subject to
exception; and, d) Extends to registered domestic partners
the same rules with respect to filing status that are
applicable in the event of the death of one or both spouses.
5)Applies the California community property rules to registered
domestic partners in the same manner as married couples.
EXISTING FEDERAL LAW specifies:
1)Five different filing status choices for federal tax purposes:
Married filing jointly, married filing separately, head of
household, single, or qualifying widow(er) with dependent
child(ren).
2)That registered domestic partners only have the filing status
choices of "single" or "head of household."
EXISTING LAW :
1)Requires an individual to use the same filing status as that
used on the federal income tax return for the same taxable
year; therefore, registered domestic partners only have the
filing status choices of "single" or "head of household" for
state purposes.
2)Provides that earned income will not be treated as community
property for state income tax purposes for registered domestic
partners.
3)Specifies that registered domestic partnerships include
same-sex partnerships and opposite-sex partnerships in which
one or both partners are age 62 or older and receive Social
Security benefits.
SB 1827
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4)Provides that registered domestic partners shall have the same
rights, protections, and benefits and shall be subject to the
same responsibilities, obligations, and duties as imposed upon
a spouse.
FISCAL EFFECT : Franchise Tax Board (FTB) staff estimate a
revenue loss of $8 million in fiscal year (FY) 2007-08, $9
million in FY 2008-09, and $10 million in FY 2009-10.
COMMENTS : In the case where a "head of household" filer and a
"single" filer combine tax returns to file jointly there could
be an increase in tax. This is due to the fact that we provide
incentives for head of households meant to mitigate the tax
burden associated with a single taxpayer with multiple
dependents. This bill would negate that incentive. It is
important to note that there is no marriage penalty in
California for joint returns.
The Secretary of State estimates that the total number of
registered domestic partners in California will be 40,950 by
December 2007. FTB staff estimate that of all tax returns
associated with this bill, 59% would see a reduction in taxes;
29% would experience no change in taxes; and 12% would
experience an increase in taxes.
Committee staff note that a different filing status for domestic
partners on their state and federal returns could lead to
confusion related to the federal deduction of state tax and the
inclusion in income of a refund previously received for this
deduction. There might not be a direct match between state and
federal reported income, leading to an increase in federal
inquiries or audits.
According to supporters of this bill, there have been unfair
financial burdens on domestic partners and their families,
especially those they bear under the state's tax laws. After
the passage of the comprehensive domestic partnership law
enacted in 2003, registered domestic partners have assumed
mutual financial responsibility of each other on the same terms
as spouses. Yet, the state's laws deny them equal treatment
with respect to state income taxes denying the convenience and
financial benefits that sometimes come with filing a joint
return. This bill, according to the supporters, will make a
significant difference in the lives of thousands of same-sex
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couples in the state and will be a statement of respectful
inclusion for all.
Opponents assert that the tax benefit that is conferred to
domestic partners under this bill is the last marital benefit
still reserved for married couples. They comment that the
benefits of marriage have been largely transferred to same-sex
relationships without the consent of California voters, despite
the passage of Proposition 22, which defined marriage as between
one man and one woman. Opponents also comment that this bill
could create confusion with federal law, leading to additional
taxpayer expense.
AB 205 (Goldberg), Chapter 421, Statutes of 2003, as introduced
on January 28, 2003, allowed domestic partners to file personal
income tax returns as either: a) married filing joint; or, b)
married filing separate. In addition, the bill, as chaptered,
made changes to various California laws regarding domestic
partners, including the creation of community property rights.
It also added language that required the same filing status on a
state income tax return as used on the federal income tax return
and provided that earned income is not community property for
state income tax purposes. The provisions of joint filing were
removed from the bill. AB 25 (Migden), Chapter 893, Statutes of
2001, allowed several existing taxpayer benefits for medical
expenses and health insurance benefits to include a taxpayer's
domestic partner and a domestic partner's dependents.
Analysis Prepared by : Sabrina Landreth / REV. & TAX. / (916)
319-2098
FN: 0016388