BILL ANALYSIS                                                                                                                                                                                                    



                                                                       



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          |SENATE RULES COMMITTEE            |                  SB 1827|
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                              UNFINISHED BUSINESS


          Bill No:  SB 1827
          Author:   Migden (D)
          Amended:  6/14/06
          Vote:     21

           
           SENATE REVENUE & TAXATION COMMITTEE  :  4-2, 4/26/06
          AYES:  Machado, Alquist, Cedillo, Scott
          NOES:  Dutton, Runner
          NO VOTE RECORDED:  Poochigian

           SENATE APPROPRIATIONS COMMITTEE  :  8-5, 5/25/06
          AYES:  Murray, Alarcon, Alquist, Escutia, Florez, Ortiz,  
            Romero, Torlakson
          NOES:  Aanestad, Ashburn, Battin, Dutton, Poochigian

           SENATE FLOOR  :  25-13, 5/30/06
          AYES:  Alarcon, Alquist, Bowen, Cedillo, Chesbro, Ducheny,  
            Dunn, Escutia, Figueroa, Florez, Kehoe, Kuehl, Lowenthal,  
            Machado, Migden, Murray, Ortiz, Perata, Romero, Scott,  
            Simitian, Soto, Speier, Torlakson, Vincent
          NOES:  Aanestad, Ackerman, Ashburn, Battin, Cox, Denham,  
            Dutton, Hollingsworth, Maldonado, Margett, McClintock,  
            Morrow, Poochigian
          NO VOTE RECORDED:  Runner, Vacancy

           ASSEMBLY FLOOR  :  Not available


           SUBJECT  :    Taxation:  domestic partners

           SOURCE  :     Equality California

                                                           CONTINUED





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           DIGEST  :    This bill requires registered domestic partners  
          to file personal income tax returns, as either (1) married  
          filing joint, or (2) married filing separate.

           Assembly Amendments  add declaratory language and make  
          technical changes.

           ANALYSIS  :    The Personal Income Tax Law imposes tax on  
          taxable income and provides, among other things, that  
          specified definitions govern the construction of that law.   
          Existing law allows married couples to file joint or  
          separate state tax returns, as specified.

          This bill allows registered domestic partners to file joint  
          or separate state tax returns, as specified. 

          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 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  







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             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. 

           Comments
           
          According to supporters of the 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 couples in  
          the state and will be a statement of respectful inclusion  
          for all.

           Prior legislation  .  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 (1) married filing joint, or (2) 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  







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          partner and a domestic partner's dependents.

           Other states' legislation  .  For tax periods ending on or  
          after May 16, 2004, Massachusetts recognizes the right of  
          same-sex couples to be married.  As a consequence, same-sex  
          spouses that marry shall file Massachusetts income tax  
          returns as married filing joint or married filing separate.  
           Massachusetts is not a community property state.

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  Yes    
          Local:  No

          According to the Franchise Tax Board, this bill would have  
          the following fiscal impact:

            2007-08:  -$8 million
            2008-09:  -$9 million
            2009-10:  -$10 million

           SUPPORT  :   (Verified  8/23/06)

          Equality California (source)
          Attorney General Bill Lockyer
          Gay and Lesbian Alliance of the Central Coast
          Lambda Letters Project
          Los Angeles Gay and Lesbian Center
          San Francisco AIDS Foundation
          San Francisco LGBT Community Center
          State Bar of California, Taxation Section
          State Controller Steve Westly
          State Treasurer Phil Angelides
          Stonewall Democratic Club of Greater Sacramento

           OPPOSITION  :    (Verified  8/23/06)

          California Catholic Conference
          Concerned Women for America

           ARGUMENTS IN SUPPORT  :    According to the Assembly Revenue  
          and Taxation Committee analysis, supporters of this bill  
          contend that 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,  







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          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 couples in the state and will be a statement of  
          respectful inclusion for all. 

           ARGUMENTS IN OPPOSITION  :    According the Assembly Revenue  
          and Taxation Committee analysis, 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. 
           
           
          DLW:mel  8/23/06   Senate Floor Analyses 

                         SUPPORT/OPPOSITION:  SEE ABOVE

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