BILL ANALYSIS ------------------------------------------------------------ |SENATE RULES COMMITTEE | SB 1827| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ 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 SB 1827 Page 2 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 SB 1827 Page 3 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 SB 1827 Page 4 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, SB 1827 Page 5 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 **** END ****