On December 20, 2013, Judge Shelby of the District Court of Utah ruled that Utah’s prohibition on same-sex marriages violated the U.S. Constitution.[fn1] For various reasons, there was no stay of the decision, and approximately 1,300 same-sex couples married in Utah.
On Monday, January 6, the Supreme Court issued a stay of Judge Shelby’s decision, halting same-sex marriages at least until the 10th Circuit Court of Appeals has a chance to rule on the issue.
Though the Supreme Court’s stay resolved what would happen with those same-sex couples who had not yet married, it initially put the status of the 1,300 marriages that had occurred in limbo. Utah’s Gov. Herbert resolved this uncertainty, telling his cabinet that the state of Utah would not recognize, at least for now, recognize those marriages that had been performed. In response, Attorney General Holder announced that the federal government would recognize the marriages that had been performed, even if Utah didn’t.
Which introduced a whole new level of limbo.
The Tax Consequences of a Federal-State Divide
When Judge Shelby issued his decision, I drafted a brief summary of the tax issues newly-married same-sex couples could face. In light of the shifting landscape, though, it’s worth flagging one important point: tax filing just became a lot more complicated.[fn2]
Why? Because, like most states, Utah’s personal income tax uses the federal income tax as a starting point. That is, to calculate your state income tax, you have to first calculate your federal income tax, then make certain state-specific changes.
For federal purposes, though, these 1,300 couples will have to file their tax returns as married. Because Utah will not recognize their marriages, though, they will have to file individual state tax returns.
In practice, this means that they will have to prepare and file married federal returns. They will also have to prepare (but not file) dummy federal returns as unmarried persons, and use those dummy returns to file their state tax returns. It’s basically the reverse situation from the pre-Windsor world, when DOMA prevented the federal government from recognizing same-sex marriages, forcing married same-sex couples to file separate federal returns, but prepare a dummy married return on which they could base their state married return.
As a practical matter, then, the intersection of Gov. Herbert’s and Attorney General Holder’s decisions will, at the very least, probably raise the cost of filing tax returns for 1,300 newly-married Utah couples.
[fn1] The next day, I wrote about some potential tax consequences of that decision.
[fn2] Although I’m basing this off of Utah’s shifting legal landscape, these same issues apply to any same-sex couple that marries and then moves to a state that doesn’t recognize same-sex marriage. The only difference is, in Utah, couples don’t have to move to get caught in this trap.