Virginia’s Twisted Taxes
LGBT advocates and tax pros slam Virginia tax policy as discriminatory and burdensome for same-sex couples
Equality Virginia, the commonwealth’s major LGBT rights organization, in conjunction with tax professionals and a married lesbian couple, held a press conference at the Virginia General Assembly Wednesday to call on Gov. Terry McAuliffe (D) and Attorney General Mark Herring (D) to allow married same-sex couples to file their state income-tax returns as ”married,” just as they are able to with their federal returns.
Due to the U.S. Supreme Court’s decision on the Defense of Marriage Act (DOMA) in 2013, married gay and lesbian couples – regardless of where they reside – are now permitted to file their federal taxes as married. But last November, the Virginia Department of Taxation issued a bulletin laying out guidelines that required married same-sex couples to file as single individuals. The policy also went a step further than other states, even those without marriage equality, by attempting to tax businesses that provide group health benefits to the families and dependents of their employees, in an attempt to discourage those businesses from providing spousal benefits to same-sex spouses.
The filing guidelines provided by the Virginia Department of Taxation affect same-sex couples by having them file as single, which, in turn, affects their ability to qualify for certain deductions, exemptions and tax credits. And the guidelines also affect businesses that claim a federal deduction for payments of fringe benefits to employees’ same-sex spouses and dependents by requiring those businesses to adjust the deductions they claim for Virginia income-tax purposes.
At Wednesday’s press conference, Equality Virginia and its allies said that the Department of Taxation’s guidelines on filing status are not only burdensome and confusing for individuals and businesses, but discriminatory.
”Virginia’s tax policy turns its back on simple, fair and transparent federal laws that allow married lesbian and gay couples to file their federal tax returns jointly,” James Parrish, the executive director of Equality Virginia, said at the press conference. ”All Virginians – including our many diverse communities, our businesses, and our children – would benefit from a more equitable tax policy. Equality Virginia urges Governor McAuliffe and Attorney General Herring to put a stop to this nonsensical, needlessly complicated, and backwards-looking policy.”
Katie Fletcher, a Richmond-based tax attorney and certified public accountant, said that what is most troubling about the current guidance from the Department of Taxation is that Virginia is advising employers that ”they must continue to impute income to an employee who is a married same-sex spouse for the cost of certain benefits, such as health insurance.” As a result, she said, this creates a discrepancy between the employee’s federal wages and their state wages on their W-2 form, thereby excluding the taxpayer from electronic filing and inviting unnecessary questions. Fletcher called the advice being given to employers ”ludicrous and discriminatory towards married lesbian and gay couples.”
”Non-conformity is causing both individual and business taxpayers unnecessary additional preparation time and cost, as well as additional taxes that they would not otherwise be subject to,” added Kenneth Dance, a partner at the Richmond-based accounting firm Wells Coleman & Company.
Stephanie and Desiree Bryan, a married lesbian couple expecting twin girls, told those assembled that they face various financial challenges as they prepare for the birth of their twins.
”We will have to decide who claims our babies as dependents for state-tax purposes only, and then make sure we track payment of medical and other expenses separately,” Stephanie Bryan said. ”That is required now in order to comply with health savings account rules. Unlike the IRS, Virginia doesn’t treat us like a family.”
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