BILL ANALYSIS
SB 105
Page 1
Date of Hearing: August 20, 2007
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Charles Calderon, Chair
SB 105 (Migden) - As Amended: June 20, 2007
Majority vote. Tax levy. Fiscal committee.
SENATE VOTE : 37-2
SUBJECT : Taxation: registered domestic partners
SUMMARY : Resolves issues relating to the new California
Registered Domestic Partner (RDP) personal income tax (PIT)
filing requirements. Specifically, this bill :
1)Provides that, except as otherwise specified, the RDP or
former RDP of a taxpayer shall be treated as the spouse or
former spouse of that taxpayer for purposes of applying the
provisions of the PIT Law, administrative franchise and income
tax laws, the Katz-Harris Taxpayers' Bill of Rights Act, and
the Corporation Tax Law, and for purposes of applying
provisions of the Internal Revenue Code (IRC) that are
applicable for purposes of these laws.
2)Provides that a RDP shall not be treated as the spouse of a
taxpayer when such treatment would result in:
a) Classification of a business entity under state tax law
that differs from the classification of that business
entity for federal income tax purposes;
b) Disqualification for federal income tax purposes of a
plan that otherwise qualifies under IRC Section 401(a)
(e.g. qualified pension, profit sharing, and stock bonus
plans); or
c) Creation of a "tax-favored account" that would not be
qualified as a tax-favored account for federal income tax
purposes. "Tax-favored account" is defined as an
individual account, plan, or arrangement that is exempt
from income tax under Chapter 1 of the IRC, including an
individual retirement account, an Archer medical savings
account, a qualified tuition program, and a Coverdell
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education savings account.
3)Provides that, in the case of RDPs and former RDPs, adjusted
gross income (AGI), for purposes of computing limitations
based on AGI, shall mean the AGI on a federal tax return
computed as if the RDP or former RDP were treated as a spouse
or former spouse, respectively, for federal income tax
purposes, and used the same filing status that was used on the
state return for the same taxable year.
4)Provides that no addition to tax shall be made for 2007 tax
returns, with respect to any underpayment created or increased
by any provision of this bill or SB 1827 (Migden), Chapter
802, Statutes of 2006.
5)Takes effect immediately as a tax levy and becomes operative
for each taxable year beginning on or after January 1, 2007.
EXISTING FEDERAL LAW :
1)Provides that, in determining the meaning of any Act of
Congress, or of any ruling or regulation of a United States
agency, the word "marriage" means only a legal union between
one man and one woman as husband and wife, and the word
"spouse" refers only to a person of the opposite sex who is a
husband or a wife.
2)Treats RDPs as single individuals for purposes of federal
income tax law.
3)Provides for several tax-favored special purpose accounts,
including Archer medical savings accounts, individual
retirement accounts, and education savings accounts. These
tax-favored accounts allow taxpayers to get special tax
treatment for amounts accumulated to pay for particular
expenses. In some cases, the laws governing these accounts
provide special rules for married individuals.
4)Defines AGI for personal income taxpayers as gross income from
all sources not specifically excluded, minus certain "above
the line" deductions such as deductions for moving expenses
and alimony payments. The federal AGI is used to determine
the limitation on certain itemized deductions.
5)Subjects taxpayers to a penalty for the underpayment of
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estimated tax.
EXISTING STATE LAW :
1)Requires that, for limitation purposes, taxpayers use the AGI
as reflected on their federal return.
2)Requires RDPs to file their California income tax returns
using the same rules applicable to married individuals. RDPs
must file PIT returns as either a) married filing joint, or b)
married filing separate.
3)Provides that RDPs shall combine the amounts reflected as AGI
on the federal income tax return of each RDP to determine
their joint federal AGI.
4)Subjects taxpayers to a penalty for the underpayment of
estimated tax.
FISCAL EFFECT : The Franchise Tax Board (FTB) has estimated that
this bill would have an inconsequential fiscal effect.
Proposition 98 Fiscal Effect : Not applicable.
COMMENTS :
1)The author states, "SB 105 is a technical clean up bill
providing the Franchise Tax Board assistance in implementing
the State Income Tax Equity Act, under SB 1827 (Migden),
Chapter 802, Statutes of 2006, which allows Registered
Domestic Partners the option to jointly file state income tax
returns for the 2007 tax year. Specifically, this bill would
clarify and resolve issues relating to SB 1827, which
permitted RDPs to use the same state income tax filing status
as married persons, in order to ensure fair and effective
implementation of the new law starting with tax year 2007."
2)Supporters state that, "SB 1827 amended the tax and family
codes to enable RDPs to enjoy the same financial protections
afforded to married couples by allowing them to file state
income tax returns as 'married filing joint' or 'married
filing separately.' However, current federal law treats RDPs
as single individuals and requires them to file tax returns as
individuals. SB 105 would clarify how California is to treat
RDPs in specified instances where state and federal law
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conflict and prevent proper administration of the new tax
rules under SB 1827." Supporters also state that, "SB 105
reaffirms California's commitment to equality for all
Californians including lesbian, bi-sexual, gay and transgender
individuals who are registered domestic partners."
3)FTB notes, "It is unclear whether legal unions between two
individuals formed in other states that have a filing
requirement in California and are substantially equivalent to
a California registered domestic partner relationship would be
required to use the filing status in California of married
filing joint or married filing separate." Committee staff are
informed that the author intends to address this specific
issue in a clean up bill to be introduced next year.
4)Committee staff note that this bill and AB 1561 (Calderon),
introduced in the current legislative session and pending in
Senate Committee on Revenue and Taxation, seek to amend
Revenue and Taxation Code Section 17024.5. As a result, the
author of SB 105 has proposed taking an amendment with
double-jointing language.
REGISTERED SUPPORT / OPPOSITION :
Support
Equality California (sponsor)
City of West Hollywood
Opposition
None on file
Analysis Prepared by : M. David Ruff / REV. & TAX. / (916)
319-2098