For California Income Tax purposes, and starting for the tax year 2007, registered domestic partners are required to either file joint tax returns or as married, filing separate. This means that for State income tax purposes registered domestic partners are treated as married couples.

This law affects tax returns which will be filed in 2008 for income earned in 2007. Remember, this is only the law in California and is not Federal Law. Under Federal Law, registered domestic partners are not eligible to file joint tax returns. And, there are lots of unanswered questions. When you file your Federal income tax return, you get a deduction for state income taxes paid. It’s not clear how the IRS is going to deal with this deduction when the IRS does not treat registered domestic partners as a married couple. Nor, is it clear what the impact this will have for people who have to file tax returns in more than one state.

In February 2006 the IRS Chief Counsel issued a memorandum denying joint filing for California Registered Domestic Partners. And, the difficulties don’t end there. Assume Robin and Pat are registered domestic partners and Robin earns $100,000 per year. Because California treats Robin’s income as community property, Pat is on the hook for declaring 1/2 of the income and paying the California income tax. But, the IRS doesn’t recognize Robin and Pat’s registered domestic partnership. So, under Federal law Robin is required to file a separate return declaring the entire $100,000. And, it gets even more complex. What if Robin and Pat decide to dissolve their registered domestic partnership? Will Pat be required to reimburse Robin 1/2 of the federal tax because the earnings are community property? We don’t know the answer to that question. But stay turned. Who said tax law isn’t interesting?