New Jersey is one of the first states in the country to pass a fairly comprehensive Domestic Partnership Act that would allow couples who register as domestic partners to receive the same benefits as a married couple under state law (not federal law). This applies to taxation, too. Married couples are allowed to file tax returns jointly and claim zero tax as between otherwise taxable transfers (whether at death or during life).
The federal government recognizes marriages in all states as they apply to state law, but not domestic partnerships. In other words, a 12-year-old who gets married in Massachusetts under state law (yep, it’s allowed with the consent of a parent or judge) is considered married in other states and for the purposes of federal law.
Keeping that in mind, today’s “Fix the Tax Code Friday” question is (or questions are, there are two):
If a state allows favorable tax treatment for domestic partners, should the federal government follow suit and allow domestic partners to file joint returns and receive zero tax for transfers as if they were married?
Would your answer be different if the question applied to same-sex marriages instead of domestic partnerships?
