New York State Department of Taxation and Finance Speaks Up on Tax Questions for Same-Sex Married Couples.
August 01, 2011 at 2:58 PM

The New York State Department of Taxation and Finance has issued its initial guidance for same-sex married couples who have tax questions.

 

My colleague, Professor Art Leonard, New York Law School, has blogged about this here. To link to the state’s official guidance click here.

 

Advice is provided for income taxes, estate taxes, withholding taxes, and sales taxes. It is worth noting that for estate tax purposes, New York has a lower exemption ($1.0 million) than under federal law (currently $5.0 million). As a result, the availability of the marital deduction at the state level will prove beneficial to many New York estates that are too small to generate federal taxes, but large enough to generate state estate tax liability.

 

While the guidance clearly states that the marital deduction is available to estates of persons who die after the effective date of the new marriage law (July 24, 2011), I still believe it is possible to claim a marital deduction for estates of decedents who may have died before that date. After all, New York did recognize same-sex marriages from other states before the enactment of the new marriage law. However, to make the marital deduction claim under state law, presumably the decedent’s estate would have to also claim a marital deduction at the federal level. That is because the general rule in New York, before July 24, was that when an estate tax return is filed for federal purposes, the amounts used to compute the gross estate and any elections reported on the federal return were binding for New York state purposes.

 

But what if there were no federal return required, as would be the case for any estate under the federal exemption amount? In that case, I see no reason why the decedent’s estate should not avail itself of the same procedure outlined in the current guidance: file a federal pro forma return and claim the marital deduction.

 

Finally, estate planners in New York who have not already done so should discuss with their clients what sort of marital deduction planning they want to do at the state level.
 

Posted by Patricia Cain | Permalink | Add Comment | Comments (7)
Comments
Quick Loan August 18, 2011 at 5:12 AM
They should be given assitance so that they can also plan their tax

david September 07, 2011 at 10:45 AM
thanks for advising us,it clear my all points

sales tax compliance October 04, 2011 at 6:16 AM
Thanks for this helpful article.

bourse en ligne October 11, 2011 at 9:21 AM
thank you for this really useful post

STEVEN J FROMM November 12, 2011 at 12:11 PM
This is very interesting strategy. Filing a pro forma return seems to be a valid strategy. It is now more relevant because of the new portability rules. In that case even though not taxes are due a proforma return is required to allow the surviving spouse the portability of the remaining exemption of the decedent.

STEVEN J FROMM November 13, 2011 at 6:02 PM
Some clarifications to my prior comments. I am not implying that New York has adopted portability. I was pointing out that there are other cases where filing a proforma estate tax return where no taxes are due is an option or strategy for taxpayers. So as another example in addition to the one cited in the article, decedent's estates would file an estate tax Form 706 to facilitate portability to the surviving spouse of the remaining estate tax exemption not utilized by the decedent. I will let our New York attorneys jump in here to let us know if portability is part of New York law or if it is being considered. Hope this clarifies this matter.

Patricia Cain November 13, 2011 at 6:44 PM
Steven:

Thanks for the clarification. Yes pro forma federal returns seem to be becoming a norm in quite a set of situations. Pro forma joint income tax returns for same-sex spouses and partners has been the rule for a number of years in other states that require joint filing (or married filing separately) at the state level for such couples.