State-Defined Marital Status: Its Future as an Operative Tax Factor

Abstract

Marital status is both overinclusive and underinclusive as an indicator of economic circumstances. Interestingly, federal tax law does not define marital status. Rather, in a majority of situations, it defers to local law determinations of marital status, recognizing the substantial interests and expertise of the states in domestic relations matters. However, the traditional interest of the states in defining and preserving the legal structure of marriage appears to be waning, while informal “marriages” are becoming more common. Moreover, temporary divorces have been undertaken for tax reasons and temporary marriages have been suggested as a tax planning strategy for the unmarried. As a result, marriage is becoming indistinguishable from many less formal relationships.

This article examines the role marital status plays in federal income tax law and the manner in which the tax law determines whether a taxpayer is single or married. Judicial and administrative reactions to tax-motivated shifts in marital status are analyzed and the increasing weakness of state-defined marital status as a taxing factor is demonstrated. The article suggests that new federal standards, designed to protect and promote tax policy, must be developed to replace or reinforce state-defined marital status as a taxing factor. Additionally, courts must be willing to abandon local law determinations of marital status and adopt more flexible analytical approaches when tax policy is threatened.

Keywords: state-defined marital status, federal income tax