Relitigating Seaborn: Taxing the Community Income of California Registered Domestic Partners

Abstract

The new California Domestic Partners Act (AB 205) extended significant spousal rights and liabilities to registered domestic partners. Most domestic partners are same-sex couples who do not have the right to marry in California. At least three other states (Massachusetts, Vermont, and Connecticut) similarly recognize either marriages or marital-like relationships between same-sex partners. California is unique, however, as it is the only community property state to grant spousal-like status to same-sex partners. As of January 1, 2005, registered domestic partners are subject to the same community property regime as California spouses. In 1930, the Supreme Court ruled in Poe v. Seaborn that community earnings were to be split for federal income tax purposes. There is a serious debate in the tax community about whether or not Seaborn should be applied to California registered domestic partners. The Internal Revenue Service has recently opined in a Chief Counsel Advisory that Seaborn does not apply. This essay disagrees with the IRS and takes the position that, whether or not Seaborn is good tax policy, it is a solid 75 year old precedent that ought to be applied to registered domestic partners. The essay further predicts that California taxpayers will likely have to litigate this issue in order to establish the correct tax reporting rule.

Keywords: domestic partnership, Seaborn, community property, same-sex couples, income tax, taxation, divorce, dissolution

JEL Classification: K11, K34