SCDOR Issues Revenue Rulings On Same-Sex Marriage Tax Issues

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rainbow stateOn December 31, 2014, the South Carolina Department of Revenue issued two Revenue Rulings (14-8 and 14-9) addressing same-sex marriage tax issues. These Revenue Rulings were necessary because South Carolina’s ban on same sex marriage was held unconstitutional in November of 2014.

Revenue Ruling 14-8 states that same-sex couples who are legally married in any state must file their South Carolina income tax returns, beginning with tax year 2014, using a married filing status, either “married filing jointly” or “married filing separately”.  Same-sex couples legally married before 2014 may amend their South Carolina income tax returns for any taxable year within the statutory time limitations to a married filing status, but they are not required to take this action.

Revenue Ruling 14-9 has more impact for real estate practitioners. It states that same-sex couples who are legally married under any state law will now be treated as married and as “spouses” for all South Carolina tax purposes.

Revenue Ruling 14-9 provided examples:

Ad valorem property taxes:

  • A same-sex legally married couple may be able to qualify their home for the 4% assessment ratio.
  • If each member of a same-sex legally married couple owns a residence, only one of those residences may qualify for the 4% assessment ratio since as a married couple they may have only one legal residence.
  • Same-sex legally married couples may now qualify for the homestead exemption.
  • A person in a same-sex marriage now qualifies as a “spouse” for purposes of exemptions for the homes of certain disabled veterans, law enforcement officers and firefighters.
  • A person in a same-sex marriage now qualifies as a “spouse” for the purposes of exemptions for the home of a paraplegic or hemiplegic person.
  • Transfers of real property between spouses of a same-sex couple may now be exempted from the assessable transfer of interest rules.

Deed recording fee

  • Transfers of real property from one same-sex spouse to the other will now be exempted from the deed recording fee.
  • Transfers of real estate to a former same-sex spouse pursuant to the terms of a divorce decree or settlement will now be exempted from the deed recording fee.
  • Deeds from a family partnership (one in which all partners are members of the same family) to one of the partners are exempt from the deed recording fee as long as no consideration is paid for the transfer other than a reduction in the grantee’s interest in the partnership. Since the definition of “family” in this exemption includes a “spouse”, the exemption now applies to family partnerships that include same-sex spouses.

Refunds

The recognition in South Carolina of same-sex marriages may allow a same-sex couple, or a same-sex spouse or surviving spouse, to be eligible for a refund of previously paid property taxes or deed recording fees if the same-sex couple was considered legally married under any state law for the period for which the refund is requested and the refund request is made within the applicable statutory time limitation.

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