Rhode Island Issues Same-Sex Marriage Tax Guidance

Author: Rena Pirsos, XpertHR Legal Editor

September 12, 2013

Effective retroactively to January 1, 2013, Rhode Island will exclude the value of health insurance benefits provided to an employee's same-sex spouse from the employee's taxable income. The Rhode Island Division of Taxation (the Division) announced this news on September 6, via an advisory and a set of Frequently Asked Questions (FAQs). Note that the state already recognizes same-sex civil unions and domestic partnerships and does not tax the value of health benefits provided to the partners of employees in such relationships. Legal same-sex marriages, civil unions and domestic partnerships performed in other states will also be recognized in Rhode Island.

As a result, employers should adjust their payroll systems to exclude from Rhode Island taxable wages and income tax withholding the value of such employee benefits. Employers also should determine whether any of their employees in same-sex marriages will be entitled to a state income tax refund for amounts withheld in prior years. Such employees who file amended federal income tax returns for prior years will also be required to file amended Rhode Island returns.

In addition, Rhode Island employees in same-sex marriages may need to adjust the amount of state income tax that is withheld from their paychecks. Employers may wish to advise such employees that they may do so by completing and submitting a new federal Form W-4, Employee's Withholding Allowance Certificate, or state Form RI-W4, to change their marital status or the number of allowances they wish to claim. Rhode Island taxpayers are required to use the same marital filing status on their state income tax return as used on their federal income tax return. Employees in same-sex civil unions or domestic partnerships cannot file a Form W-4 or a return claiming "married" status.

In the advisory, the Rhode Island Tax Administrator David M. Sullivan states that "[s]ame-sex couples married in Rhode Island on or after August 1, 2013, will be recognized as married for Rhode Island income tax purposes. Sullivan also said that, "[a]s a result, effective August 1, 2013, from a Rhode Island tax perspective, same-sex married couples have the same rights - and responsibilities - that formerly applied only to opposite-sex married couples."

The advisory and FAQs follow on the heels of a revenue ruling recently released by the Internal Revenue Service announcing that it will recognize all legal same-sex marriages for federal tax purposes and provide an income-exclusion for the value of same-sex spouse health insurance coverage and other fringe benefits purchased by legally married employees from their employers. The guidance also explains the state income tax filing requirements that now apply to same-sex married couples.