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On October 18, 2013, the North Carolina Department of Revenue (the Department) issued Directive PD-13-1 (the Directive). In the Directive, the Department stipulates that since North Carolina law does not recognize same-sex marriages as valid, such married couples cannot file a North Carolina income tax return using the filing status of married filing jointly or married filing separately.

The relevant law, North Carolina General Statutes § 51-1.2, provides that “[m]arriages, whether created by common law, contracted or performed outside of North Carolina, between individuals of the same gender are not valid in North Carolina.”

The Directive provides that if same-sex married couples file a joint federal tax return, these individuals must each complete a separate pro forma federal return for North Carolina purposes with the filing status of single or, if qualified, as head of household or qualifying widow(er) to determine the individual’s adjusted gross income (AGI). When filing electronically, each individual in the same-sex marriage must transmit their pro forma federal returns when filing each of their state returns with North Carolina.

The Multistate Tax Update will continue to follow developments in state tax law in the wake of the Court’s ruling in United States v. Windsor (striking down Section 3 of the Defense of Marriage Act (DOMA) on grounds that the federal interpretation of "marriage" and "spouse" to apply only to heterosexual unions is unconstitutional under the Due Process Clause of the Fifth Amendment), as well as Revenue Ruling 2013-17 (holding, in part, that: (1) “husband” and “wife” include an individual married to a person of the same sex if the individuals are lawfully married under state law, and the term “marriage” includes such a marriage; and (2) a marriage of same-sex individuals that was validly entered into in a state whose law authorizes the marriage of two individuals of the same sex even if the married couple is domiciled in a state that does not recognize the validity of same-sex marriages). These holdings have only begun their ripple effect throughout the United States at both the federal and state level. To be sure, a multitude of state legislation, rulings, guidance, and litigation will continue to ensue as a result. If you have questions on how these holdings or other developments may affect you or your business, please contact us.

Click here to read Directive PD-13-1.

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