Lasw week, we blogged Chief Counsel Memorandum 200608038 (2/24/06), which ruled that an individual who is a registered domestic partner in California must report all of his or her income earned from the performance of his or her personal services, notwithstanding the enactment of the California Domestic Partner Rights and Responsibilities Act.  Mark Schwanhausser of Knight Ridder published an interesting article on the subject:

California’s registered domestic partners should report their pay on federal tax forms the way single people do, rather than using methods available to married couples, according to an internal memo the IRS released last week. The clarification is the first guidance from the IRS in the wake of a sweeping state law that took effect in 2005, giving gays and lesbians many of the rights of married couples.

The news should ease the confusion facing the state’s 71,000 partners with the April 17 tax-filing deadline just weeks away. But the federal agency’s response wasn’t the answer that gay and lesbian activists wanted to hear, because it does not recognize the property rights California’s domestic partners have under state law. In short, IRS lawyers determined that a 1930 Supreme Court decision that entitles married couples to divide their incomes cannot be extended to the state’s domestic partners because they’re not married. For example, if one partner earns $100,000 but a stay-at-home partner earns nothing, that’s what they’d report on their respective federal returns — rather than $50,000 each….

[C]ritics said the IRS is ignoring the community property rights extended to registered partners under the new state law. "If there’s no difference between the legal rights that spouses have in their community property and the legal rights that domestic partners have in their community property, then how can they be taxed differently?" said Donald Read, a Berkeley attorney who also practices at Lakin-Spears in Palo Alto. "I can’t say I’m shocked, but it strikes me as an indefensible position." "The analysis is defective," added Jenny Pizer, senior counsel for Lambda Legal, a gay and lesbian advocacy group. "The federal government seems to have created another exception for gays and lesbians."