We previously blogged (here) Pat Cain’s wonderful article on the tax consequences of California’s Domestic Partners Act.  Pat has updated her article, Relitigating Seaborn: Taxing the Community Income of California Registered Domestic Partners, in light of the IRS’s recent release of Chief Counsel Memorandum 200608038 (2/24/06), which requires 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 Act [blogged here and here].  Here is the abstract of Pat’s article, which takes issue with the IRS’s position:

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.