Every same-sex couple who is legally married will have access to federal tax benefits, even if they live in a state that does not recognize their marriage.
The announcement, made by the IRS and the Treasury Department last week, puts to rest the question of whether federal recognition would apply based on the state of marriage celebration, or the state of residence of the couple in question. The state of celebration has won out, and included under the umbrella are couples who get married in a U.S. territory or foreign country.
Clarification on the issue has been awaited ever since the U.S. Supreme Court struck down the federal Defense of Marriage Act in June, which had banned the federal government from acknowledging LGBT marriage.
“Today’s ruling provides certainty and clear, coherent tax filing guidance for all legally married same-sex couples nationwide,” Treasury Secretary Jacob Lew said in a statement. “This ruling assures legally married same-sex couples that they can move freely throughout the country knowing that their federal filing status will not change.”
As a result, same-sex couples will be able to file joint tax returns, get breaks on gift and estate taxes and take advantage of other benefits that married people enjoy. The IRS said it considers the policy retroactive up to a three-year statute of limitations, meaning that couples who would have received better refunds if their marriages were recognized can amend their returns as far back as 2010.
The policy does not apply to couples in civil unions or domestic partnerships.
Also last week in post-DOMA shuffling, the Health and Human Services Department announced that same-sex spouses will have access to equal coverage under Medicare in the same nursing home as their partner.
Measured, Thoughtful Approach
Gay rights groups applauded the announcement, and Edith Windsor, plaintiff in the Supreme Court case, issued a statement saying, “Thanks to today’s ruling at the Treasury Department, no one will have to experience the pain and indignity that I went through ever again. I feel so proud and grateful to my country and to our president.” Windsor challenged DOMA after she had to pay $363,053 in estate taxes on her late wife’s inheritance, for which she would not have been liable were she married to a man.
As a practical matter, employers and their attorneys can now go about planning how to line up with the new policies with plenty of time before the end of the year.
Alden J. Bianchi
“The IRS took a very measured, thoughtful approach,” says Alden J. Bianchi, practice group leader of Employee Benefits & Executive Compensation Practice at Mintz Levin. ”They more than anyone knew it’s one thing to say ‘state of celebration.’ It’s another thing to answer all the ancillary questions. When does it take effect? Can I apply for retroactive refunds?”
In addition to personal income tax implications, the downfall of DOMA affects other domains like medical plans, life insurance and pensions. Not all questions have been answered yet — for example, it’s still unclear if a same-sex partner of a pension beneficiary can claim a benefit retroactively — but consumers, officials and employers now have a clearer path forward.
“This isn’t the end of all issues and questions or even disputes,” Bianchi notes. “It’s a good start.”
