The Treasury Department and the IRS announced on August 29 that they will take a place of celebration approach to recognizing same-sex marriages following the U.S. Supreme Court's June 26 decision to strike down Section 3 of the Defense of Marriage Act (DOMA). Same-sex couples who are legally married in jurisdictions that recognize their marriages will be treated as married for federal tax purposes regardless of whether or not the jurisdiction of their residence recognizes same-sex marriage, a senior Treasury official told reporters during a news conference in Washington, D.C.
Supreme Court's Decision
In a 5-to-4 decision, the Supreme Court held that Section 3 of DOMA was unconstitutional as a deprivation of the equal protection of persons protected by the Fifth Amendment (E.S. Windsor, 2013-2 USTC ¶50,400, 2013-2 USTC ¶60,677). Section 3 had defined marriage for federal purposes as only a legal union between one man and one woman as husband and wife. The Court did not address Section 2 of DOMA, which provides that no state or territory is required to recognize a same-sex marriage that is recognized by another jurisdiction. As of August 29, 2013, 13 states (California, Connecticut, Delaware, Iowa, Maine, Massachusetts, Maryland, Minnesota, New Hampshire, New York, Rhode Island, Vermont, and Washington) and the District of Columbia recognize same-sex marriage. Additionally, several counties in New Mexico are issuing marriage licenses to same-sex couples.
State of Celebration
From a tax administration standpoint, it would be difficult to administer a state of residence approach, rather than a state of celebration approach, the Treasury official explained. The IRS took a state of celebration approach for purposes of common law marriage in Rev. Rul. 58-66, the official noted, where the Service determined that it would recognize the marriages of taxpayers who enter into a common-law marriage in a state that recognizes common-law marriage and who later move to a state that does not.
The Treasury official explained that any same-sex marriage legally entered into in one of the 50 states, the District of Columbia, a U.S. territory or a foreign country will be covered by the ruling. This treatment, however, does not extend to registered domestic partnerships, civil unions, or similar formal relationships recognized under state law, the official added.
2013 Returns
Legally married same-sex couples generally must file their 2013 federal income tax return using either the married filing jointly or married filing separately filing status, the Treasury official explained. Individuals who were in same-sex marriages may, but are not required to, file original or amended returns choosing to be treated as married for federal tax purposes for one or more prior tax years still open under the statute of limitations. Couples on a filing extension who have not yet filed their original 2012 tax year returns, however, can only file as single taxpayers for the 2012 tax year if they file by September 16, the date on which the IRS will officially publish Rev. Rul. 2013-17, according to the Treasury official. Further, although employees who purchased same-sex spouse health insurance coverage from their employers on an after-tax basis are now allowed to treat the amounts paid for that coverage as pre-tax and excludable from income, they may do so only on an open-year amended return on which they file as married filing jointly or married filing separately, the Treasury official added.
FAQs
The IRS has also provided questions and answers regarding domestic partnerships. The FAQs address filing status, joint returns, dependency exemptions, itemized and standard deductions, and the adoption credit. A number of questions are posed and answered in the context of state community property laws, pertaining to income determination, filing status, tax credits, dependency, medical care and Social Security benefits, returns, withholding, estimated tax payments, and certain deductions. In general, laws that have applied to a husband and a wife do not apply to the members of a domestic partnership.
Additional FAQs address joint returns, dependency exemptions, itemized and standard deductions, the adoption credit, employer-provided health care coverage, qualified retirement plans, and refund procedures for employees and employers. In general, laws that have applied to a husband and a wife now apply to the members of a same-sex marriage.
Guidance will be issued later on issues pertaining to qualified retirement plans and employers will be given streamlined procedures to file refund claims for payroll taxes paid on previously taxed benefits provided to same-sex couples.
Copyright © 2013, CCH INCORPORATED. All Rights Reserved. Contents of this publication may not be reproduced without the express written consent of CCH and CBIZ. To ensure compliance with requirements imposed by the IRS, we inform you that-unless specifically indicated otherwise-any tax advice in this communication (and any attachments) is not written with the intent that it be used, and in fact it cannot be used, to avoid penalties under the Internal Revenue Code, or to promote, market, or recommend to another person any tax related matter. This publication is distributed with the understanding that CBIZ is not rendering legal, accounting or other professional advice. The reader is advised to contact a tax professional prior to taking any action based upon this information. CBIZ assumes no liability whatsoever in connection with the use of this information and assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.
CBIZ MHM is the brand name for CBIZ MHM, LLC and other Financial Services subsidiaries of CBIZ, Inc. (NYSE: CBZ) that provide tax, financial advisory and consulting services to individuals, tax-exempt organizations and a wide range of publicly-traded and privately-held companies.