All legal same-sex marriages recognized for tax purposes

In the wake of the Supreme Court’s Windsor decision (Sup. Ct. Dkt. No. 12-307 (6/26/13)), which invalidated a portion of the Defense of Marriage Act (DOMA), P.L. 104-199, the Treasury Department and IRS announced in late August that “same-sex couples, legally married in jurisdictions that recognize their marriages, will be treated as married for federal tax purposes.” The IRS also issued a revenue ruling (Rev. Rul. 2013-17) and FAQs (tinyurl.com/ptg3u7q) providing guidance on the topic.

The ruling will apply to all federal tax provisions where marriage is a factor, for all federal taxes, including income, estate, and gift taxes. Tax provisions in which marriage is a factor include filing status, personal and dependency exemptions, the standard deduction, employee benefits, contributions to IRAs, the earned income tax credit, and the child tax credit, among others.

According to the IRS, more than 200 provisions in the Code and Treasury regulations include the terms “spouse,” “marriage,” “husband,” “wife,” or “husband and wife.” Under the revenue ruling, the IRS will treat gender-neutral terms, such as “spouse” and “marriage,” as including, respectively, an individual who is married to a person of the same sex if the couple is lawfully married under state law and such a marriage between same-sex individuals. The terms “husband,” “wife,” and “husband and wife” will be interpreted to include same-sex spouses.

The ruling will apply to taxpayers who are in 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. These marriages will be recognized for federal tax purposes, even if the state in which the couple currently resides does not recognize same-sex marriages. The IRS says this is consistent with its long-standing position (Rev. Rul. 58-66) that for federal tax purposes the IRS will recognize marriages based on the law of the state in which they were entered into and will disregard subsequent changes in domicile.

The ruling does not apply to taxpayers who are in registered domestic partnerships, civil unions, or similar formal relationships recognized under state law that do not have the status of legal marriage under state law. However, some states extend full community property treatment to such unions, for which the FAQs also provide guidance.

Under the ruling, legally married same-sex couples generally will file their 2013 federal income tax returns using either married filing jointly or married filing separately status. Such individuals 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 limitation, if they were legally married during that tax year.

Treasury and the IRS also announced that they intended to issue streamlined procedures for employers who wish to file refund claims for payroll taxes paid on previously taxed health insurance and fringe benefits provided to same-sex spouses. They also said that they intended to issue further guidance on cafeteria plans and on how qualified retirement plans and other tax-favored arrangements should treat same-sex spouses for periods before the effective date of this revenue ruling.

The revenue ruling applies prospectively, effective Sept. 16, 2013, but taxpayers who wish to rely on it for earlier periods (for which the statute of limitation has not expired) may do so.

  Rev. Rul. 2013-17

By Alistair M. Nevius, J.D., the JofA’s editor-in-chief, tax.