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For same-sex couples, IRS answers one question

When the U.S. Supreme Court in June struck down part of the federal Defense of Marriage Act, it left many unanswered questions.

Can a validly married same-sex couple file a joint federal tax return — even in states that don’t recognize gay marriage?

How will federal agencies such as the Department of Defense, Department of Labor and Social Security Administration respond?

And would the decision lead to the downfall of state constitutional amendments, like the one passed by Michigan in 2004, limiting marriage as between one man and one woman?

Roughly three months later, attorneys finally have a few answers for their clients.

Last week, the Treasury Department and Internal Revenue Service released Ruling 2013-17, declaring that the agency will look to the state of celebration to determine if a couple is validly married for all federal tax-related purposes. If a couple is married in a state that recognizes same-sex unions, therefore, it doesn’t matter that they reside in Michigan — they may still file a joint tax return.

The ruling applies with equal measure to all federal tax considerations from income to gift and estate taxes, to personal and dependency exemptions, employee benefits and IRA contributions.

In addition, the ruling has retroactive effect. The three-year statute of limitations for filing a federal tax refund claim gives same-sex couples the chance for a “do-over” for tax years 2010, 2011 and 2012.

Employers were also implicated by the ruling, which requires that as of Sept. 16, all qualified employee benefit plans must treat same-sex spouses the same as opposite-sex spouses for all qualified plan purposes — like survivor benefits, for example.

The ruling “certainly provides some answers,” Birmingham attorney Randall A. Denha said. “But it also raises as other questions,” as taxpayers in the 37 states like Michigan that do not recognize same-sex marriage will now have to file state and federal tax returns with different statuses.

How the state will handle the situation remains unclear, but this is “going to create total discombobulation,” Denha said.

One by one

In U.S. v. Windsor, the Supreme Court held, 5-4, that Section 3 of DOMA, defining marriage as the union of man and woman, was unconstitutional.

But the practical implications of the landmark decision are still being worked out — one federal agency at a time.

In addition to the IRS, several other federal agencies have taken steps to comply with the decision. Attorney General Eric Holder Jr. sent a letter to the Speaker of the House on Sept. 4, stating that at the direction of President Obama the Department of Justice will no longer enforce 38 U.S.C. §§ 101(3) and 101(31).

The provisions covered veteran’s benefits and defined “spouse” as a “person of the opposite sex.” Same-sex spouses of veterans and some active duty or reserve members will now be eligible for benefits like home loans and health care.

In August, the DOL issued an internal memorandum to update various documents removing references to DOMA and making clear that spousal leave under the Family and Medical Leave Act, for example, is available to same-sex spouses. Secretary Thomas Perez indicated to DOL staff members that the changes are “one of many steps the Department will be taking over the coming months” to implement the Windsor decision.

Not to be outdone, the Department of Defense announced that same-sex spouses of uniformed service members and DOD civilian employees will now be included in coverage. The agency said it reviewed its policies in light of Windsor and broadened its coverage beginning in September for benefits like health care, housing allowance and family separation allowance.

In its first statement on the issue, the Department of Health and Human Services recently released a memo clarifying one aspect of coverage as applied to same-sex couples. The Medicare Advantage plan entitles Medicare beneficiaries to care in the same skilled nursing facility where their spouse resides.

Previously, same-sex spouses did not qualify for this benefit and had to either disenroll from the Advantage plan and pay out of pocket to live in the same nursing home as their spouse or live in a separate facility.

The HHS memo makes clear that the Advantage program now applies to same-sex spouses — regardless of the state in which they reside — and took immediate effect as of Aug. 29.

While the memo only addresses one specific aspect of Medicare coverage, the memo could be an indication that, similar to the IRS, HHS intends to recognize the state of marriage celebration rather than the state of residence for all purposes.

One outlier to the wave of federal recognition of same-sex couples: the Social Security Administration.

A recently updated operations manual advising eligibility workers about how to make a determination as to whether a claimant is eligible for benefits recognizes validly married same-sex couples that also reside in a jurisdiction that recognizes same-sex marriage — i.e., California, Connecticut, Delaware, Iowa, Maine, Maryland, Massachusetts, Minnesota, New Hampshire, New York, Rhode Island, Vermont, Washington and Washington, D.C.

However, claims for legally married same-sex couples now living in states where their marriage is not recognized are to be held pending further guidance from the Administration, Payne explained. The SSA noted that it is “working with the Department of Justice to interpret the Windsor decision,” and will continue to update its policies and procedures.

The Administration has not taken a formal position, instead “holding” claims for the time being, so the agency could still select celebration state or state of residence.

‘Their day in court’

The Supreme Court’s decision will also likely be front and center on Oct. 1, when a Michigan federal court will consider the legality of the state’s constitutional ban on same-sex marriage.

Jayne Rowse and April DeBoer’s original 2012 complaint challenged the state’s law prohibiting same-sex couples from jointly adopting each other’s children; it was expanded to include the constitutional amendment last year.

U.S. District Judge Bernard Friedman denied the state’s motion to dismiss in July, stating that the plaintiffs are “entitled to their day in court and they shall have it.”

He scheduled that day for Oct. 1, when oral arguments will begin.


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