estate planninglegal analysismarriage equality

The IRS Recognizes Your Marriage Even if Your State Won’t

By September 4, 2013No Comments

Last week, in the wake of Windsor v. U.S., the IRS issued Revenue Ruling 2013-17. A Revenue Ruling, or “Rev. Rule,” is similar to a court opinion; it’s just IRS law instead of case law. Thus, Rev. Rule 2013-17 mandated equal tax treatment for all lawfully married same-sex couples in ALL of the United States of America.

Relationship Rings

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As discussed here previously, in Windsor, the Supreme Court struck down Section 3 of the so-called Defense of Marriage Act (DOMA), which provided that the definition of marriage for purposes of rules, regulations, and laws promulgated through the federal government was the legal union of one man and one woman as husband and wife. The Windsor decision was a great step forward in ending discrimination against a segment of the U.S. population; however the decision was incomplete because it left standing DOMA’s Section 2 that provides that states do not have to recognize same-sex marriages. As a result, Windsor v. U.S. left an even messier patchwork of laws for states and the federal government to wrestle with in regards to marriage equality.

The question in Windsor was whether the IRS wrongfully denied issuing an estate tax refund requested by the surviving spouse of a married same-sex couple. The IRS lost in the lower court and SCOTUS affirmed that court’s decision by striking Section 3. Having not prevailed, the IRS then had to determine how to comply with the Court Order.

Had the IRS decided that tax return filings were to be based on domicile, then it would have been aligned with Section 2 of DOMA. Same-sex married couples residing in “unfriendly” states would have had to ignore the fact that they were legally married and file as “single.” So the IRS could still have chosen a less than friendly route for same-sex marrieds. However, recognizing the spirit of Windsor, Rev. Rule 2013-17 mandated equal treatment of married same-sex couples by basing the filing of returns on place of solemnization:

“For Federal tax purposes, the [IRS] adopts a general rule recognizing a marriage of same-sex individuals that was validly entered into in a state whose laws authorize the marriage of two individuals o the same sex even if the married couple is domiciled in a state that does not recognize the validity of that same-sex marriage.” (Emphasis added.)

What exactly does this mean overall? It means that lawfully married same-sex couples can live in unfriendly states and file taxes for the federal government using “married filing jointly” or “married filing separately.” Unfortunately, they still must abide by state tax return rules but at least they don’t have to move.

What does this mean for same-sex couples in Illinois?

  1. If you were legally married elsewhere, e.g., Iowa, but reside in Illinois, you can file federal and state taxes using your legal relationship status and file “married filing jointly” or “married filing separately.”
  2. If you are in a Civil Union, you can’t file your federal taxes as a married couple but you can file your state taxes as a married couple. Agreed: Illinois needs to get with the program and provide marriage equality.

Summarily? While SCOTUS purportedly left the issue of validating same-sex marriage to the states, at least some federal agencies, such as the IRS, that actually must perform the work SCOTUS decisions create, recognize the “United” in U.S.A. and are willing to pass laws accordingly.

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