The Treasury and the IRS will now apply the "place of celebration" rule in recognizing same-sex marriages, consistent with opposite-sex marriages.
On August 29, 2013, the U.S. Department of the Treasury and the Internal Revenue Service (IRS) issued Revenue Ruling 2013-17, declaring that same-sex couples legally married in a jurisdiction that recognizes same-sex marriage will be recognized as married for all federal tax purposes, regardless of where the couple resides. The Treasury and the IRS will now apply the "place of celebration" rule in recognizing same-sex marriages, consistent with opposite-sex marriages. That means that as long as the marriage was valid in the jurisdiction in which it occurred, the same-sex couple will be recognized as married under the federal tax laws, even if the couple lives in a state that bans same-sex marriage.
In the wake of the Supreme Court decision in U.S. v. Windsor, which struck down as unconstitutional the provisions of the Defense of Marriage Act (DOMA) that denied federal recognition of legally married same-sex couples, it was unclear whether same-sex couples legally married in one state (such as New York) would be considered married if they resided in a state that bans same-sex marriage, such as Florida or Pennsylvania. The ruling provides certainty that legally married same-sex couples, regardless of where they live, may now file their federal income tax returns as "married filing jointly" or "married filing separately," as well as claim other benefits where marriage is a factor.
The ruling is retroactive, allowing married same-sex couples to file original or amended returns to elect married status for federal tax purposes for one or more prior tax years still open under the statute of limitations. Given that the statute of limitations for filing a refund claim is three years from the date the return was filed or two years from the date the tax was paid, whichever is later, same-sex couples who were legally married before 2013 may file refund claims for tax years 2010, 2011 and 2012. Employees who purchased same-sex spouse health insurance coverage from their employer on an after-tax basis may amend their tax return to treat the amounts paid for that coverage as pre-tax and excludable from their gross income. Similarly, employees may exclude from gross income certain employer contributions to employer benefit plans and other fringe benefits. As in the circumstances of the Windsor case, surviving spouses of same-sex marriages are entitled to the federal marital deduction on qualifying transfers of estate assets for their benefit. Some taxpayers may have special circumstances, such as a protective claim filing or an agreement with the IRS to keep the statute of limitations open, that permit them to file refund claims for tax years 2009 and earlier.
In addition to the significant news from the Treasury and the IRS, the Department of Health and Human Services (HHS) ruled on August 29, 2013, that legally married same-sex couples, wherever they live, are eligible for certain Medicare benefits reserved for married couples. In its memo, HHS specifically clarified that all beneficiaries in private Medicare plans have access to equal coverage when it comes to care in a nursing home where their spouse lives, including legally married same-sex couples.
Revenue Ruling 2013-17, however, does not apply to registered domestic partnerships, civil unions or similar formal relationships that are not regarded as a marriage under that state or foreign law. The Social Security Administration continues to deny spousal benefits to same-sex couples living in states where such marriages are not recognized.
For Further Information
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[To learn more about how this IRS Revenue Ruling impacts employers and employee benefit plans, please see our Employment, Labor, Benefits and Immigration practice's Alert, which addresses these issues in greater detail.]
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