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April 23, 2014

Federal Tax Treatment of Married Same-Sex Couples

On August 29, 2013, the Internal Revenue Service ruled that married same-sex couples will be treated the same as married heterosexual couples for all federal tax purposes, including income and gift and estate taxes. Revenue Ruling 2013-17 applies to all federal tax provisions where marriage is a factor, which includes filing status, personal and dependency exemptions, the standard deduction, employee benefits, IRA contributions, the earned income tax credit, and child tax credit. This ruling was issued in response to the Supreme Court’s decision in United States v. Windsor earlier this year, which held that a portion of the Defense of Marriage Act was unconstitutional.

In keeping with a longstanding policy regarding marriages, the IRS also ruled that if a same-sex marriage is valid in the state where entered into, it will be recognized by the IRS as valid regardless of whether the marriage is recognized by the state in which the couple resides. This means that same-sex couples who are lawfully married, but reside in a state that does not recognize same-sex marriage, will be treated as married for federal tax purposes, but likely will not for state tax purposes.

The ruling applies only to couples who are married. It does not apply to registered domestic partnerships, civil unions, or similar relationships recognized under various state laws.

This ruling will be applied prospectively beginning September 16, 2013. Additionally, affected taxpayers may, but are not required to, file amended returns to elect to be treated as married for federal tax purposes for prior years which are still open under the statute of limitations. Generally, 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. Consequently, same-sex couples who were married in those years and could see a tax benefit can file refund claims for tax years 2010, 2011 and 2012.

Not all issues raised by the Supreme Court’s decision in Windsor are addressed in this ruling. In particular, the ruling recognizes that additional guidance is needed on the retroactive application of Windsor.

IRS Circular 230 Notice

Internal Revenue Service regulations state that only a formal opinion that meets specific requirements can be used to avoid tax penalties. Any tax advice in this communication is not intended or written to be used, and cannot be used by a taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer, because it does not meet the requirements of a formal opinion.

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About the Author

Christopher J. Anderson, Trusts & Estates Attorney, Armstrong Teasdale law firm
Partner

For more than 35 years, Chris Anderson has been protecting his clients’ assets and their legacies. As leader of the Trusts and Estates practice in the Kansas City office, he provides counsel in the areas of estate planning, taxation, corporate matters and charitable organizations.

816-472-3117

About the Author

Dan Cooper, Corporate Services Attorney, Armstrong Teasdale, Law firm
Associate

Dan Cooper is a member of the Corporate Services Group concentrating in the areas of tax, public finance, acquisitions and general corporate transactions.

For individuals and businesses, Dan aids with various federal and state income, sales, and employment tax issues. Nonprofit organizations, in particular, look to him for assistance in filing the necessary paperwork with the IRS when applying for Section 501(c)(3) tax-exempt status. Dan also provides counsel in the closing of merger and acquisition transactions, formation and succession planning.

314-259-4715
Scott Hunt, Tax attorney, Armstrong Teasdale, law firm
Partner

A member of the firm’s Tax practice group, Scott Hunt handles matters relating to employee benefit and exempt organizations issues.

In the heavily regulated and constantly evolving field of employee benefits law, Scott monitors and analyzes all new legislation and regulations. He regularly designs stock option plans, phantom or restricted stocks, bonuses and various other types of incentive compensation plans and arrangements and advises with respect to tax, securities and corporate law issues that arise in connection with the establishment and administration of such plans....

314-342-4145

About the Author

John Igoe, Tax, Employee Benefits, Trusts, Estates, Attorney, Armstrong Teasdale
Partner

As a member of the Tax, Employee Benefits and Trusts and Estates practice group since 1986, Jon Igoe guides individuals in the creation and administration of trusts and estates and in connection with closely-held businesses. He also handles guardianships, conservatorships and employee benefits issues involving health care plans.

314-342-8019

About the Author

Of Counsel

Jill Palmquist specializes in estate planning and works closely with her clients to protect their families and wealth during transitional times such as illness, disability and death utilizing instruments such as powers of attorney, wills, revocable trusts, irrevocable trusts (including irrevocable life insurance trusts, irrevocable grantor trusts and charitable trusts) and limited partnerships. She has experience in dealing with special assets such as closely held stock, 401(k) plans, traditional and ROTH IRAs, Section 529 Plans; and in working with situations requiring extra...

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