IRS Announcement Regarding Windsor Same-Sex Marriage Decision
Let’s hear it for the IRS. Yes, you heard right: Why? Because the IRS promised a quick response to address the confusion after the Supreme Court’s June 2013 Windsor decision, which struck down The Defense of Marriage Act. The IRS proved good on its promise on August 29th, when it issued Revenue Ruling 2013-17, stating that it will recognize same-sex marriages for all federal tax purposes regardless of where the couple lives, as long as the couple was married in a jurisdiction that recognizes such marriages. For example, a gay couple legally married in New York that now lives in Virginia or Florida (states that do not recognize such marriages), will receive the same federal tax treatment as heterosexual couples. In the estate world, this is important for marital deduction purposes.
Broadly speaking, Ruling 2013-17 creates certainty in federal tax law for same-sex couples. When the Supreme Court concluded it was unconstitutional to define "marriage" for federal tax purposes as only between a man and a woman, the decision clearly applied to same-sex couples married and living in a state that recognizes such marriages. However, it was unclear whether Windsor applied to same-sex couples living in a state that does not recognize same-sex marriage. Thus, there was uncertainty from state to state. As Treasury Secretary Jacob Lew stated, "This ruling also assures legally married same-sex couples that they can move freely throughout the country knowing that their federal filing status will not change."
The ruling does not apply to non-legal marriages, such as domestic partnerships or civil unions. There will be additional questions and situations where IRS guidance will be required, such as for employers and the effect on payroll taxes and health and fringe benefits. But the IRS provided answers to the major questions last week, and it should be commended for its quick and appropriate response.