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Same Sex Marriage Defined by IRS

Just before Labor Day weekend, the U.S. Department of Treasury and the Internal Revenue Service (IRS) released final regulations amending the definitions of “marriage” and “husband and wife” in the wake of the Supreme Court’s Obergefell v. Hodges decision, which legalized same-sex marriage, and the Windsor v. U.S. decision, which struck down Section 3 of the Defense of Marriage Act (DOMA). The proposed regulations, issued in October 2015, were followed by several comments and a request for a public hearing (at which the requestor did not attend, and at which no one else asked to speak). The comments prompted minor refinements to the proposed rules, with the final regulations providing the following:

  • For federal tax purposes, the terms “spouse,” “husband,” and “wife” are defined as an individual lawfully married to another individual. These terms do not include individuals who have entered into a registered domestic partnership, civil union, or other similar relationship if that relationship is not denominated as marriage under applicable law in the jurisdiction in which the relationship was entered into (regardless of where the couple lives (i.e., domicile)).

  • “Husband and wife” is defined as two individuals lawfully married to each other.

The definitions set forth above apply regardless of the taxpayers’ sexes or genders.

Building off of Revenue Ruling 2013-17, which adopted the “place of celebration” rule over the “place of domicile” rule for purposes of determining the validity of a same-sex marriage, the final regulations further provide:

  • A marriage between two individuals entered into in, and recognized by, any state, possession, or territory of the United States will be treated as a marriage for federal tax purposes (regardless of the married couple’s place of domicile). This standard applies regardless of the term used in the Internal Revenue Code.

  • Foreign marriages are discussed separately from domestic marriages to ensure clarity on how these foreign marriages are to be treated. Under the foreign marriage rule, two individuals entering into a relationship denominated as marriage under the laws of a foreign jurisdiction are married for federal tax purposes if the relationship would be recognized as marriage under the laws of at least one state, possession, or territory of the United States. Under this construction, it is sufficient for a couple who is married outside the United States to be treated as married for federal tax purposes in the United States if a single jurisdiction would recognize them as married; thus, a review of all pertinent laws of a state or territory within the United States will not be required.

Notably, the IRS declined to adopt certain suggestions submitted by commentators, including:

  • That the regulations specifically reference “same-sex marriage” such that they would be gender-neutral and to avoid any potential issues of interpretation. The IRS reasoned that the regulations were clear and did not present any potential for confusion; further, adopting this comment was deemed to potentially undermine the goal of eliminating distinctions in federal tax law based on gender.

  • That the regulations clarify that common-law marriages of same-sex couples will be recognized for federal tax purposes. While the statutes of certain states recognizing common law marriages only do so for opposite-sex couples, the Treasury and IRS opined that the Supreme Court’s holdings, coupled with prior IRS guidance, make clear that common law marriages are valid, lawful marriages for federal tax purposes. While the agencies did acknowledge that some states had laws “on the books” prohibiting same-sex marriage (including some states that allow common law marriage), since the government was “unaware” of any state enforcing those statutes or otherwise prohibiting same-sex couples from entering into common law marriages, the Treasury and IRS declined to make any further clarifications on this issue.

While employers who sponsor benefit plans should have already modified their plans and procedures to come into compliance with Obergefell, Windsor, and Revenue Ruling 2013-17, the finalization of these regulations brings refinements to the rules that should be captured by those working with benefit plans. For example, how are foreign marriages treated for imputation of income in a group health plan setting? In addition, how are same-sex common law marriages reviewed under the qualified plan joint and survivor rules? A careful review of the final regulations’ definitions as compared to current plan documents and administrative practices is recommended.

©2023 MICHAEL BEST & FRIEDRICH LLPNational Law Review, Volume VI, Number 258

About this Author

Jorge Leon, Michael Best Law Firm, Labor and Employee Benefits Attorney
Partner, Diversity and Inclusion Committee Chair

Plan sponsors, administrators, fiduciaries, and third-party recordkeepers turn to Jorge for strategic counsel on designing, establishing, and maintaining retirement plans. Clients laud his responsiveness and meticulous approach to matters ranging from plan establishment and design to government investigations and inquiries, ongoing compliance and qualification, ERISA litigation, and mergers and acquisitions.

Before joining Michael Best, Jorge practiced for 15 years at a premiere Chicago-based AmLaw 100 firm,...