DOMA Falls

By on June 26, 2013 3:52 pm
Same Sex Tax

Today the United States Supreme Court ruled 5/4 that DOMA is unconstitutional. In the case, Windsor v. United States, a majority of the Court clearly struck down DOMA on its face and not just as applied to Edie Windsor. She will get her estate tax refund for sure. But questions continue to mount for other married couples across the country.

One of the most piercing questions is: who will count as married for federal purposes? And, as it turns out, the answer to that question might vary from agency to agency. The Social Security Administration, for example, has some pretty specific statutory rules regarding that question. If you are married and living in a state that recognizes your marriage when you apply for social security benefits, you are entitled to receive spousal benefits. Over time, the INS has applied a rule that determines the validity of the marriage by looking to the state of celebration. If the marriage was valid in the state of celebration, then it is valid in the eyes of the INS. The Court of Appeals for the Ninth Circuit announced that rule in a gay rights case from the 1980s in which an American citizen and his foreign-born boyfriend had managed to obtain a marriage license from a County Clerk in Boulder Colorado. But because Colorado did not recognize the marriage, the court ruled that the marriage was not valid. Only Colorado law was relevant under the place of celebration rule.

What should be the rule for federal tax law? That’s a good question. I have long wondered about the special tax rules that apply to married couples.  The joint return, with its penalty versus bonus rates, and its joint and several liability rules, does not make a lot of sense to me. Yes, many married couples operate as a single economic unit and so maybe we need to have some anti-abuse rules that prevent such couples from manufacturing losses  within the economic unit. But not all spouses operate as a single economic unit. Some non-spousal couples do. And while I understand the argument for taxing married couples at higher rates based on their combined income — because after all two can live more cheaply than one – it is also true that taxpayers have very free choices these days about whether they live alone or together, as well as whether they get married or not. While I think marriage could be relevant to tax policy, I am not convinced that it is the bright line we have made it in our current tax policy. Perhaps the outcome in the Windsor opinion will encourage us to rethink the role of marriage in measuring income tax liability.

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3 comments on “DOMA Falls
  1. Elsa says:

    I cannot agree with you more. Yesterday was a historic day as one more blatant discrimination has been made illegal in the 13 states where marriage is now legal. It is a good day for all Americans and the human race as we are making progress towards lesser discriminations and intolerance.

  2. David Holmstrom says:

    There’s been a lot of speculation in the media about what happens when a couple marries in one state and moves to another where the marriage is not recognized. The NY Times etc keep saying that the IRS follows state law. I think that’s correct with regard to divorce, but not to marriage once they are married. I haven’t been able to find a citation for this in the IRC, but the instructions for Form 1040 say that you can only file as single if you were never married, are widowed and have not remarried, or if you are legally divorced according to state law. That seems pretty clear to me. There may be other tax rules that rely on state law, but as far as I can tell, once married, you are married until divorced or widowed. Any comments?
    Do you happen to know how the IRS treats common law marriage? If a couple’s common law marriage is celebrated in a state that recognizes it (ie they start filing MFJ) and then they move to a state that does not recognize common law marriage, does the IRS force them to file as single?

    David Holmstrom, EA dhtax@pobox.com

  3. James BIgelow says:

    Where will we look to for guidance on the possibility of recovering taxes paid for 2010, 2011, 2012 for imputed income from health insurance? This is a case where my partner and I filed for RDP in June 2010 in the absence of the marriage option due to Prop *.

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