The case, Windsor v. United States, will be handed down by the Supreme Court sometime in the next 6 weeks. At that time we will know whether or not DOMA remains good law. Discussions about the Windsor case and its likely aftermath occur frequently and often. There were numerous discussions of the case at the recent ABA Tax Meeting in D.C.

 

On Friday, May 10, at the May meeting, I participated on a panel, sponsored by the Diversity Committee, discussing life before and after the Windsor case. The panel was coordinated by Laura Westfall (King & Spalding). Other panelists were Aaron Tax (SAGE), Eric San Juan (Office of the National Taxpayer Advocate), and Shawn Newman (private practice, Wilton Manors, Florida). The discussion was a lively one. Here are some of the key points.

 

Same-sex couples are treated in many different ways by federal tax law. In recognition states, couples whose relationships are recognized have access to a handful of tax rules that rely on state marital property laws and family law rules. In non-recognition states, couples are treated as strangers. In community property recognition states, couples are treated differently from same-sex couples in non-community property states. These differences are important to note since one of the prime justifications for DOMA is that it was intended to treat all same-sex couples alike – that is the “uniformity” argument. But truth is, it is impossible to treat all same-sex couples alike absent a substantive federal rule that says how they should be treated.  We don’t have substantive federal rules on property rights and family relationships (other than non-recognition of same-sex marriages). Instead, federal tax law relies heavily on state law to fill in the blanks about who owns what and who is related to whom.

 

Nor do we have uniform federal tax treatment for opposite-sex married couples. There is much more uniformity now that we have joint returns and Section 1041 (property divisions at divorce). But so long as federal tax law honors state property and family law, it is impossible to create true uniformity.

 

On our panel, Aaron Tax (who ironically is not a tax person) stressed the plight of LGBT elders. Failure to recognize their relationships burdens those in need of social security to support their families. Furthermore, the rules regarding social security and medicare and who is eligible for what are very confusing. Service providers and advisers are not always expert on how these rules apply to same-sex couples. The lack of clarity sometimes results in bad advice which can penalize needy LGBT elders even more.  

 

Shawn Newman explained how much planning it takes to protect the rights of couples whose relationships are not recognized at all even though they might live for decades in intimate and committed relationships. He represents many such couples in the state of Florida, a non-recognition state. And a huge question is hanging out there: if DOMA falls what law is applied to the couple married in Massachusetts but now living in Florida?

 

Eric San Juan reminded us of the important work the Taxpayer Advocate has done on these issues by addressing them in her reports to Congress. He stressed the fact that we will need guidance from the IRS in the event the Supreme Court strikes down DOMA. We are all hopeful that the Taxpayer Advocate will press IRS personnel to provide that guidance as quickly as possible.

 

We all made predictions about what was likely to happen in Windsor. About the only sure prediction we had was that the decision would be handed down in very late June. But the discussion among the tax professionals in the room indicated that there are many that believe it is likely that the Court will strike DOMA down.

 

That, of course, is only the first step in figuring out how the IRS will tax all same-sex couples in the future. For an updated version of the CLE outline for this panel see here.

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