Since the Windsor case struck DOMA down, there has been a lot of debate over which marriages should count for federal purposes. Some federal statutes provide possible answers to that question. For example, the Social Security laws provide that if you are legally married in your state of domicile at the time you apply for benefits, then you are sufficiently married to receive spousal social security benefits. If you later move to a state that does not recognize your marriage, there is nothing in the law that will strip you of those spousal benefits.
But what rules should apply to determine marital status year by year under federal tax law? For example, if you are legally married in the state in which you celebrated your marriage, can you lose that marital status for federal tax purposes once you cross the state line into a nonrecognition state? Many pundits are construing the Windsor opinion to say that the only marriages that will be recognized for federal tax purposes are those of taxpayers who reside in recognition states. According to these pundits, the couple who marries in Massachusetts and then moves to Georgia (or who already lives in Georgia but marries in Massachusetts on a weekend visit) is not really married for federal tax purposes.
Wait a minute! There is nothing in Justice Kennedy’s opinion to suggest the result these pundits have adopted. Kennedy says state law should control, but nowhere does he say which state law should control. It is true that Windsor was a case involving a marriage recognized by the state of domicile of the taxpayer. And, it is also true, that its holding should be limited to that fact situation. A case decides no more than the specific fact situation in front of it. Every good lawyer knows that.
Whether or not the Georgia couple with the Massachusetts marriage is married for federal tax purposes is a new and different question beyond Windsor. We don’t yet know the answer to that question. And we won’t know the answer until the federal government or a court finally decides the issue. However, until we know the answer for sure, it is worth noting that there are many good reasons to support an answer that favors federal recognition of the Georgia couple’s Massachusetts marriage.
First of all they are really married in the United States, whether or not Georgia elects to treat them as married for purposes of state law. Neither partner is free to marry another spouse until their marriage is dissolved. At any time either spouse could establish residence in a recognition state and sue for divorce, thereby subjecting the couple to property division and spousal support laws that are imposed on all married couples. Some recognition states, having learned about the problem that same-sex married couples who want to divorce face in states that will not recognize their marriages – not even long enough to grant them a divorce – have adopted statutes that allow the couple to divorce in the recognition state (e.g., California) without having to come back and establish residency. In such a case, why should Georgia law determine federal tax liability when California law recognizes the marriage and will grant any requested divorce even though the couple is living in Georgia?
Some people have complained that being married at the federal level but not at the state level would create an unworkable situation for filing state income taxes. The problem arises because state income taxes are typically based on federal tax returns. States, in effect, piggyback on the federal tax rules so that the starting point for calculating state income tax liability is the computation of one’s federal adjusted gross income. How in the world can a taxpayer compute state income tax liability as a single person if the federal tax liability is computed as a married person on a joint return?
The situation does create a hassle, but it is not unworkable. After all, married same-sex couples in Massachusetts have been dealing with this sort of problem since 2004. California Registered Domestic Partners (and later spouses) have similarly dealt with a similar problem since 2007. And before DOMA fell, taxpayers in other marriage states, e.g, Connecticut and New York, have all dealt with the problem of non-uniformity – i.e., the fact that state and federal tax filings required different statuses.
If the new rule were to require all legally married couples, wherever they reside, to file joint returns at the federal level, that would merely mean that states that wanted to continue to require such couples to file as single would have to adopt rules to accomplish that result. States like Massachusetts and California cared enough about equality at the state level to devise a method that would allow same-sex couples to file jointly in the same way that all other married couples were able to file. These states merely required each couple to fill out a mock federal joint return that would serve as the basis of the state joint return. Presumably, any state that cares enough about inequality at the state level would simply create a similar solution requiring couples to file mock single returns at the federal level.
There are a number of good reasons for the IRS to adopt a state of celebration choice of law rule for the application of federal tax law. Not only are couples who are legally married in the state of celebration really married, such a rule would tax them consistently year after year. Imagine a system in which a couple could elect to move to a non-recognition state to avoid the spousal anti-abuse rules during one tax year and then move back to a recognition state for the next year. And what rule should apply to a married couple living in a non-recognition state that then turns into a recognition state halfway through a tax year? Is that couple married for the entire year or only for the period of time that the marriage was recognized? A place of celebration rule would avoid these issues.
In addition, the rule would be clear. The IRS would not have to delve into the intricacies of each state’s law on marriage recognition and it would not have to keep up with the ever changing landscape. It would have to be able to determine that there was a legal marriage. But that is a one-time determination and not a year by year one.
States that are opposed to same-sex marriage can continue to impose discrimination against same-sex couples at the state level – at least until such discrimination is ruled unconstitutional. Just because the federal government recognizes the marriage, it does not mean that a state must do the same. You may not be married in Georgia or Florida or Texas, but you are married in the United States of America. And I believe that is the only concern that the IRS should have: the creation of a uniform rule across the United States that will treat all committed same-sex couples who marry the same.