Paul L. Caron

Wednesday, August 7, 2013

CRS: The Federal Tax Implications of United States v. Windsor

CRS LogoCongressional Research Service, The Potential Federal Tax Implications of United States v. Windsor (Striking Section 3 of the Defense of Marriage Act (DOMA)): Selected Issues (R43157):

This report will provide an overview of the potential federal tax implications for same-sex married couples of the U.S. Supreme Court (SCOTUS) ruling in United States v. Windsor, with a focus on the federal income tax. Estate tax issues are also discussed. Importantly, this report focuses on changes in the interpretation and administration of federal tax law that may result from the SCOTUS decision. This decision did not amend federal tax law. This report is not intended to address all tax-related issues that may arise as a result of the Windsor decision. Such discussion is beyond the scope of this report. 

(Hat Tip: Bruce Bartlett.)

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As Anthony Infanti writes, "Although the federal government can recognize same-sex marriages even when a state refuses to do so, under current tax law it can’t treat a couple as unmarried without state sanction. " My colleague who prepares many returns for same-sex couples has clients who confront this dilemma. For example, " Client lives in an Eastern state that just enacted gay marriage, and now recognizes those entered in other states. He married his ex in MA the year that MA recognized gay marriage, broke up shortly thereafter, and has no idea where partner is now. Never lived in MA."

IRS should provide an "opt-in" choice for same-sex marriages that preceded the Windsor decision, allowing couples to make a one-time election to choose whether for all federal tax purposes they are married. Academics should be pointing them in this direction.

Posted by: Bob | Aug 7, 2013 11:11:28 AM

The case Bob describes is interesting. The couple "broke up," he says. Did they get a divorce? If not, are they not still married? If so, don't each of them have to file as married filing separately?

Posted by: eli bortman | Aug 8, 2013 4:55:36 AM

The details of this case came from another practitioner, but the pattern is familiar: A same-sex couple, residents of State A, which does not allow same-sex marriage and whose courts do not permit same-sex divorce, travel to State B which permits such marriages, even for nonresidents, but may limit divorce-court access to residents only. For years, there was no tax consequence and the end of the relationship went just as unrecognized by DOMA as its beginning. One or both of the couple may have moved on to States C and D. Should IRS now force them to recognize a marriage, that IRS was forbidden to recognize for half a decade?

Posted by: Bob | Aug 8, 2013 11:01:29 AM