DOMA decision and IRS guidance change tax landscape for same-sex spouses.

• Author: Brown, Mark
• Position: Defense of Marriage Act of 1996

On June 26, the U.S. Supreme Court held 5-4 that Section 3 of the Defense of Marriage Act (DOMA), P.L. 104-199, is unconstitutional. The decision requires the federal government to recognize as married same-sex couples who are legally married under state law.

While the Court did not explicitly rule on any tax issues beyond the eligibility of a same-sex surviving spouse to claim a marital estate tax deduction, the decision results in significant changes to a broad range of federal tax laws for same-sex couples. Since these marriages are now recognized by the federal government, same-sex married couples will be granted additional rights and protections previously available only to opposite-sex married couples. The most significant of these new rights and protections involve federal income tax, estate and gift tax, and employee benefits.

Background

DOMA was passed in 1996 by Congress and signed into law by President Bill Clinton. Section 3 of DOMA defined marriage as a legal union between one man and one woman. Consequently, same-sex marriages have not been recognized for federal purposes.

Section 3 of DOMA was challenged in Windsor, No. 12-307 (U.S. 6/26/13), a case that dealt with the estate tax marital deduction set forth in Sec. 2056(a). Edith Windsor and Thea Spyer were a same-sex couple from New York state who were married in Canada in 2007. New York did not permit same-sex marriages at the time, but the state recognized same-sex marriages if they were valid where performed. (New York state gave full legal recognition to same-sex marriages in 2011.) In 2009, Thea Spyer died and left her estate to Windsor. The estate did not qualify for the marital deduction under Sec. 2056 (a) because the marriage was not valid under federal law. Without the marital deduction, Spyer's estate paid $363,053 in federal estate tax.

Windsor sued the federal government, arguing that Section 3 of DOMA was unconstitutional. After she prevailed in a district court and the Second Circuit, the case was heard by the Supreme Court.

In ruling Section 3 of DOMA unconstitutional, the Court ordered the federal government to recognize same-sex marriages if a state recognizes them. At this writing, 13 states (California, Connecticut, Delaware, Iowa, Maine, Maryland, Massachusetts, Minnesota, New Hampshire, New York, Rhode Island, Vermont, and Washington) and the District of Columbia recognize same-sex marriages.

Broad Federal Tax Implications

Same-sex married couples...