Category Archives: Defense of Marriage Act

Roundup of DOMA Guidance re: Benefit Plans

The Internal Revenue Service and Department of Labor have in recent months issued initial guidance to employers on the benefit plan consequences of the U.S. Supreme Court’s June 2013 decision in U.S. v. Windsor, 133 S.Ct. 2675 (2013), which ruled Section 3 of the federal Defense of Marriage Act (“DOMA”) to be unconstitutional on equal protection grounds.  That now defunct DOMA provision limited the federal law definitions of “marriage” and “spouse” to refer only to unions between members of the opposite sex.

The recent guidance, which I summarize below (and have separately addressed in earlier posts), represents early stages in the process of fully implementing the US v. Windsor holding within ERISA’s extensive compliance regime.  Please note that this post focuses on the federal tax consequences of same-sex benefits; state taxation of such benefits, and those provided to domestic partners, depends upon the revenue and taxation laws of each state.

IRS and DOL Adopt “State of Celebration” Rule

In U.S. v. Windsor the Supreme Court held that federal law will recognize all “lawful marriages” between members of the same sex, but left open the question of which state’s law will determine whether a same-sex marriage is lawful:  the state of domicile (where the married couple lives), or the state of “celebration” (where the marriage took place).

This is an important question because the Supreme Court decision left intact Section 2 of DOMA, under which a state, territory or Indian tribe need not give effect to another state’s laws regarding same-sex marriage.  The “state of domicile” rule, if it determined whether or not a same-sex couple was legally married, could cause benefits chaos.  For instance, an employer with operations in multiple states would be required to track where each employee in a same-sex relationship lived, and possibly modify their benefit offerings if they moved from a state that recognizes same-sex marriage, to a “non-recognition” state.

Note:  As of the date of this post, the District of Columbia and 14 states recognize same-sex marriage: California (since June 28, 2013, also prior to November 5, 2008); Connecticut; Delaware (eff. 7/1/2013); Iowa; Maine; Maryland; Massachusetts; Minnesota (eff. Aug. 1, 2013); New Hampshire; New Jersey (eff. October 21, 2013); New York; Rhode Island (eff. Aug. 1, 2013); Vermont; and Washington.  (Follow updates to this list here.)

The U.S. v. Windsor ruling also gave rise to some confusion over the status, under federal law, of domestic partnerships, civil unions, and other formalized same-sex relationships that fall short of marriage.

Fortunately, both the IRS and the DOL have resolved these issues in separate guidance released in September 2013.

Specifically, in Revenue Ruling 2013-17, the IRS announced that:

  • The IRS will recognize, as a legal marriage for all federal tax purposes, a marriage of same-sex individuals that was validly entered into in a domestic or foreign jurisdiction that recognizes same sex marriage, regardless of where the couple lives.
  • Under federal tax law, the terms “husband,” “wife,” “husband and wife,” “marriage” and “spouse” includes lawful same-sex marriages and individuals in such marriages.
  • “Marriage” for federal tax purposes does NOT include domestic partnerships, civil unions, or other formal relationships falling short of marriage.

To reach these conclusions the IRS invoked a prior Revenue Ruling from 1958 (Rev. Rul. 58-66) that held that individuals who became common-law spouses under state law were entitled to be treated as legally married spouses for federal income tax purposes regardless of where they later resided.

The DOL also adopted the “state of celebration” rule for purposes of defining same-sex marriage under ERISA benefit plans, including retirement plans, in Technical Release 2013-14.  In this guidance, published September 18, 2013, the DOL also specifies that the terms “spouse” and “marriage,” for ERISA purposes, do not include domestic partnerships or civil unions, whether between members of the same sex or opposite sex, regardless of the standing such relationships have under state law.

The IRS ruling takes effect September 16, 2013 on a prospective basis.  The DOL Technical Release should be treated as effective immediately on a prospective basis.  The DOL will issue further guidance explaining any retroactive application of the U.S. v. Windsor ruling under ERISA, for instance with regard to previously executed beneficiary designations, plan distribution elections, plan loans and hardship distributions.

Other Tax Guidance from Revenue Ruling 2013-17 and FAQs

Revenue Ruling 2013-17 also contains guidance on prospective and retroactive tax filing aissues resulting from the U.S. v. Windsor decision, including refund/credit opportunities.  More specific guidance for taxpayers is set forth in separate IRS FAQs for same-sex married couples, and for couples in registered domestic partnerships.

In order to understand  the tax refund/credit procedures it is helpful first to review the federal tax consequences of providing employment benefits to same-sex spouses while Section 3 of DOMA remained in effect.

Through Internal Revenue Code (“Code”) Section 105(b), Federal law has long allowed employers to provide health and other benefits on a tax-free basis to employees, their opposite-sex spouses and dependents.  However, under DOMA § 3, the same benefits provided to same-sex spouses and other partners generally resulted in “imputed incometo the employee for federal tax purposes, in an amount generally equal to the value of the benefits provided.  Similarly, employees could not use Sec. 125 cafeteria plans to pay premiums for same-sex spouses/partners on a pre-tax basis.  Only in rare instances where the same-sex spouse was a dependent of the employee spouse as a result of disability, did same-sex spousal coverage not result in an additional federal tax burden to the employee spouse.

Note that benefits provided to domestic partners and partner in civil unions are still treated this way for Federal tax purposes.  For benefits provided to employees who are lawfully married to same-sex spouses, however, the new rules effective September 16, 2013 and prospectively are as follows:

  • Individuals in lawful same-sex marriages must file their federal income tax returns for 2013 and subsequent years as either married filing jointly, or married filing separately.
  • Employer-provided benefits provided to an employee’s lawfully-married same-sex spouse are excludable from the employee’s income for federal tax purposes.
  • As a consequence, employers must stop imputing income to employees, for federal tax purposes, based on same-sex spousal benefits, and must adjust affected employees’ Form W-2 income for 2013 to remove imputed income amounts.
  • The tax-qualified benefit plans that are affected are:
    • health, dental and vision coverage;
    • qualified tuition reduction plans maintained by educational organizations;
    • meals and lodging provided to employees on business premises (other specific conditions apply);
    • fringe benefit including qualified transportation fringe benefits, moving expenses, employee discounts, and work-related expenses; and
    • pre-tax participation in Section 125 cafeteria/flex plans, including health flexible spending accounts and dependent care flexible spending accounts.
  • Employees in lawful same-sex marriages can file amended personal income tax returns for “open” tax years (generally 2010, 2011, 2012) to recoup over-withheld federal income taxes resulting from imputed income and after-tax cafeteria plan participation.
  • However, if they re-file, they must re-file as married for all tax purposes, not just to obtain the refund or credit.  In many cases, the income tax adjustment will not warrant the loss of other deductions.  Employees must consult their individual CPAs and other tax advisors for answers; employers must refrain from offering any specific advice or guidance in this regard.

Corrective Payroll/Withholding Steps for 2013 and Prior “Open” Tax Years

IRS Notice 2013-61, published September 23, 2013, sets forth optional, streamlined ways for employers to claim refunds of over-withheld “employment taxes” (FICA and federal income taxes) applied to imputed income/same sex spouse benefits in 2013, and prior “open” tax years.

The “normal” over-withholding correction process – which remains available to employers in this instance – varies slightly depending on whether or not the employer is seeking an adjustment of withholding taxes, or a refund of withholding taxes, but generally includes the following steps:

  • identify the amount of over-withholding;
  • repay the employee’s portion to the employee in cash (or “reimburse” them by applying the overpayment to FICA taxes for current year);
  • obtain written statements from affected employees that they will not also claim a refund of over-withheld FICA taxes, and if an employer is seeking a refund of over-withheld taxes, obtain affected employees’ written consent to the refund; and
  • file IRS Form 941-X for each quarter affected, to recoup the employer portion of the tax.

Notice 2013-61 sets forth two streamlined correction methods permitting use of one single Form 941 or Form 941-X for all of 2013.  Under the first method, the employer takes the following steps before the end of the current year:

  • identify and repay/reimburse employees’ share of excess income tax, FICA tax withholdings resulting from same-sex spousal benefits on or before December 31, 2013; and
  • make corresponding reductions in affected employees’ wage and income-tax withholding amounts on the 4th quarter 2013 Form 941.

The second method is available if the employer does not identify and repay/reimburse employees’ share of excess income tax, FICA tax withholdings until after December 31, 2013.  In that case the employer:

  • Files one single Form 941-X in 2014 seeking reimbursement of employer’s share of tax with regard to imputed income for same-sex spouse benefits reported in all quarters of 2013.
  • In addition to the regular Form 941-X filing requirements, including obtaining written statements and/or consents from employees, employers must write “WINDSOR” at the top of the Form 941-X and must file amended Form W-2s (IRS Form W-2c) for affected employees, reporting the reduced amount of wages subject to FICA withholding.

Note:  This second correction method can apply only to FICA taxes.  Employers cannot make adjustments for overpayments of income tax withholding for a prior tax year unless an administrative error (e.g., wrong entry on Form 941) has occurred.

Employers may also recoup their share of FICA taxes for earlier open tax years (generally, 2010, 2011 and 2012) using one Form 941-X for all four calendar quarters that is filed for the fourth quarter of each affected year.  In addition to marking the Form “WINDSOR” the employer must also file amended Form W-2s for affected employees, reporting the reduced amount of wages subject to FICA withholding.

Employers making use of the correction methods set forth in IRS Notice 2013-61 for 2013 or earlier open years must take account of the Social Security Wage Base in effect for applicable years.  For employees whose 2013 compensation exceeds the taxable wage base ($113,700) even after imputed income is eliminated, no corrections for the Social Security component of FICA taxes can be made.  If retroactive corrections are made, you must observe the SS wage base limitations in effect in prior years:  $106,800 for 2010 & 2011, and $110,100 for 2012.

One final note:  many employers that provide benefits to employees’ domestic partners and/or same sex spouses have followed a practice of grossing up the employees’ taxable compensation to account for the additional federal taxes they must pay on imputed income.  The IRS guidance on recouping over-withheld taxes apply only to imputed income amounts, not to the gross-up amounts.  “Normal” over-withholding correction procedures using Forms 941 and 941-X should apply to 2013 gross-up amounts but employers should consult their payroll and tax advisors for specific advice.  Note also that California recently adopted a law that will exclude gross-up amounts from employees’ taxable compensation for state personal income tax purposes.  AB 362 takes immediate effect and is slated to expire January 1, 2019.  You can find a fuller discussion of the measure here.

Leave a comment

Filed under Cafeteria Plans, Defense of Marriage Act, ERISA, Fringe Benefits, Payroll Issues, Registered Domestic Partner Benefits, Same-Sex Marriage, U.S. v. Windsor

IRS Details Benefit Parity for Same-Sex Spouses

In U.S. v. Windsor, the Supreme Court struck down Section 3 of the Defense of Marriage Act as a violation of the 5th Amendment’s guarantee of equal protection under the law.  Section 3 defined “marriage” and “spouse” for purposes of Federal law as limited to a legal union between one man and one woman as husband and wife.  Elimination of this standard impacts a multitude of Federal laws, and guidance from a number of Federal agencies will be needed before the ruling fully is integrated into the U.S. Code.

Some of the first of that guidance explains Federal tax treatment of same-sex spouses under certain employment benefits plans and arrangements.  The guidance was released on August 29, 2013 by the Treasury Department and the Internal Revenue Service, in the form of Revenue Ruling 2013-17 and two sets of Frequently Asked Questions (FAQs.)  I addressed this guidance briefly in my prior post.  Below I go into more detail on the key compliance points of relevance to employers:

Treatment of Same-Sex Marriage under Federal Tax Law

  • Same-sex marriages lawfully performed in any U.S. state, the District of Columbia, or a foreign county are valid as marriages under Federal tax law, regardless of where the couple reside.
    • This means that employers with operations in states that do not recognize same-sex marriage, such as Texas, must treat same-sex spouses residing in those states equal to opposite-sex spouses for Federal tax purposes, so long as the couple legally was married in a state or other locale that recognizes same-sex marriage.
    • Obviously, equal Federal tax treatment is also required in those states that currently recognize same-sex marriage: California (since June 28, 2013; also some unions prior to November 5, 2008); Connecticut, Delaware (eff. July 1, 2013); Iowa, Maine, Maryland, Massachusetts, Minnesota (eff. Aug. 1, 2013); New Hampshire, New York, Rhode Island (eff. Aug. 1, 2013); Vermont; Washington; District of Columbia.
    • For Federal tax purposes, the terms “spouse,” “husband and wife,” “husband” and “wife” and “marriage” include reference to lawful same-sex marriage as defined above.
    • Registered domestic partnerships, civil unions, or other relationships formalized under state law as something other than marriage are not treated as marriage for Federal tax purposes, whether between same-sex or opposite sex individuals.
      • The Internal Revenue Code (“Code”) permits tax-free treatment of employer-sponsored benefits, including health care, offered to employees, their spouses (now including same-sex spouses) and dependents.  Employer-sponsored benefits provided to individuals not meeting these categories constitutes taxable income to the employee; specifically “imputed” income generally equal to the value of the benefits provided.
      • These rulings take effect September 16, 2013 and subsequent, but have some retroactive effect as described below.

Compliance Point:  As a result of these rulings, employers must identify employees who are in legal same-sex marriages, and, for those employees, adjust income tax withholding, and Social Security and Medicare taxes for 2013, so that the cost of benefits provided to same-sex spouses are treated as excluded from gross income.  Employers must continue to impute income to employees for Federal tax purposes, equal to the value of benefits provided to registered domestic partners, partners in a civil union, and other non-marital relationships, whether same-sex or opposite sex.

Tax Refunds and Credits for Prior “Open” Tax Years

Individuals in Lawful Same-Sex Marriages

  • Individuals in legal same-sex marriages must file their income tax returns for 2013 and subsequent as either “married filing jointly” or “married filing separately.”
  • These individuals may – but are not required to – amend or re-file their income taxes, and claim tax refunds or credits, for all “open” tax years in which they were in a legal same-sex marriage.
    • Generally, for refund or credit purposes a tax return remains “open” for three years from the date the return was filed or two years from the date the taxes reported in the return were paid, whichever is later.
      • For individuals who timely filed their Form 1040 tax returns and paid related taxes by the April deadline each year, returns for 2010, 2011 and 2012 likely remain open, however readers must confirm with their own accountants or other tax advisors which tax years remain open for them.
      • The retroactive tax relief is as follows:
        • As mentioned, individuals in lawful same-sex marriages may re-file their federal tax returns as “married filing jointly,” or “married filing separately,” which was not previously an option under Federal law.
          • Note:  this change in filing status could significantly change the amount of  federal taxes owed and readers must consult with their own accountants or other professional tax advisors about the impact to their own bottom line.
  • Individuals may request a refund of income taxes they paid on “imputed income” resulting from benefits provided to same-sex spouses.  This relief can also take the form of a credit against future income taxes owed.
    • Example:  Alex legally was married to a same-sex spouse for all of 2012.  Alex’s employer offers group health coverage to employees, their spouses and dependents, and pays 50% of the cost of coverage elected by the employee.  The value of the employer-funded portion of coverage for Alex’s spouse was $250 per month.  Alex may file an amended Form 1040 (Form 1040X) for 2012 that reduces gross income by $3,000 ($250 x 12 months) and be refunded the taxes paid on that amount.
    • Employees who paid for their own health coverage with pre-tax dollars under a Code § 125 cafeteria plan have the option of treating after–tax amounts that they paid for same-sex spouse coverage as pre-tax salary reduction amounts.
      • Example:  Alex’s employer sponsors a group health plan under which employees must pay the full cost of spousal and dependent coverage.  However, they may do so with pre-tax dollars under a Section 125 cafeteria plan.  During open enrollment in late 2011 Alex enrolled in self-only coverage for 2012, but she entered into a legal same-sex marriage on March 1, 2012.  Alex enrolled her spouse in health coverage beginning March 1, 2012.  The monthly premiums were $500.  Alex may file an amended Form 1040 (Form 1040X) for 2012 that reduces her gross income by $5,000 ($500 x 10 months).  This puts her in the position she would have been in, had she been able to increase her salary reductions under the cafeteria plan to cover spousal coverage beginning in March 2012.
    • Other benefit plans with regard to which retroactive tax relief is available include qualified scholarships under Code § 117(d), fringe benefits under Code § 132, dependent care benefits under Code § 129, and employer-provided meals or lodging under Code § 119.
    • Note:  individuals who seek a tax refund or credit related to imputed income credited to them in past, open tax years must adjust their tax returns for those years consistent with the tax status (i.e., married filing jointly or separately) that they are claiming with respect to the refund or credit.  In other words, an individual cannot seek a refund of taxes paid for imputed income credited to them in 2012, but retain their status as a single taxpayer for 2012.

Compliance Point:  Employers need to be aware that employees in same-sex marriages may be filing amended returns and seeking tax refunds related to these benefits, and take steps to quantify the imputed income or provide other information to employees to assist in retroactive tax relief.

Employers

  • Retroactive income tax relief is only available to individuals; employers may not seek refunds for overwithheld income taxes in prior years.
  • Employers may seek a refund of Social Security and Medicare taxes paid on imputed income resulting from same-sex coverage, or claim a credit against future taxes owed.
  • The relief is available for “open” tax years which generally are the same as for individual tax returns (3 years from date of filing return or 2 years from date of paying taxes, whichever is later).
    • For purposes of calculating the open period, quarterly Form 941s are treated as if they were all filed on April 15 of a given calendar year.
    • The relief generally applies to the employer and employee portions of Social Security and Medicare taxes, however employers are limited to recovery of the employer portion only in two instances:
      • In relation to an employee who cannot be located, or
      • When the employer notifies an employee that it is seeking a refund but the employee declines, in writing, to participate in same.
    • The IRS will establish a “special administrative procedure” for employers to seek refunds or claim credits for Social Security and Medicare taxes related to same-sex spousal benefits, to be defined in future guidance.

Compliance PointEmployers should be alert to future guidance from the IRS on  the “special administrative procedures” that will apply to Social Security and Medicare tax refunds, and should take steps to quantify the amounts involved for open tax years.

Retirement Plan Issues

The IRS Frequently Asked Questions for individuals in lawful same-sex marriage begin to address same-sex spouse treatment under qualified retirement plans (QRPs), including 401(k) and profit sharing plans.  Much more guidance in this area will be needed both from Treasury and from the Department of Labor.  The following guidance applies as of September 16, 2013 and subsequent.  Future guidance will address any retroactive application of Revenue Ruling 2013-17 to retirement plans and other tax-qualified benefits, including with regard to plan amendments and plan operation in the interim between September 16, 2013 and the date such future guidance is published.

  • QRPs must treat a same-sex spouse as a spouse for all Federal tax purposes relating to QRPs, regardless of where the same-sex spouses reside.
    • For instance, a QRP maintained by an employer in Florida, which does not recognize same-sex marriage, must pay a survivor annuity to a surviving same-sex spouse of a plan participant, unless the spouse consented in writing to another beneficiary prior to the participant’s death.
    • QRPs are not required to treat registered domestic partners, partners to a civil union, or partners to other formalized but non-marital relationships as spouses, whether the partners are same-sex or opposite sex.
      • For instance, a QRP need not pay a surviving spouse annuity to a registered domestic partner upon a participant’s death.  However a plan may treat a registered domestic partner as a default beneficiary who will receive a plan benefit if the participant failed to choose another beneficiary.  Plans must also treat registered domestic partners as designated beneficiaries when they are named as such by the participant.

Compliance PointEmployers should be on the alert for future guidance on QRP administration related to same-sex spouses.  In the interim, check with your company’s accountant or other tax professional if same-sex spouse benefit questions arise.

Affordable Care Act Issues

Not all of the consequences of Federal tax recognition of same-sex marriage are positive.  Under the Affordable Care Act, couples in a legal same-sex marriage now must combine their incomes for purposes of determining eligibility for premium tax credits and cost sharing on the healthcare exchanges, beginning in 2014.  This may prevent some persons in same-sex marriages from receiving federal financial aid they would have qualified for, as unmarried individuals.

The reason for this is that financial aid towards health coverage on the exchanges is based on “household income” and household income must be between 100% and 400% of federal poverty level for financial aid to apply.  Couples whose combined income exceeds 400% of the Federal Poverty Level (currently $62,040 for a 2-person household) will be ineligible for any financial aid toward the cost of coverage even if, individually, the same-sex spouses might have qualified for coverage on their own.

Additionally, “dependent” coverage which must be offered by applicable large employers in 2015 applies to children up to age 26, but not to “spouses,” and hence not to same-sex spouses.

Hopefully, future guidance from the IRS and from Health and Human Services will address in more detail the impact that Federal tax treatment of same-sex marriages has under the Affordable Care Act.

Compliance Point:  Employers need to be aware that household income for employees in legal same-sex marriages will include their spouse’s compensation and will likely impact their eligibility for financial aid towards coverage on the health exchanges.

2 Comments

Filed under 401(k) Plans, Affordable Care Act, Benefit Plan Design, Cafeteria Plans, Defense of Marriage Act, Employer Shared Responsibility, ERISA, Fringe Benefits, Health Care Reform, Health Insurance Marketplace, Payroll Issues, PPACA, Profit Sharing Plan, Registered Domestic Partner Benefits

IRS Provides Federal Tax Parity to Same Sex Spouses

On August 29, 2013, the Internal Revenue Service (“Service” or “IRS”) issued guidance on how same-sex spouses will be treated for Federal tax purposes, in the wake of the Supreme Court’s ruling, in US. v. Windsor, that Section 3 of the Federal Defense of Marriage Act was unconstitutional.  The guidance, announced here, takes the form of Revenue Ruling 2013-17 and two FAQs – one for legally married same sex spouses, and one for persons in domestic partnerships, civil unions, and other formal relationships other than marriage.  This post discusses the Revenue Ruling; a future post will cover the FAQs which describe tax refund procedures related to same sex spousal coverage, and begin to address the impact of US v. Windsor on retirement plans.

Section 3 of DOMA – the part struck down in US v. Windsor – provided that, for all federal law purposes, the word “marriage” meant only a legal union between one man and one woman as husband and wife, and the word “spouse” referred only to a person of the opposite sex who is a husband or wife.   In US v. Windsor the Supreme Court determined that, with respect to individuals in same sex marriages, that provision violated the principles of due process and equal protection under the law guaranteed by the 5th Amendment to the US Constitution.

The question that the new IRS guidance answers is whether, in determining whether a same sex marriage is valid for Federal tax purposes, the IRS will look to the laws of the state where the marriage was performed or “celebrated” (the “celebration” rule), or the laws of the state where the couple resides (the “domicile rule”).

Traditionally, ERISA case law has determined married status based on the domicile rule.  However it quickly became clear, after the Supreme Court decision, that employers with employees in multiple states would face significant administrative hardship –particularly with regard to health and retirement benefit plan coverage – if they needed to look to each employee’s state of residence in order to determine whether spousal benefits applied.  Thus, it was hoped that a same sex marriage legally performed in any state or other jurisdiction would constitute a valid marriage for Federal tax purposes in all states, including those that do not recognize same sex marriage.

Under Revenue Ruling 2013-17, that is indeed the case.  In it the Service concludes that, for Federal tax purposes (including income and estate tax purposes), the following is true:

  • The terms “spouse,” “husband and wife,” “husband” and “wife” include an individual married to  a person of the same sex if the individuals are lawfully married under  state law, and the term “marriage” includes a same sex marriage.  “State” for these purposes means a U.S. state or the District of Columbia, as well as any foreign jurisdiction.
  • The gender-specific terms “husband” and “wife” apply, for Federal tax purposes, to members of a same-sex couple regardless of their actual gender.
  • This is the case even if the state where the same sex couple resides does not recognize the validity of same-sex marriages.
  • The terms “marriage,” “spouses” and “husband and wife” for federal tax purposes will not, however, include domestic partnerships, civil unions or other formal relationships – short of marriage – between same-sex or opposite sex individuals.

Revenue Ruling 2013-17 is effective as of September 16, 2013 and subsequent, however the accompanying FAQ for same sex spouses describes how individuals who included same sex spouses in their employers’ benefit plans, and who received “imputed income” as a result, may seek tax refunds and credits back to 2010.  As mentioned, I will cover those points in a separate post in the very near future.

The IRS describes Revenue Ruling 2013-17 as an “amplification and clarification” of 1958 Revenue Ruling (Rev. Rul. 58-66, 1958-1 C.B. 60) which concluded that persons who enter into a common law marriage in a state that recognizes common law marriage could file a joint Federal tax return even after they moved to a state that did not recognize common law marriage.   And, in fact, following the laws of the state of domicile for purposes of common law marriage would present the same difficulties in the context of same sex marriage:

“A rule under which a couple’s marital status could change simply by moving from one state to another state would be prohibitively difficult and costly for the Service to administer, and for many taxpayers to apply.”

The IRS notes that it may provide future additional guidance on this rule and on the application of US v. Windsor with respect to Federal tax administration, and that other agencies may discuss its impact on other federal programs that are affected by the Internal Revenue Code.   It will also be interesting to see how the new rule is squared with the traditional “domicile” rule used to determine marital status in ERISA case law.  (Interestingly, the first post-Windsor (but pre-Rev. Rul. 2013-17) decision on same-sex benefits under ERISA, Cozen O’Connor, P.C. v. Tobits, 2013 WL 3878688 (E.D. Pa., July 29, 2013), followed the domicile rule in order to award survivor benefits to a same sex spouse.  A good discussion of the case is found here.)

Revenue Ruling 2017-13 also stands in contrast with still-in-effect Section 2 of DOMA, which permits each state to ignore, for state law purposes, same sex marriages officiated in other states:

“No State, territory, or possession of the United States, or Indian tribe, shall be required to give effect to any public act, record, or judicial proceeding of any other State, territory, possession, or tribe respecting a relationship between persons of the same sex that is treated as a marriage under the laws of such other State, territory, possession, or tribe, or a right or claim arising from such relationship.”

As a consequence, imputed income will continue to apply to same sex spouses for state tax purposes in states that do not recognize same sex marriages, despite its abolition at the federal level.  Additionally, state law will continue to govern group health insurance and HMO contracts, and states that do not recognize same sex marriage generally do not require that policies sold in the state cover same sex spouses.

Clearly, further guidance from the IRS and other federal agencies will be needed to address the complicated benefit compliance issues raised by US v. Windsor.

A final note – this post is my 100th at EforERISA, a bit of a milestone, and I want to thank my readers and subscribers for their support and helpful comments and suggestions along the way.

Leave a comment

Filed under Defense of Marriage Act, ERISA, Profit Sharing Plan

DOMA Repeal Bill Introduced by House Democrats

Only a few weeks after the Justice Department announced withdrawal of its support for the federal Defense of Marriage Act, legislation to repeal it was introduced in the House of Representatives. Specifically, on March 16, 2011 Rep. Jerrold Nadler (D. N.Y.) re-introduced the Respect for Marriage Act, which he first sponsored in 2009. The legislation has the support of over 100 co-sponsors in the House, including four openly gay members of Congress. A version of the bill shortly is expected to be introduced in the Senate by Sen. Dianne Feinstein (D. California). This will be the first time that the Senate has entertained a bill to repeal DOMA, which since 1996 has limited the rights and protections of federal laws to legally married, opposite sex spouses.

Prior to DOMA, marital status was decided at the state level, and if the Respect for Marriage Act becomes law this again will be the case. If a same-sex couple legally was married in a state that permits such unions, such as Massachusetts, the couple would have equal treatment under federal law as an opposite-sex married couple. Couples who are registered domestic partners or in civil unions would not have spousal status for federal purposes unless they also legally were married under state law. Lamda Legal prepared a concise summary of the likely impact of the Respect for Marriage Act; you can read that summary here.

Leave a comment

Filed under Defense of Marriage Act, Registered Domestic Partner Benefits