Several federal agencies, including the Internal Revenue Service, the Department of Homeland Security and the Department of Defense, have issued guidance that provides some clarity regarding the availability of federal benefits for married same-sex couples following the recent case of United States v. Windsor, in which the Supreme Court ruled that a portion of the Defense of Marriage Act is unconstitutional. See our recent article regarding the Windsor case here.
For a married same-sex couple living in a state that recognizes the marriage, the Windsor ruling made available over 1,000 benefits that are governed by federal law. Following the ruling, however, it was not clear whether federal marital benefits would also be made available to a married same-sex couple living in a state that does not recognize same-sex marriages, such as Indiana, Kentucky or Ohio. At issue was whether federal agencies would adopt a "place of celebration" rule, which would provide federal benefits to a married same-sex couple as long as the marriage is valid where it was performed (and regardless of where the couple resides), or a "place of domicile" rule, which would make federal benefits available to a married same-sex couple only if the marriage is recognized in the state where they reside.
Three federal agencies recently announced that the "place of celebration" rule will apply to marital benefits and obligations administered under their jurisdiction.
On Aug. 29, 2013, the Internal Revenue Service announced that it would recognize, for federal tax purposes, a same-sex marriage performed in any state, U.S. territory or foreign country whose laws recognize the validity of same-sex marriage, even if the couple resides in a state that does not recognize the validity of same-sex marriage. The announcement also clarified that civil unions, domestic partnerships and other similar relationships will not be treated as marriages for federal tax purposes.
As a result of this announcement, a married same-sex couple will be treated the same as a married opposite-sex couple for all federal tax purposes, including income taxes, gift and estate taxes, employee benefits and IRA contributions. For example, a married same-sex couple will now be able to take advantage of the unlimited marital deduction for federal gift and estate tax purposes and will be required to file their 2013 federal income tax return as either "married filing jointly" or as "married filing separately." In general, the announcement will apply prospectively, but married same-sex couples will be permitted (but not required) to file amended returns and claims for refunds for any prior years that are still open under the statute of limitations.
Affected couples should discuss these changes with their accountants and tax preparers as soon as possible. If a married same-sex couple resides in a state that does not recognize same-sex marriage, it is possible that the couple will have to continue to file their state income tax returns as if they were not married even though they will file their federal income tax returns as a married couple.
On Aug. 14, 2013, the Department of Defense announced that it would provide spousal and family benefits to same-sex spouses of service members even if they are stationed in a jurisdiction that does not recognize same-sex marriage. The DOD also announced that it will grant leave to service members who are stationed in jurisdictions that do not recognize same-sex marriage so that they can travel to and get married in a jurisdiction that does recognize same-sex marriage.
On July 1, 2013, the Department of Homeland Security announced that it would recognize, for immigration purposes, same-sex marriages performed in any state or foreign country that recognizes same-sex marriage even if the couple resides in a state that does not recognize same-sex marriage. DHS also announced that it would conduct a review of previously submitted applications and petitions that were previously denied on the basis of the Defense of Marriage Act.
It is likely that other federal agencies will issue guidance in the coming months. Notably, neither the Social Security Administration nor the Department of Veterans Affairs has issued guidance resolving the place of celebration vs. place of domicile question for purposes of Social Security and VA benefits.
Attorneys in Taft's Private Client group will continue to monitor developments in this area and are available to discuss the unique planning opportunities and challenges facing same-sex couples. We encourage you to contact us with any questions.