Agencies Issue Guidance on Treatment of Same-Sex Marriages
October 18, 2013
Last June's U.S. Supreme Court ruling in United States v. Windsor, 570 U.S. ___(2013), which overturned Section 3 of the Defense of Marriage Act (DOMA), has a cascading effect on the interpretation and application of numerous existing provisions of federal law. Although the constitutional challenge to DOMA was based on inheritance tax rules, the decision was far-reaching and impacts numerous tax, pension, and benefits provisions. The Internal Revenue Service and the Department of Labor have issued guidance on their interpretations and the impact for employers, pension plan administrators, and individuals.
IRS Revenue Ruling 2013-17
Revenue Ruling 2013-17, released on August 29, provides guidance on how the Windsor decision affects IRS interpretations of the more than 200 sections of the Internal Revenue Code that refer to a taxpayer's marital status. Generally, the IRS has determined that terms referring to marital status—such as marriage, spouse, husband, or wife-include individuals of the same-sex if they are lawfully married under state law. Further, the IRS clarifies that marital status is based on the laws of the state where the marriage was performed, not the state in which the couple currently resides. Although a number of states recognize domestic partnerships, civil unions, or other formalized relationships, the IRS will not consider such arrangements equivalent to marriage.
The ruling took effect on September 16 prospectively, but taxpayers may also rely on it retroactively "with respect to any employee benefit plan or arrangement or any benefit provided thereunder" for filing original, amended, adjusted, or claims for credit or refund of overpayments related to employer-provided health coverage or fringe benefits. This allows taxpayers to recoup amounts that were treated as taxable income but would have been excluded from income if their same-sex marriage had been recognized at the time. Generally, tax returns for the past three years are considered "open" for amendment.
The IRS also addressed a number of questions pertaining to the ruling in an FAQ released at the same time.
DoL Technical Release 2013-04
On September 18, the Department of Labor issued similar guidance for employee benefit plans regarding the definitions of "spouse" and "marriage" under the Employee Retirement Income Security Act of 1974 (ERISA).
IRS Notice 2013-61
On September 23, the IRS released more specific guidance for employers who provide subsidized benefits to same-sex spouses and affected employees, to correct overpayments of FICA and federal income tax withholding relating to those benefits.
Under DOMA, employers were required to impute income and pay taxes on benefits for same-sex spouses or domestic partners. IRS Notice 2013-61 details how to make corrections for 2013 and prior years, given the retroactive application of Revenue Ruling 2013-17. Because the changes affect only individuals who are legally married, not those with other types of domestic unions, institutions will need to ensure they apply the new rules in appropriate circumstances.
Director, Tax Policy
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