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DOMA ruling expanding the rights of same-sex couples

Legal News Reporter

Published: October 25, 2013

Same-sex couples living in Ohio may not have won the right to marry, but those who are legally married outside of the state now have more options when it comes to their federal taxes and estate planning matters.

On Aug. 29, the U.S. Department of the Treasury and the Internal Revenue Service ruled that all same-sex couples legally married in jurisdictions recognizing their marriage would be treated as married when it comes to their federal tax returns, regardless of where they are living at the time they file.

The ruling applies to all tax provisions where marriage is a factor, including filing status, claiming personal and dependency exemptions, taking the standard deduction, employee benefits, contributing to an Individual Retirement Account (IRA) and claiming the earned income tax credit or child tax credit.

The decision follows the June 26 U.S. Supreme Court landmark decision in Windsor v. United States overturning Section 3 of the federal Defense of Marriage Act (DOMA), which defined a “spouse” and “marriage” as excluding same-sex partners.

“The Supreme Court reasoning was that Section 3 of DOMA failed to respect a state’s determination of what constituted a valid marriage,” said Patrick J. Weschler, a partner in the trusts and estates group at Buckingham, Doolittle & Burroughs. “The IRS has interpreted this to mean that a same-sex couple legally married in, say, New York or a foreign country where same-sex marriage is legal, will be allowed to file a joint tax return.

“It does not matter if the couple was domiciled in the state where the marriage occurs. For example, residents of Ohio who meet the New York requirements for a legal marriage can be married in New York while Ohio residents and then file their taxes jointly.”

The Windsor case itself grew out of an estate tax issue that began in 2009 when Edith Windsor’s spouse, Thea Spyer, passed away, leaving her entire estate to Windsor. Spyer and Windsor had been married in Ontario, Canada in 2007 and the marriage was recognized under the Canadian Civil Marriage Act. However, when Windsor tried to take a federal estate tax marital deduction for the portion of her deceased partner’s assets that were left to her, the IRS denied it on the grounds that the marriage was not recognized under U.S. law, citing DOMA. As a result, Windsor was required to pay over $363,053 in federal estate taxes.

In November 2010, Windsor filed suit in the U.S. District Court for the Southern District of New York arguing that Section 3 of DOMA, which defines a “spouse” in the context of male/female marriage, was unconstitutional because it treated same-sex couples differently than male/female couples, thus violating the Equal Protection Clause of the 14th Amendment of the Constitution.

In June 2012, the district court ruled in Windsor’s favor, with the decision being affirmed by the 2nd Circuit U.S. Court of Appeals in October. Although Windsor had asserted the Equal Protection Clause, the rulings were based on the Due Process Clause of the Fifth Amendment, which prohibits an individual from being deprived of liberty or property without “due process of law.” The U.S. Supreme Court affirmed.

Weschler said the federal tax decision that followed means same-sex couples that have been unable to file as married in years prior to 2012 and paid more in taxes for that reason can also look into filing for a refund. “The IRS has announced that any claim for a refund must be filed no more than three years after the return in question was filed, or two years following the date on which the tax payment in question was made, whichever is later. For example, a refund claim for 2010 must be filed no later than April 15, 2014,” he said.

So far, same-sex marriage is legal in over a dozen states, but Ohio is not one of them. As a result, same-sex married couples in Ohio must follow a different set of rules when it comes to their state taxes.

According to a press release issued on Oct. 11 by Ohio Tax Commissioner Joseph W. Testa, since the state does not recognize same-sex marriage, “individuals who entered into such a marriage in another jurisdiction shall not use the filing status of ‘married filing jointly’ or ‘married filing separately’ when filing Form IT 1040.”

Instead each individual in Ohio must file a state return, using the status “single” or, if qualified, “head of household,” and then complete Ohio Schedule IT S (Federal AGI to be reported by same-gender taxpayers filing a joint return), which is a supplement to Form IT 1040. The schedule allows individuals to allocate the federal adjusted gross income (federal AGI) reported on their joint federal income tax return. The schedule and instructions are available at http://www.tax.ohio.gov/Forms.aspx.

“This is going to cause some confusion for couples as well as those at the Ohio Department of Taxation,” said Weschler.

“The decision (U.S. Supreme Court) does not require one state to give another state’s determination of marriage full faith and credit if that other state’s determination were found to violate an important public policy of the first state,” said Weschler.

“Section 2 of DOMA, which was not challenged, allows states to refuse to recognize same-sex marriages performed under the law of other states. I think there will be more legal challenges in the future until some type of uniform rule takes effect.”

Despite the U.S. Supreme Court’s limited ruling, Buckingham, Doolittle & Burroughs Trusts and Estates Partner Patricia Pacenta said she believes Windsor is a “game changer.” She said the case will greatly accelerate the recognition of same-sex marriages and domestic partnerships that have already started to occur, even in Ohio.

“Ohio has already enacted O.R.C. §2108.70, which allows an individual to designate a person of his or her choice to be the person authorized to make legally enforceable decisions regarding his or her burial and funeral arrangements,” Pacenta said.

“I think that statute had the same goal of allowing same-sex partners to make certain of the same decisions for one another that spouses are able to make.”

She said the Windsor case has already had an impact on Ohio law as to the definitions of “spouse” and “marriage.”

In July in Cincinnati, James Obergefell filed suit in the U.S. District Court in the Southern District of Ohio to ensure that his marriage to his partner, John Arthur, was recognized on Arthur’s death certificate so that the two could be buried next to each other in Arthur’s family plot, which allows only descendants and spouses. Arthur was dying of Lou Gehrig’s disease at the time. A second couple, William Herbert Ives and David Michener, joined the lawsuit after Ives died unexpectedly and Michener wanted him to be listed as married before he was cremated. In both cases, the couples were married in states that recognize same-sex marriages.

District Judge Timothy Black ruled to allow the request in both instances, arguing that Ohio law historically has recognized out-of-state marriages as valid as long as they were legal where they took place, citing marriages between cousins and involving minors.

The lawsuit has been expanded with lawyers asking that Ohio’s health department director be required to order funeral directors and coroners to list gay clients as married if they were legally wed in another state. Judge Black is expected to rule in December.

Some opponents are now calling for the judge’s impeachment.

“My sense is that the country is moving forward toward accepting the inevitable fact that, religious considerations aside, from a civil law standpoint if a couple is validly married in one state they are married in all states and with respect to the federal government,” said Pacenta. “We are not there yet but I think we will see more states legalizing same-sex marriage in the future in an effort to avoid losing residents to states where it is legal.”