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Treasury and IRS announce Tax Rules for

Legal Same-Sex Marriages1

 

On August 29, 2013, the Treasury Department and the Internal Revenue Service (IRS) issued Revenue Ruling 2013-17, which provides guidance on the federal tax treatment of same-sex couples who are legally married in jurisdictions which permit such marriages. The Revenue Ruling makes it clear that such individuals are treated for federal tax purposes as married whether or not they live in a state recognizing same-sex marriage.

Background

The U.S. Supreme Court, in their recent decision in the case of United States v. Windsor, declared unconstitutional section 3 of the Defense of Marriage Act, which provided that for federal purposes, the terms “marriage” and “spouse” only refer to the legal union between one man and one woman as husband and wife. The ruling clarified that same-sex couples who are married in, and reside in a state which permits same-sex marriage are to be treated as married for federal purposes. It left unanswered, however, other questions such as what happens if the legally married couple resides in a state which does not permit same-sex marriage, and whether the ruling was to be effective retroactively.

Code and Regulations

The Revenue Ruling establishes that the two hundred or so Internal Revenue Code (“Code”) and Treasury Regulation references to such terms as “spouse”, “marriage”, as well as such gender-specific terms as “husband” and “wife” include individuals who are legally married to members of the same sex, and the marriages of such individuals.

Marital Status based on State of Celebration

For federal tax purposes, the Revenue Ruling also establishes a general rule that the determination of marital status is based upon the laws of the state where the marriage was initially established (sometimes referred to as the “State of Celebration”). This rule makes it clear that legally married same-sex couples are treated as married for federal tax purposes regardless of their state of domicile.

Effect on Domestic Partnerships and Civil Unions

The Revenue Ruling provides that other types of recognized relationships such as civil unions or domestic partnerships are not treated as marriages for federal tax purposes.

Effect on Qualified Retirement Plans

The effect of the ruling on qualified retirement plans was clarified in a Frequently Asked Question document which was issued with the Revenue Ruling. It makes clear that a qualified retirement plan must treat a same-sex spouse as a spouse for purposes of satisfying federal tax laws. It also must recognize a legal same-sex marriage, even if the couple lives in a domestic or foreign jurisdiction that does not recognize the validity of same-sex marriages. The document also makes clear that for qualified plan purposes individuals in civil unions or domestic partnerships are not recognized as married.

Effective Date

In general, the effective date of the Revenue Ruling (including the date qualified retirement plans must comply) is September 16, 2013. The IRS intends to issue additional guidance on how qualified retirement plans and other tax-favored arrangements must comply, including information on plan amendments and any need for retroactive corrections.

Next Steps

We will continue to keep you informed of any additional developments.

 

 

 

 

1 Source: Principal Compliance News – August 2013, “Treasury and IRS announce Tax Rules for Legal Same-Sex Marriages.”

 

 

 

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