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Same-sex couples in the United States have faced numerous obstacles and challenges raised by traditionalists. While the exact level of difficulty faced varies across states and individual experiences, all same-sex couples have been forced to contend with restrictive and discriminating federal legislation like the Defense of Marriage Act (DOMA).
Thankfully for same-sex couples, DOMA is no longer the law of the land and significant strides towards equality have been made. Compared with even a decade ago, same-sex couples have made tremendous strides towards equality and public acceptance. This is undoubtedly a long process. However, recently the IRS announced that it was taking another major step towards marriage equality. Under a new final rule, the IRS has redefined married to include same-sex couples.

Why Did the IRS Include Same-Sex Couples in the Definition for ‘Marriage?’

The IRS was essentially required to take this action to bring the U.S. Tax Code into compliance with previous U.S. Supreme Court decisions. In 2013, the first of these rulings, United States v. Windsor held that Section 3 of the Defense of Marriage Act was unconstitutional. DOMA was a federal law signed by President Clinton in 1996. Under DOMA, the federal government the federal government was generally prohibited from recognizing same-sex marriages. The Supreme Court striking down DOMA, opened the door for same-sex couples to experience a taste of equality, but many questions were beyond the scope of the issues presented by Windsor. For instance, states were still free to define marriage. While same-sex couple taxpayers in some states might be able to reap the tax benefits of a recognized marriage, taxpayers in other more traditional states could not. Furthermore, the question as to the correct treatment for an initially valid same-sex marriage where the couple then moves into a state that does not recognize their marriage was also an open question.

Thus, the next major legal precedent required before the IRS could make this change toward marriage equality came two years later in Obergefell v. Hodges. In Obergefell, the U.S. Supreme Court found that the fundamental right to marry could not be denied to same-sex couples. The court found that under both the due process clause and the equal protection clause of the 14th Amendment to the U.S. Constitution, all states were required to grant same-sex marriages and recognize same-sex marriages that occurred other states.

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Impacts of New IRS Same-Sex Marriage Regulations

The final rule recently published by the IRS is intended to bring the tax code into compliance with the court cases discussed above. Under new final regulations published in the Federal Register on September 2, 2016, Regulation Section 301.7701-18 is added. This regulation states that:

Section 301.7701–18(a) of the proposed regulations provides that for federal tax purposes, the terms ‘‘spouse,’’ ‘‘husband,’’ and ‘‘wife’’ mean an individual lawfully married to another individual. The term ‘‘husband and wife’’ means two individuals lawfully married to each other.

This final language tracks rather closely to the original proposed language with some changes. The comments provided in the Federal Register continue to explain that the final regulations definition of the terms spouse, husband, and wife do not generally include those who have entered into domestic partnerships, civil unions, or other arrangements not explicitly deemed a marriage under the state’s law.

Thus, the IRS has respected the potential that same-sex couples may have entered into a relationship other than marriage for their own reasons and does not disturb that decision. However, for same-sex couples who are or will be married, this final rule opens the door for married filing jointly status to be available in all 50 states. For many couples, the availability of married filing jointly status can lead to tax savings. However, for other same-sex couples, this change in the tax law may mean that it is no longer proper to use sole filer status and they must file married filing separately. Depending on one’s finances, it can require a complex analysis to determine which approach is likely to be more favorable to the taxpayer.

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Speak with a Sacramento Tax Attorney About Questions on Taxes Following a Same-Sex Marriage in California

The recently issued final rule is yet another step towards marriage equality for millions of Americans, but changes to the law often introduce additional complexity and considerations that taxpayers must fully consider. A Sacramento tax lawyer at NewPoint Law Group can examine your situation and determine if your past filing practices are still compliant and favorable under Regulation Section 301.7701-18. To schedule a confidential consultation, call our tax law team at 1-800-358-0305 or contact us online today.