Supreme Court’s Decision in the Windsor (DOMA) Case Leaves Lots of Questions and Lots Deadline Pressure for Federal Agencies.
The Social Security Administration (SSA), as well as the U.S. Defense and Labor Departments, recently updated their same-sex marriage policies to reflect that the Supreme Court overturned part of the Defense of Marriage Act (DOMA) on June 26
That ruling invalidated DOMA’s definition of marriage for federal benefits purposes as only between a man and a woman (United States v. Windsor). As a result, same sex spouses whose marriages are recognized at the federal level must change their tax filing status from unmarried to married. That may affect their marginal tax rates, as well as their eligibility under several tax rules and the treatment of certain forms of employee compensation.
IRS issued guidance Released 8/29/2013 -The place of marriage will be used to determine marital status for federal income and other tax purposes, regardless of the status allowed in the state where they resides.
SSA Changes Offer Insight
The SSA said that it is now processing some retirement claims for couples in same-sex marriages and paying benefits if they are due. In addition, the SSA has urged individuals who believe they may be eligible for benefits to apply as soon as possible to protect themselves from losing them.
Acting Commissioner of Social Security Carolyn W. Colvin said the agency will put into effect additional policy and processing instructions, noting that it must work through legal issues to ensure that its policies are “legally sound and clear.”
Under the SSA’s changes, all claims filed on or after the date of this Supreme Court decision, or that were pending final determination at that time, are subject to the so-called “Windsor instructions.” Under these instructions, claims can be filed when the holder of a Social Security Number:
Was married in a state that permits same-sex marriage, and
Resides in a state that recognizes same-sex marriage at the time of application or while the claim is pending a final determination.
Claims have been put on hold in several situations, however. For example, it may happen if a couple initially entered a same-sex civil union and the state subsequently converts same-sex civil unions to marriages. The fate of these claims remains unclear.
Other Agencies Weigh in on Same-Sex Marriages
The SSA move is the latest in a series of federal changes in the wake of the Windsor decision, including changes made by these federal agencies:
1. Department of Labor (DOL): The agency updated the Family and Medical Leave Act (FMLA) to define spouse as “a husband or wife as defined or recognized under state law for purposes of marriage in the state where the employee resides, including ‘common law’ marriage and same-sex marriage.”
As a result, a qualified employee in a same-sex marriage who was married and resides in a state that recognizes same-sex marriages is entitled to as many as 12 weeks of leave in a 12-month period to care for a seriously ill spouse or for activities associated with a military spouse’s deployment, and as many as 26 weeks of caregiver leave for a military spouse who is seriously injured or ill.
Covered employers in states that allow same-sex marriage, and the District of Columbia, should revise policies and procedures to conform to the DOL’s new guidance.
However, some legal experts believe the department doesn’t have to make FMLA spousal leave available to a same-sex spouse who resides in a state that doesn’t recognize same-sex marriage. Employers in those states may extend equivalent FMLA spousal leave benefits to same-sex spouses if they wish, however.
2. Department of Defense: Secretary of Defense Chuck Hagel recently stated that the department will make spousal and family benefits available to all spouses, regardless of sexual orientation, no later than September 3. That means healthcare and allowances for housing and family separation will be granted to same-sex married military and civilian couples. Same-sex spouses can claim the benefits retroactively, starting with the date of the Windsor decision.
In addition, service members who are stationed in jurisdictions where same-sex marriage is not legal will be granted leave to travel to a jurisdiction where they can marry.
3. Office of Personnel Management: This agency no longer prohibits federal employees in same-sex marriages from collecting survivor benefits on civil service annuities. Now same-sex couples have two years from the date of the Windsor decision to do so. Newly retiring employees may make those elections through the regular retirement process.
The spouses and children of both active and retired employees in same-sex marriages are now covered under several benefits programs in addition to health insurance. While coverage is automatic, employees and retirees who missed the August deadline to make certain enrollment changes, such as switching from individual to family coverage for health insurance, will have to wait for the annual benefits open season that starts in November.
4. Department of Homeland Security: On its website, the department states that it looks to the law of where the marriage took place in determining whether it is valid for immigration law purposes.
5. Department of State: The Bureau of Consular Affairs states on its website that same-sex spouses may qualify for an immigrant or non-immigrant visa provided their marriage is valid in the jurisdiction (U.S. state or foreign country) where it took place.
“American taxpayers need clarity and they need it quickly. The midyear decision by the Supreme Court in the Windsor case was welcome news, but we cannot leave so many taxpayers in limbo, if not financial jeopardy,” said Senator Ben Cardin in recent statement.
In addition to the push from Cardin, the tax agency’s own deadlines may pressure it to issue guidance in light of Windsor. October 15 is the deadline to file 2012 tax returns for individuals who requested an extension from April 15.
Other issues that need clarification are:
Retroactivity: The Windsor decision may be retroactive and allow for amended tax returns for open tax years. The IRS needs to state whether same-sex taxpayers can voluntarily amend returns and receive any refunds, credits or carry-forwards that may be available. Cardin also wrote in his letter that, as same-sex spouses could not file joint returns before the Windsor ruling, he believes it would be inappropriate to audit, make assessments, or otherwise challenge same-sex spouse’s decisions not to amend their returns. He urged the IRS to use its statutory authority to make clear that it will not pursue such actions.
Civil unions: These unions are legal in eight states and generally provide same-sex couples with the same legal rights and responsibilities as spouses of opposite sexes. Couples in civil unions generally are considered spouses in those states. Consequently, Cardin stated, it is important to determine whether the IRS will treat those couples as spouses for federal tax purposes.
Our experts have been working hard to stay up to speed with the rapid changes taking place after the court’s decision. Each day more information comes to light and the course becomes clearer. If you and your same sex partner need guidance through the many twists and turn of the rapidly evolving rules contact our office.