This blog was last updated on June 27, 2021
A little over a year has passed since the United States Supreme Court, in United States v. Windsor, tackled the Defense of Marriage Act (DOMA). The chief issue considered by the Court was whether the federal government should treat same-sex couples, who were legally married under the laws of a particular state, as married under the United States Code. The Court ruled that because the definition and regulation of marriage is historically treated as being under the purview of the separate states, the portion of DOMA defining marriage as the legal union between one man and one woman was an unconstitutional deprivation of liberties protected under the due process clause of the Fifth Amendment. The DOMA decision impacted thousands of federal law references to marriage, including for federal income tax reporting. The Court did not strike down DOMA in its entirety: it did not rule on the section of DOMA permitting states to refuse to recognize same-sex marriages performed under the laws of other states, pointing to a long-standing tradition of allotting states the authority to define and regulate marriage. Implications of DOMA for Federal Tax Reporting Following the Windsor decision, the IRS issued Revenue Ruling 2013-17 to clarify the new implications of DOMA for purposes of federal income tax reporting. The IRS determined that the definition of “marriage” extends to individuals that have legally entered into same-sex marriages under state laws. The IRS will recognize the validity of a same-sex marriage that is legal in the state where it was entered into, regardless of the married couple’s actual place of domicile. Accordingly, the IRS recognizes marriage for purposes of federal tax reporting, even if the couple’s state of domicile does not recognize such marriage. This means that an individual in a same-sex marriage may file as “married filing jointly” or “married filing separately” for federal purposes, but then file as “single” or “head of household” for state purposes. The IRS acknowledges that the application of the Revenue Ruling strictly encompasses same-sex marriages. It does not extend to registered domestic partnerships, civil unions or similar formal relationships that are not the equivalent of “married” under state law. Application of DOMA to Qualified Retirement Plans The IRS provided additional DOMA guidance through Notice 2014-19 to sponsors of certain Qualified Joint and Survivor Annuity (QJSA) plans and Qualified Preretirement Survivor Annuity (QPSA) plans regarding rules relating to married participants. The outcome of Windsor mandates that any retirement plan qualification rule that applies because a participant is married must be applied with respect to a participant who is legally married to a same-sex spouse. The IRS determined that the ruling for retirement plans is effective retroactive to the date of the Windsor decision, which is June 26, 2013. Withholding Repercussions following DOMA The IRS was unable to resolve the state-by-state decision-making regarding the validity of same-sex marriage for purposes of state income taxes. Consequently, states differ on treatment and recognition of same-sex marriage, which presents complications for calculation of the withholding tax by employers. Federal Form W-4 is used by employers to determine withholding allowances and exemptions for federal income tax purposes. A number of states have their own versions of the W-4 for calculating state withholding. Employees are required complete the W-4 forms based on the filing status used for payment of the income tax. Individuals in a same-sex marital relationship must check the “Married” box on the Federal W-4 and the “Single” box on the State W-4. In such a circumstance, the employer calculates federal withholding in a different manner than state withholding. State-by-State Treatment of Same-Sex Marriage 1. States that Prohibit Same-Sex Marriage and have Provided Guidance Mandating Same-Sex Married Couples to File as Single for Income Tax Purposes Arizona; Georgia; Kansas; Kentucky; Michigan; Mississippi; Nebraska; North Carolina; North Dakota; Ohio; Oklahoma; South Carolina; Virginia; and Wisconsin 2. States that Prohibit Same-Sex Marriage but have not Provided Income Tax Guidance for Same-Sex Couples Alabama; Arkansas; Idaho; Indiana; Louisiana; Montana; Pennsylvania; and West Virginia 3. States that Prohibit Same-Sex Marriage but do not have an Income Tax Alaska; Florida; South Dakota; Tennessee; Texas; and Wyoming 4. States that have not Legalized Same-Sex Marriage, but have Provided Guidance Instructing Same-Sex Married Couples to use the Same Filing Status that is used for Federal Income Tax Purposes Colorado; Missouri; and Utah (but note that this was limited to Tax Year 2013, while the Utah waits for judicial and/or legislative action) 5. States that have Legalized Same-Sex Marriage California; Connecticut; Delaware; Hawaii; Illinois; Iowa; Massachusetts; Minnesota; New Hampshire; New Jersey; New Mexico; New York; Rhode Island; Vermont; Maine; Maryland; Washington; and District of Columbia 6. States with Unique Requirements for Same-Sex Marriages Nevada: While same-sex marriage is constitutionally prohibited, Nevada currently recognizes domestic partnerships performed within the state, as well as domestic partnerships and same-sex marriages performed in another state. Oregon: Same-sex marriage is constitutionally prohibited, but Oregon statutes recognize domestic partnerships. Oregon deems couples in a registered domestic partnership to be married for purposes of state reporting (however, federal laws currently treat persons in domestic partnerships as single). Oregon also recognizes same-sex marriages and domestic partnerships legally entered into in another state. Sources: United States v. Windsor, 570 U.S. 17 (2013) IRS Revenue Ruling 2013-17 (2013) IRS Notice 2014-19 (2014) To see the previous segment of this series click here.
