On Sept. 2, 2016, the Department of the Treasury and the Internal Revenue Service released final regulations that reflect the holdings of Obergefell v. Hodges,1 Windsor v. United States2 and Revenue Ruling 2013-173 and that define terms in the Internal Revenue Code describing the marital status of taxpayers for federal tax purposes. In response to these decisions that the federal government must recognize and states must allow same-sex marriages, the IRS came out with proposed regulations in October 2015.
Back in 2013, the Supreme Court in Windsor held that the Defense of Marriage Act, which generally prohibited the federal government from recognizing same-sex marriage, is unconstitutional because it violates the principles of equal protection and due process. In Obergefell, in 2015, the Supreme Court held that state laws excluding same-sex couples from marriage due to the same-sex character of their relationships are invalid and that there’s no lawful basis for any state to refuse to recognize a same-sex marriage lawfully performed in another state. Rev. Rul. 2013-17 was the IRS’ original guidance recognizing same-sex marriages following the Windsor decision.
The newly-issued final regulations provide that the terms “spouse,” “husband” and “wife” mean an individual lawfully married to another individual, and the term “husband and wife” means two individuals lawfully married to each other. The terms “husband” and “wife” may be applied without regard to the gender of the individuals being labeled by the terms. One commenter to the proposed regulations recommended that the regulations should specifically refer to same-sex marriage; however, the IRS didn’t adopt the suggestion to ensure that the definitions were gender-neutral. The IRS also decided against adopting a suggested revision to update all forms to use gender-neutral terms, as such a suggestion is beyond the scope of these regulations, but stated that the recommendation would be considered when updating IRS forms and publications.
Place of Celebration Is Determinative
The final regulations clarify that a marriage of two individuals is recognized for federal tax purposes if the marriage is recognized by the state, possession or territory of the United States in which the marriage is entered into, regardless of the married couple’s place of domicile. The proposed regulations stated that the marriage of two individuals is recognized for federal tax purposes if the marriage would be recognized by any state, possession or territory of the United States. As pointed out by the commenters, this would mean that a marriage is recognized for federal tax purposes if at least one state recognizes it, which could have unintended consequences of mistakenly including certain divorced couples or couples in alternative legal relationships. The final regulations make it clear that the place of celebration is the point of reference for determining whether a couple is married for federal tax purposes.
The IRS further clarified that, for couples married in foreign jurisdictions, a marriage is recognized for federal tax purposes if that marriage would be recognized in at least one state, possession or territory of the United States. The marriage is recognized regardless of the married couple’s place of domicile and regardless of whether they ever reside in the United States. While this rule requires couples to review the laws of the various states, possessions and territories to determine if they would be treated as married, it’s only necessary that they find at least one jurisdiction, and there’s no need to consider the laws of all jurisdictions.
In addition, the final regulations state that the term “marriage” doesn’t include registered domestic partnerships, civil unions or similar relationships recognized under state law that aren’t denominated as a marriage under that state’s law. After a lengthy discussion regarding comments received, the IRS took the stance that its reliance on a state’s denomination of a relationship as marriage to determine marital status for federal tax purposes avoids inconsistencies with a state’s intent regarding the status of a couple’s relationship under state law. The IRS stated that including alternative legal relationships in the definition of marriage may interfere with the choice of those couples who entered into a civil union or registered domestic partnership with the expectation that their relationship won’t be treated as a marriage for federal law purposes. The IRS further supported its position with the fact that many states have permitted couples in alternative legal relationships to convert their relationship to marriage, while continuing to designate marriage separately from alternative legal relationships.
The final regulations obsolete Rev. Rul. 2013-17 and amend Parts 1, 20, 25, 26, 31 and 301 of Title 26 of the Code of Federal Regulations.
1. Obergefell v. Hodges, 576 U.S. ___, 135 S. Ct. 2584 (2015).
2. Windsor v. United States, 570 U.S. ___, 133 S. Ct. 2675 (2013).
3. (2013-38 IRB 201)
4. Definitions of Terms Regarding Marital Status, 81 Fed. Reg. 171 (Sept. 2, 2016). Federal Register: Rules and Regulations of the United States.