In the wake of the U.S. Supreme Court’s Windsor decision striking down the section of the Defense of Marriage Act prohibiting same-sex married couples from receiving federal benefits, the Internal Revenue Service issued Revenue Ruling 2013-17 on August 29, 2013, on the tax treatment of same-sex married spouses under the Internal Revenue Code. United States v. Windsor, Executor of the Estate of Spyer, et al. (U.S. 2013). Under the ruling, same-sex couples who are married in a state or foreign country that recognizes same-sex marriage will be considered “married” for federal tax purposes. This new rule applies to all same-sex couples regardless of where the couple resides.
Currently, 13 states, along with the District of Columbia and several Native American tribes, recognize same-sex marriage. Five counties in New Mexico have also begun issuing marriage licenses for same-sex couples. Since the passage of the Colorado Civil Unions Act in 2013, Colorado recognizes same-sex civil unions, but not marriage.
The new ruling will give same-sex couples married in one of these jurisdictions but currently residing in Colorado, for example, the same federal tax treatment as married opposite-sex couples. State and local income taxes remain unaffected.
The new guidance takes effect September 16, 2013, and gives same-sex married taxpayers the right to file amended returns and claim refunds for tax years 2010, 2011, and 2012. In addition, for the same time period, employees who purchased same-sex spouse health insurance coverage from their employer (including cafeteria plans) on an after-tax basis may amend their returns to treat amounts paid for such coverage as pre-tax contributions excluded from income. The IRS has provided detailed FAQ documents for both same-sex married couples and for registered domestic partners and individuals in civil unions.
Employers should review their payroll taxes and benefit plans, paying careful attention to which plans offer benefits or coverage for same-sex spouses, domestic partners, or parties to civil unions. The IRS will be issuing future guidance to assist sponsors of employee benefit plans.