Today, the U.S. Department of the Treasury (the "Treasury") and the Internal Revenue Service (the "IRS") issued Revenue Ruling 2013-17 (the "Ruling"), which states that same-sex couples who are legally married in jurisdictions that recognize their marriages will be treated as married for federal tax purposes. The Ruling will apply regardless of whether the couple lives in a jurisdiction that recognizes same-sex marriage or a jurisdiction that does not recognize same-sex marriage.
For example, if a same-sex couple was legally married in New York, but they reside in Florida (which does not recognize same-sex marriage), they will be considered legally married for purposes of federal tax law.
The Ruling implements federal tax aspects of the June 26, 2013 U.S. Supreme Court decision that invalidated a key provision of the Defense of Marriage Act, as discussed in our previous client alert.
While the Treasury and the IRS will begin applying the terms of the Ruling on September 16, 2013, taxpayers who wish to rely on the terms of the Ruling for earlier periods may do so, provided that the statute of limitations has not expired (i.e., currently, refund claims can still be filed for tax years 2010, 2011, and 2012).
According to a press release, employees who purchased same-sex spouse health insurance coverage from their employers on an after-tax basis may treat the amounts paid for that coverage on a pre-tax basis and, therefore, excludable from income.
The Treasury and the IRS will be issuing guidance for employers who wish to file refund claims for payroll taxes paid on previously-taxed health insurance and fringe benefits provided to same-sex spouses. In addition, the Treasury and the IRS will be issuing guidance on cafeteria plans and on how qualified retirement plans (e.g., 401(k) plans) and other tax-favored arrangements should treat same-sex spouses for periods before the effective date of the Ruling.
Importantly, the Ruling only applies to same-sex couples who are legally married in one of the 50 states, the District of Columbia, a U.S. territory, or a foreign country. It does not apply to registered domestic partners, civil unions, or similar formal relationships.