Recognition of Same-Sex Marriage Officially the Tax Law of the Land

September 1, 2016

Effective tomorrow, September 2, 2016, new IRS final regulations will take effect which provide that for federal tax purposes, the terms “spouse,” “husband,” and “wife” mean an individual lawfully married to another individual.  The terms “husband and wife” mean two individuals lawfully married to each other.  Lawful marriage means the marriage is recognized by the state, possession, or territory of the United States in which the marriage is entered into, regardless of the domicile of the individuals.  For foreign marriages, the foreign marriage is considered lawful for federal tax purposes if the foreign marriage would be recognized as marriage under the laws of at least one state, possession, or territory of the United States.

Wasn’t this already the law of the land?  Is the IRS just now catching up?  No, the IRS was already on board with the recognition of same-sex marriages back in 2013 after the United States Supreme Court decision in Windsor.  But then came the Obergefell decision in 2015, followed by proposed IRS regulations issued in October 2015.  Now, the IRS has finalized those October 2015 proposed regulations with a couple of tweaks in response to comments submitted on the proposed regulations.  One of which was to make clear that only couples that actually entered into a lawful marriage would be treated as married, as opposed to couples whose relationship might be lawful marriage in a state, possession, or territory of the United States.  The best example of this is a couple living in a state which does not recognize common law marriage.  There are some states that do recognize common law marriage, however.  The proposed regulations would arguably have treated that couple as legally married for federal tax purposes just because there was a state that would have recognized their relationship as lawful.

Whew!  Good thing there are astute tax people out there pointing out nuances that rival only the upcoming college football season for excitement (Go Irish!).

Anyway, tomorrow’s final regulations should serve as a reminder to review both personal tax situations, as well as employee benefit plan documents maintained by employers.

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Mary Ellen Schill

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