The Department of Treasury’s announcement to treat all married couples equally for federal tax purposes is a landslide win for same-sex marriage and brings an explosive pressure to welcome marriage equality to nonrecognition states like Pennsylvania.
In Windsor vs. United States, the Supreme Court declared that the Defense of Marriage Act (DOMA) was unconstitutional because of its violation of the Equal Protection and Due Process Clause guaranteed by the 5th and 14th Amendments.
Since then, the challenge has been dealing with how federal agencies recognize marriage. Some federal agencies adhere to what is known as a “place of celebration” standard. This means that no matter where a couple legally marries anywhere in the world, the union is recognized as a marriage for the purpose of federal benefits.
But other agencies, including the Internal Revenue Service and the Social Security Administration, historically use the “place of residence” standard. According to this precedent, marriage has to be recognized in the place the couple is living for them to be eligible for those federal spousal benefits.
With encouraging speed and efficiency, the IRS, the Department of Health and Human Services, the Immigration Department, Federal Benefits Agency, and the Veteran and Military Defense Agencies now all use the “place of celebration” standard. Social Security has yet to follow suit, but pressures are increasing drastically to make the system more workable and equality friendly. The practical effect of the IRS using “place of celebration” allows the rights that flow from the 200 provisions of the Internal Revenue Code, which references marriage, to be available to LGBT people living right here in Philadelphia; this includes benefits for retirement accounts, health care, estate taxing and Medicare Advantage Plans.
Not to be too lawyerly, but everyone considering marriage in a recognition state or those married and seeking to file jointly for federal purposes, should seek the advice of a tax adviser because the IRS “benefits” of marriage may cost LGBT individuals’ money! For the tax year of 2013, legally married LGBT couples must use the “married filing jointly” or “married filing separately” status. As heterosexual couples know all too well, married couples are in either a “marriage bonus” or “marriage penalty” situation.
In other words, some same-sex couples may end up paying more in taxes (marriage penalty) due to the government’s recognition of their marriage. So, for same-sex couples that are equal income earners, expect the federal government to pocket more of your tax dollars. The good news is, couples in a marriage bonus situation will have the option to amend returns filed as far back as three years ago and can seek refunds.
The better news is you aren’t required to re-file returns if you would have paid more. It seems that LGBT individuals are one step closer to the vision of our founding fathers that everyone deserves “Life, Liberty, and the Pursuit of Happiness.” Of course, with these new developments in federal tax standards, Benjamin Franklin, always the astute clairvoyant reminds us, “there are two certain things in life: death and taxes.”
Original Article from Philadelphia Business Journal
ANGELA GIAMPOLO is the principal of Giampolo Law Group, which specializes in LGBT law, business law, real estate law and civil rights and maintains offices in both Pennsylvania and New Jersey. For more information, visit www.giampololaw.com.