Newsletter 2013
Newsletter 2013
End of DOMA
End of DOMA
Print Full ArticleLast Reviewed: Jan 2014
Last Modified: Jan 2014
The Defense of Marriage Act was a piece of federal legislation that prohibited the federal government from recognizing same sex marriage in any of the programs and benefits it administers, including its administration of the tax code and tax compliance. The various states also passed legislation and constitutional provisions that allowed or disallowed benefits to same sex couples, depending on the views of their legislators and electorate. The end result was a hodgepodge of rules and laws all across the nation with little uniformity, except we always knew the federal government would not recognize a same sex marriage. That was until a woman named Edie Windsor decided to challenge DOMA as it applied to her deceased partner's federal estate tax return. Her case made it all the way to the US Supreme Court whose final opinion penned an end to DOMA. We now have a clear mandate for the federal taxation of married same sex couples in a manner that is identical to that of heterosexual couples. This basically means same sex couples can, for the first time, file a joint federal return if they decide to marry and must file either jointly or married filing separately if they do so.
There was some initial confusion about whether a marriage outside of your state of residence would be recognized for federal purposes. The IRS quickly issued a Notice indicating that the place of marriage would be irrelevant for federal tax purposes. This means an Oregon same sex couple can be married in Washington (Oregon does not allow same sex couples to marry, but Washington does) and file a joint federal return.
Oregon has for some time now had a domestic partnership registration available for same sex couples which allows them to file an Oregon joint return. In October, the Oregon Attorney General issued an opinion indicating that Oregon agencies should recognize out-of-state same sex marriages because the failure to do so violates the federal constitution. This means that Oregon same sex couples that marry in Washington (or any other state that recognizes their marriage) can now file both a federal and Oregon joint return. Oregon couples can also remain unmarried and use the domestic partnership registration to just file jointly in Oregon.
The confusion in Oregon is driven largely by a constitutional amendment adopted some years ago that prohibits same sex marriage in Oregon. There will be a ballot measure in the next general election that, if passed, will eliminate this provision of our constitution. Even if the measure fails, the amendment faces more than one challenge in the courts.
Even though the barriers to filing a joint return have been removed, there remains the question whether this filing status gives same sex couples the best tax result. A common phrase you hear in the tax world is "watch out for the marriage penalty." In our experience, this statement is too general to really have any meaning. There are specific tax code provisions you can point to that indicate married couples are taxed more aggressively than single filers, but those disparities do not always apply. In some instances when you compare the tax amounts for single and joint filings they are very close. As with all tax strategy decisions, it is best to complete a full analysis before making a change; and of course there are also considerations other than just the tax result to look at.
