Thousands of American families now can claim crucial tax protections and benefits that they were previously denied. In what is arguably the federal government’s most significant rule change since the U.S. Supreme Court’s watershed decision striking down the federal Defense of Marriage Act last June, the Treasury Department and its Internal Revenue Service have mandated that all legally married same-sex couples be treated as such for the purposes of federal taxation.
Although 37 states — including Ohio — still don’t recognize gay marriage, the federal government has taken a powerful step in equalizing standards for same-sex couples, no matter what state they call home. Gay couples legally married in certain states but living in others will now be treated no differently from their heterosexual neighbors.
At the conclusion of the 2013 tax year, such couples will be required to file their federal tax returns in the same way that other married couples always have, either as “married filing separately” or “married filing jointly.” No longer must they file as if either spouse were single.
It’s heartening to see the federal government prioritize this issue and mobilize itself so quickly to enforce the Supreme Court decision. Equalizing federal tax standards wasn’t a simple fix, and it took far more than the stroke of a pen.
After months of deliberation, the IRS ultimately decided to adapt a 1958 ruling that dealt with a similar logistic problem involving common-law marriages. As with same-sex marriages, common-law marriages can be contracted in only some states, but many couples in those unions reside in states that don’t recognize them.
In 1958, the solution was to base tax policies on where a couple was married, rather than where they live. The IRS used the same logic in the decision its announced last week: A same-sex couple’s “place of marriage,” rather than “place of domicile,” is now the relevant factor.
Some significant headaches remain on the horizon for couples who live in one of the 37 “non-recognition” states, and for administrators in those states. It’s likely that gay couples in many of those states still will have to file individual state tax returns.
But given that federal taxable income is often used as the starting point for state taxation, nonrecognition states will have to provide at least some sort of guidance for their citizens. If they don’t, a regulatory nightmare is bound to follow.
In any case, the updated IRS standards are a welcome addition and an important step in the nuts-and-bolts implementation of equality.