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IRS proposes changes to tax regulations post-Obergefell

The United States Supreme Court effectively ended the national debate surrounding the validity of same-sex marriage this past summer in Obergefell v. Hodges, the landmark case that held that all 50 states must legalize these marital unions going forward.

As much as Obergefell was lauded from a purely human rights perspective, it also served to eliminate the uncertainty -- from a purely tax perspective -- that remained in the wake of SCOTUS' decision in the 2013 case United States v. Windsor.

For those unfamiliar with Windsor, it was essentially the predecessor to Obergefell in that the high court held that Section 3 of the Defense of Marriage Act otherwise prohibiting the federal government from granting legal recognition to same-sex marriage was unconstitutional.

As far as federal taxes were concerned, the Windsor decision meant that the Internal Revenue Service could now effectively extend the same federal tax treatment to couples in same-sex marriages performed in states where it was legally recognized.

However, questions nevertheless remained as to whether these same married same-sex couples could avail themselves of the same federal tax treatment if they later moved to a state where their marriages where not legally recognized.  

Given that Obergefell has resolved this uncertainty, the IRS is now free to take more definitive action.

Indeed, just a few weeks ago, the agency published its proposed regulations that would effectively change how the tax code defines marital status in relation to things like income, gift, payroll and estate taxes.

These proposed regulations read in part: "A marriage of two individuals is recognized for federal tax purposes if the marriage would be recognized by any state, possession, or territory of the United States."

It should be noted that these proposed regulations specifically omit mention of civil unions, domestic partnership and other similar legally recognized relationships.

According to IRS officials, this oversight is intentional and borne out of the understanding that many people make the decision to enter into one of these unions instead of a same-sex marriage after careful consideration, often because they prefer the tax treatment (i.e., the ability to file an individual tax return).

Experts indicate that it will be interesting to see whether more same-sex couples elect to go this route or understandably elect to exercise their constitutional right to marry going forward.

If you have questions concerning state or federal tax issues, consider speaking with an experienced legal professional going forward.  

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