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IRS to treat same-sex marriages equally for tax purposes

Published August 29, 2013 7:09 pm

Taxes • Feds will recognize all legally married couples no matter where they live; Utah tax officials may follow suit.
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Marian Edmonds Allen of Ogden will now file a joint federal tax return with her wife because of the announcement Thursday by The Treasury Department and Internal Revenue Service that those federal agencies will treat same-sex marriages the same as heterosexual marriages for tax purposes.

The new policy, which comes in response to the Supreme Court ruling in June overturning a key portion of the Defense of Marriage Act (DOMA), allows same-sex spouses to file tax returns as couples if they were married in a state legally recognizing such unions regardless of whether they live in a state — like Utah — that doesn't recognize them.

There are roughly 114,100 same-sex U.S. couples who are legally married.

Allen and her wife, legally married recently in New York, may also be filing a joint Utah income tax return — unless the Legislature acts to prevent that or the Utah attorney general declares such action a violation of the state Constitution.

Following the feds • Absent specific legislation, "we would just follow the federal government," Utah Tax Commission Chairman Bruce Johnson told The Tribune on Thursday.

The Utah income tax system piggybacks on the federal system, so no action would be required at the state level to follow the new policy.

Nevertheless, because of Amendment 3, the constitutional amendment approved by Utah voters in 2004 banning any marriage-like privileges to same-sex couples, tax commissioners are unsure how the issue will play out.

"That's a very good question. All I can tell you is that we've asked the attorney general's office to look at it," Johnson said.

Johnson called an assistant attorney general within days of the Supreme Court ruling and was told the office already was looking into it. Attorney general office spokesman Paul Murphy said Thursday that attorneys will meet soon with tax officials to discuss the issue in the context of state laws and the Constitution.

Leaving aside the legal questions, the commissioner said it wasn't clear how Utah's tax system could practically detach from the federal policy.

"I don't know that it would be obvious" that a couple filing jointly was same-sex "unless we put something specific on the Utah return to request information," Johnson said. "I don't have any idea how many returns we're talking about and I don't know how we would identify those returns."

Sen. Curt Bramble, R-Provo, is a member of the Senate Revenue and Taxation Committee and a CPA. He said unplugging the state tax system from the federal would increase costs and headaches for Utah.

"I don't think there's going to be an appetite in Utah to take that on," Bramble said.

New policy • The federal policy announcement won immediate praise from gay-rights advocates.

"Overturning DOMA, and with the two big supporting decisions coming today — federal tax benefits and Medicare ensured nursing home access for same-sex spouses — has a huge impact on [lesbian, gay, bisexual and transgender] LGBT youth, even in Utah," said Edmonds Allen, executive director of the OUTreach Resource Center. "Instead of thinking about a life as a single person, the youth we work with are planning families: How old they will be when they get married and how many children they will have."

Clifford Rosky, a University of Utah law professor and an Equality Utah board member, said when people get married they often think about "filing tax returns is the one big benefit of marriage."

"This is a big deal," Rosky said. "I don't know if it will tip the scales for anyone to get married ... but it's clearly an incentive."

He said people get married for a variety of reasons, usually for love or recognition, but the latest ruling could help a gay couple finance a trip to California to get married.

The tax savings could be substantial — topping $1,000 per couple simply for doing away with the current requirement that health insurance for a same-sex spouse be counted as taxable income, according to the Human Rights Campaign.

" Furthermore, transfers of property, gifts and inheritances between same-sex spouses were taxed, unlike those between opposite-sex spouses," the organization said in a press release.

Weston Clark of Salt Lake City said he will not be getting married to his longtime partner, even with the latest news.

"I am really excited that the federal government is moving, yet again, to recognize same-sex marriages in another way," Clark said. "I honestly don't think it'll be a big enough incentive for us to get married because I feel like in some ways we take advantage of being 'single' in the eyes of the government. As far as the government knows, I'm a dependent, jobless, single-person with a kid. There are some advantages there."

If he were to get married, Clark said he wants to do it in Utah.

"I, and many others, want to get married in our home state," Clark, a Utah native, said. "We want to get married where our whole family and all of our friends can easily be there. I would feel very sad getting married in another state in which it would be difficult, or a sacrifice, for my family to be there. So I think we will likely wait.

Future challenge • More importantly, Rosky said the language in the majority opinion on the Supreme Court DOMA decision means a future challenge for Utah's Amendment 3, and similar bans in more than 30 other states.

The opinion, written by Justice Anthony Kennedy, states that DOMA placed same-sex couples in a "second-tier" marriage that "demeans" a relationship a state has sought to dignify.

"And it humiliates tens of thousands of children now being raised by same-sex couples," the 5-4 majority said. "The law in question makes it even more difficult for the children to understand the integrity and closeness of their own family and its concord with other families in their community and in their daily lives."

Rosky said there are cases now that could result in overturning Amendment 3 including "one in Nevada and Hawaii before the 9th Circuit Court of Appeals, one step before the Supreme Court."

In announcing the tax-policy change, Treasury Secretary Jack Lew said in a statement that the move "provides certainty and clear, coherent tax filing guidance for all legally married same-sex couples nationwide. It provides access to benefits, responsibilities and protections under federal tax law that all Americans deserve."

He also said the policy will contribute to tax stability, regardless of residence, by assuring "legally married same-sex couples that they can move freely throughout the country knowing that their federal filing status will not change."

The ruling does not apply to registered domestic partnerships, civil unions, or similar formal relationships recognized under state law.

Same-sex couples married before the DOMA ruling will have the option of filing amended returns for one or more prior tax years, according to the announcement. —

Fast facts • There are nearly 650,000 same-sex couples in the United States, including some 114,100 who are legally married and more than 108.600 in civil union or registered domestic partnerships, according to the Williams Institute at the University of California-Los Angeles.

Same-sex couples are able to marry in 13 states: California, Connecticut, Delaware, Iowa, Maine, Maryland, Massachusetts, Minnesota, New Hampshire, New York, Rhode Island, Vermont and Washington, as well as the District of Columbia.

A New Jersey judge said her decision on whether the state is constitutionally required to legalize gay marriage will be delivered as early as September.

Six states now offer broad protections short of marriage. Colorado, Hawaii, Illinois and New Jersey, while Oregon and Nevada offer broad domestic partnership. Wisconsin has more limited domestic partnership.

New Mexico honors out-of-state marriages between same-sex couples but does not perform them in-state.