ARTICLE DETAIL

September 28, 2017

Legislation to Provide Equal Tax Treatment for Married Same Sex Couples

By:  Cheryl A. Jones, Esquire

On July 13, 2017 Rep. Richard E. Neal (D-MA-1), joined by other members of the U.S. House of Representatives, introduced H.R. 3234, Refund Equality Act of 2017, which has been referred to the House Committee on Ways and Means.  The bill was also introduced on the Senate side as S. 1564, by Elizabeth Warren (D-MA), joined in by other Senators, and referred to the Senate Committee on Finance.

The legislation is intended to address perceived inequity arising from a “disconnect” in timing between the U.S. Supreme Court’s decision in U.S. v. Windsor, 570 U.S. ___ (2013) (Docket No. 12-307), and the existence of the federal Defense of Marriage Act, invalidated by the opinion in Windsor (“DOMA”) (Pub.L. 104–199, 110 Stat. 2419, enacted September 21, 1996, 1 U.S.C. § 7 and 28 U.S.C. § 1738C), which prevented the federal government from recognizing the marriage of same-sex couples.  Consequently, they were thereby prevented from filing joint income tax returns if legally married in a state which recognized such marriages.

After the decision in Windsor, the IRS announced that married same-sex couples could amend previously-filed tax returns to claim refunds or credits due as a result of marital status in light of the Windsor decision.  However, the IRS lacks authority to override the applicability of two time limitations in the Tax Code: Section 6013(b) limits to three years the period within which a married couple may make an election to file jointly after having filed separate returns, and section 6511(a) generally requires a claim for credit or refund of an overpayment of tax to be filed within three years from the time the return was filed. Without passage of the legislation, same-sex couples who were married in jurisdictions that recognized same-sex marriage prior to the Windsor decision are currently unable to claim refunds for certain years that they were legally married.

The Act would create an exemption to this three-year limitations period in the Internal Revenue Code that would allow married same-sex couples to file for federal income tax adjustments back to the date of marriage. The Act provides that an amended return for a past year can be filed up to the due date for the return for the year in which the provision is enacted.  Therefore, if the Act were enacted in 2018, same sex married couples could file an amended return for any previous year in which they were legally married until April 15, 2018.

Couples can often save money by filing jointly. The wider tax brackets available to married couples allow for much of a couple’s income to fall into a lower bracket, which can reduce their overall tax rate, thereby creating what professionals refer to as a “marriage bonus.”

Some argue that same-sex couples were aware of the tax laws when they were married and no further exception should be made to the three year limitation periods.  Proponents argue that since non-recognition of same-sex marriages was illegal that those couples should not be treated disparately from other married couples.  Those proponents argue that there are other exceptions in the tax law for similar treatment of other taxpayers and that the cost to the government would be minor compared to the potential refunds that such couples might secure.

The bill, which is currently in committee, is unlikely to get much traction in the current political environment in Washington.  

Cheryl A. Jones is an attorney in the Wealth Preservation department at PK Law whose practice includes estate administration, elder law, second parent adoptions, and estate planning for a wide variety of clients, including for same-sex couples. Cheryl can be reached at 410-769-6141 or cjones@pklaw.com.