How the IRS just handed gay marriage a huge win

Peter Weber
The WeekAugust 30, 2013
Stefanie Berks and Daisy Boyd hold hands before their marriage ceremony on June 28 in New York City.

On Thursday, the Internal Revenue Service ruled that, for tax purposes, same-sex couples legally married in any state are married, so far as the federal government is concerned, no matter where they live.

This may seem like tax policy minutia. It isn't.

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It's "a big first step to general federal recognition of same-sex marriages," says Dylan Matthews at The Washington Post. After the Supreme Court neutered the Defense of Marriage Act (DOMA) in June, allowing federal recognition of gay marriage, the IRS could very easily have decided that married gay couples file their taxes on a "place of residence" basis — if their state recognizes same-sex marriage, they can file as a married couple; if not, they file individual returns.

Instead, the IRS opted for a "place of celebration" rule, meaning that once they are married in one of the 13 states that recognize same-sex marriage (plus Washington, D.C.), the IRS considers them married, period. And the ruling is retroactive, meaning married gay couples can re-file their taxes back to 2010, but don't have to if it isn't advantageous to do so. (Couples with legally sanctioned civil unions still have to file as individuals.)

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This wasn't the obvious thing for the IRS to decide. The DOMA decision "invalidated a federal definition of marriage as between one man and one woman, and general reaction at the time suggested that the definition of marriage would thus revert to state law," says Joseph Henchman at the Tax Foundation. That is, the IRS would use the "state of residence" standard.

This interpretation is supported by the fact that Section 2 of DOMA, which permits states to refuse to recognize marriages that are at odds with their state's public policy, was not struck down.... The administration asserts that "state of celebration" is in line with private industry practice, which provides benefits to any employee that can demonstrate they are married, regardless of where they live. [Tax Foundation]

"Many may cheer the result, which resolves federal tax ambiguity for same-sex couples in the 13 states and the District of Columbia that recognize their marriage," says Henchman, but it will create a royal headache for the 24 states that bar gay marriage but require taxpayers to reference their federal returns when filing their state tax returns.

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The troubles the IRS ruling hoists on states with no same-sex marriage isn't lost on gay-marriage proponents. Thanks to the tax agency, says Chris Geidner at BuzzFeed, "states that ban same-sex couples from marrying will nonetheless have to deal directly with married same-sex couples living in their states come tax time — putting pressure on executive officials, lawmakers, and courts to address the issue, whether they want to or not."

Several gay-marriage advocates tell Geidner that the IRS decision will not only force non-gay-marriage states to figure out a way to align their tax policies with federal returns, it will also apply new public pressure on civil-union states to move toward recognizing same-sex marriage. Barring that, there will inevitably be more litigation.

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"I expect the Supreme Court is going to need to revisit these issues in the next two to four years," Jon Davidson at Lambda Legal tells BuzzFeed, and Thursday's decision "will be an additional force moving things in the right direction."

If this still seems mostly like quibbling over tax policy, consider the reaction of gay-marriage opponents.

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"The re-election of President Obama meant that the gay agenda would be imposed top-down by executive authority," and here we are, says Robert Stacy McCain at The Other McCain. We have now "advanced to the point that, with the de facto federal imposition of gay marriage (despite constitutional amendments to the contrary in more than 30 states), we are now a judicial hop, skip, and jump from a Supreme Court decision mandating compulsory sodomy."

Ryan T. Anderson makes a similar case, albeit with less hyperbole, at the Heritage Foundation's Foundry blog:

Just as families are getting ready to head out the door for a long holiday weekend, the Obama Administration has rolled out new policies that disregard states' authority over marriage and redefine marriage for a variety of federal purposes.... Given the Supreme Court's ruling on Section 3 of DOMA, the federal government should look to each state's definition of marriage as governing for federal law. This respects both federalism and democratic self-government. A bad Supreme Court ruling should not allow federal bureaucrats to redefine marriage across America for their agency. [The Foundry]

Another way of looking at this: The IRS's gay-marriage policy seems "the most logical way for the federal government to deal with this issue in light of the Supreme Court's decision," says Doug Mataconis at Outside the Beltway. But it isn't a total win for married gay couples. In states with no gay marriage, "same-sex couples will be required to prepare two different sets of federal returns, one for married couples, and one for each of them as single persons for the purposes of preparing the state return." That seems like "yet another inequity experienced by gay and lesbian couples."

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The Week's Carmel Lobello has pointed out all the financial benefits gay couples might reap from DOMA's downfall. But because "same-sex couples are likelier to have similar incomes than opposite-sex couples," says The Washington Post's Dylan Matthews, "the tax bill for many couples will grow going forward." Still, this is a big win for gay marriage, and another sign that the Obama administration wants to offer "benefits to as expansive a set of same-sex married couples as possible." Mostly.

It's still not all federal government roses for these couples. Social Security uses a place of residence rule, and has issued instructions to personnel to deny claims for spousal benefits from same-sex couples living in states where such marriages are not recognized. [Washington Post]

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