IRS Ruling on Same-Sex Marriage and Domestic Partnerships

Categories: National Developments
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From School Services of California Inc., by Sheila G. Vickers, September 6, 2013

In the wake of the Supreme Court’s ruling striking down a section of the federal Defense of Marriage Act (see “Impact of the Supreme Court’s Rulings on Same-Sex Marriage” in the August 9, 2013, Community College Update), the Internal Revenue Service (IRS) has just issued Revenue Ruling 2013-17 to provide some guidance on the impact of this ruling on the implementation of the Internal Revenue Code (IRC).

First, the IRS has determined that, for federal tax purposes:

  • The terms “spouse,” “husband and wife,” “husband,” and “wife” as they appear in the code include an individual in a same-sex marriage if they are married under a state law that allows marriage between individuals of the same sex
  • The term “marriage” includes a marriage of individuals of the same sex if they are married under a state law that allows such a marriage

Secondly, the IRS has determined that the above two rules would apply for federal tax purposes even if the individuals move to another state that does not recognize same-sex marriages.

Third, the IRS has determined that, for federal tax purposes, the terms “marriage,” “spouse,” “husband and wife,” “husband,” and “wife” do not apply to individuals who have not entered into a marriage, whether the individuals are of the opposite sex or the same sex. In other words, registered domestic partners, which by California law are afforded the same rights and privileges as for married couples, would not enjoy the same benefits as marriage under federal law.

Since the Supreme Court also struck down the validity of California’s Proposition 8, same-sex couples can get married under California law, so those couples can enjoy these benefits under federal tax law.

The IRS has specified that this Revenue Ruling is to be applied prospectively as of September 16, 2013, and it can be relied upon by married couples for the purpose of filing federal tax returns. In addition, this ruling can be relied upon retroactively for the purpose of employer-provided health benefits—the employer portion of the premium for a same-sex spouse’s health benefits can be excluded from the employee’s income, and any contribution that the employee makes can be made through a pre-tax salary reduction arrangement (an IRC Section 125 cafeteria plan).

Further guidance is forthcoming with regards to the retroactive provision of this ruling from the IRS. In the meantime, employers will need to revise their payroll systems to prospectively treat same-sex marriages like opposite-sex marriages—specifically, for participation in Section 125 plans and for W-2 reporting of employer-paid premiums related to the health benefits provided to same-sex spouses.

The full text of IRS Revenue Ruling 2013-17 can be found at http://www.irs.gov/pub/irs-drop/rr-13-17.pdf.


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