Employee Benefits-What Did IRS Say On Treatment Of Same-Sex Marriage For Federal Tax And Employee Benefits Purposes?

Further to Wednesday’s blog, the Internal Revenue Service (“IRS”) has issued Revenue Ruling 2013-17, which provides guidance on the treatment of same-sex marriage for federal tax purposes, including employee benefits governed by federal tax rules. Here is what the Ruling says:

HOLDINGS

1. For Federal tax purposes, the terms “spouse,” “husband and wife,” “husband,” and “wife” include an individual married to a person of the same sex if the individuals are lawfully married under state law, and the term “marriage” (apparently under the law of that state) includes such a marriage between individuals of the same sex.

2. For Federal tax purposes, the IRS adopts a general rule recognizing a marriage of same-sex individuals that was validly entered into in a state whose laws authorize the marriage of two individuals of the same sex even if the married couple is domiciled in a state that does not recognize the validity of same-sex marriages. Translation: The law of the state in which the marriage occurred, that is, the state of celebration, determines the status of a same-sex marriage, not the law of the state in which the couple reside.

3. For Federal tax purposes, the terms “spouse,” “husband and wife,” “husband,” and “wife” do not include individuals (whether of the opposite sex or the
same sex) who have entered into a registered domestic partnership, civil union, or other similar formal relationship recognized under state law that is not denominated as a marriage under the laws of that state, and the term “marriage” (again, apparently under the law of that state) does not include such
formal relationships.

PROSPECTIVE/RETROACTIVE APPLICATION

The holdings of this Revenue Ruling will be applied prospectively as of September 16, 2013. Except as provided below, affected taxpayers also may rely on this revenue ruling for the purpose of filing original returns, amended returns, adjusted returns, or claims for credit or refund for any overpayment of tax resulting from these holdings, provided the applicable limitations period for filing such claim under section 6511 has not expired.

Taxpayers may rely on this Revenue Ruling retroactively with respect to any employee benefit plan or arrangement or any benefit provided thereunder only for purposes of filing original returns, amended returns, adjusted returns, or claims for credit or refund of an overpayment of tax concerning employment tax and income tax with respect to employer-provided health coverage benefits or fringe benefits that were provided by the employer and are excludable from income under Code sections 106, 117(d), 119, 129, or 132 based on an individual’s marital status. For purposes of the preceding sentence, if an employee made a pre-tax salary-reduction election for health coverage under a section 125 cafeteria plan sponsored by an employer and also elected to provide health coverage for a same-sex spouse on an after-tax basis under a group health plan sponsored by that employer, an affected taxpayer may treat the amounts that were paid by the employee for the coverage of the same-sex spouse on an after-tax basis as pre-tax salary reduction amounts.

The IRS intends to issue further guidance on the retroactive application of the
Supreme Court’s opinion in Windsor to other employee benefits and employee benefit plans and arrangements.