On 20 December 2013, the U.S. District Court for the District of Utah ruled that the state’s ban on same-gender marriage is unconstitutional. Although the state intended to appeal the decision, the U.S. District Court did not place a stay on same-gender marriages pending a ruling by the higher court. About 1,400 marriage licenses were issued before the U.S. Supreme Court held that same-gender marriages should cease in Utah pending a ruling by the Federal District Court.
On 10 January 2014, the U.S. Department of Justice issued a statement announcing that Utah marriage licenses issued to same-gender couples prior to the stay will be recognized as lawful and considered eligible for all relevant federal benefits on the same terms as other same-gender marriages.
This announcement by the U.S. Justice Department underscores the growing complexities in determining the tax treatment of same-gender spousal benefits. In Missouri for instance, although same-gender marriages are not permitted, these couples file a joint Missouri income tax return if a federal joint return is filed. Now, a same-gendered couple married in Utah is considered married for US tax purposes, although the marriage is not recognized within the state.
Finally, the announcement raises the question as to how the U.S. Justice Department will define what constitutes a lawful marriage, particularly how it will rule when same-gender marriage licenses are issued in a state where a prohibition on such unions is under legal challenge.
It is hoped that the IRS will post to its website a list of state and foreign jurisdictions for which marriage licenses are valid for federal purposes.
For more on the tax treatment of same-gender spousal benefits, see our 2013 year in review.
|Ernst & Young LLP insightsThe U.S. Treasury Department and the IRS held in Revenue Ruling 2013-17 that same-gender couples who are lawfully married in state and foreign jurisdictions recognizing same-gender marriages will be treated as married for US federal tax purposes. Until 10 January 2014, there was some uncertainty as to how the Treasury Department would define “lawfully married.” A number of states have placed a constitutional ban on same-gender marriages. In the wake of the U.S. Supreme Court in Windsor, the legality of such bans has faced numerous challenges. Consequently, questions have arisen as to the extent to which marriages would be deemed lawful for federal purposes if such unions are pending state appeal.|