On August 29, 2013, in IR-2013-72 and Revenue Ruling 2013-17, 2013-38 I.R.B. __, the Treasury and the IRS announced that same-sex couples that were legally married in a state or jurisdiction that recognizes same-sex marriages will be treated as married for federal tax purposes.  This tax treatment will take place even if the same-sex married couple live in a state or jurisdiction that does not recognize same-sex marriages. The announcement can be accessed at http://op.bna.com/dt.nsf/id/emcy-9b2pa8/$File/Treasury_doma_8.29.pdf.   

In United States v. Windsor, No. 12-307 (U.S. 6/26/13), the Supreme Court ruled that Section 3 of DOMA is unconstitutional as a deprivation of the liberty of the person protected by the Fifth Amendment of the Constitution.  Under the Due Process Clause of the Fifth Amendment, the federal government cannot fail to recognize lawful same-sex marriages for federal tax law purposes.  The Federal government must look to state law to determine whether an individual is a spouse. 

Prior to the August 29, 2013 announcement, the extent of the application of the Windsor holding was unclear, as the Supreme Court did not opine on whether federal benefits extend simply when spouses are married in a state that recognizes same-sex marriage, irrespective of their current residence (e.g., same-sex couple married in MA, but living in VA), or whether the spouses must have been married and currently reside in a state that recognizes same-sex marriages (e.g., same-sex couple married in RI and living in MD).  The fact that Section 2 of DOMA remained untouched added to the confusion.  

The announcement by the Treasury and IRS provides much-appreciated tax certainty and relief in the area of employee benefit administration because it provides for uniform application of the myriad of rules and requirements that apply to married couples under the Code and ERISA.   For example, qualified plans must offer joint and survivor annuities (surviving spouse receives 50% - 100% of a participant’s benefit during their life) and pre-retirement survivor annuities with the surviving spouse as beneficiary of the survivor portion.  This requirement will now apply to opposite-sex and same-sex married participants. 

Revenue Ruling 2013-17 also brings tax certainty in the realm of employer-provided health care coverage. Code §106(a) provides that employer-provided health coverage and reimbursements for medical care are excluded from an employee’s gross income.  Also excluded under Code §105(b) are contributions made by the employer for health care coverage of the employee’s spouse and children (up to age 27) and reimbursements for their medical care.  Revenue Ruling 2013-17 makes it clear that coverage for same-sex spouses is nontaxable under Code §105(b).  Employees who purchased same-sex spousal health care coverage from their employers on an after-tax basis (which was the treatment prior to Windsor and generally through the date of Revenue Ruling 2013-17) may treat any amounts paid for such coverage as pre-tax and excludible from income.