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Federal tax implications of same-sex marriage.

On Nov. 18, 2003, the Massachusetts Supreme Judicial Court handed down a decision which, potentially, could have vast implications for the culturally charged issue of the Federal position on same-sex marriage. In Hillary Goodridge v. Dep't of Pub. Health, 440 Mass. 309, 343 (2003), the court held that to "deny the protections, benefits, and obligations conferred by civil marriage to two individuals of the same sex who wish to marry" was inconsistent with the constitution of the Commonwealth of Massachusetts.

The court further clarified, on Feb. 3, 2004, that merely granting civil union status would not satisfy the decision to grant marriage rights to two individuals of the same gender; see Opinions of the Justices to the Senate (SJC-09163, 2/3/04).This position immediately incited debate, as Lawmakers, government agencies and activist groups began wrestling with the resulting implications for two important issues: filing Federal returns and qualifying for Social Security benefits.

The Federal Definition of Marriage

The Federal definition of marriage determines the U.S. government's position on both of these issues. In 1996, the Defense of Marriage Act (DOMA) was enacted, which currently defines marriage for Federal purposes. DOMA Section 3(a) states, "[i]n determining the meaning of any Act of Congress, or of any ruling, regulation, or interpretation of the various administrative bureaus and agencies of the United States, the word 'marriage' means only a legal union between one man and one woman as husband and wife, and the Word 'spouse' refers only to a person of the opposite sex who is a husband or a wife."

Application by the IRS

In response to queries about the Federal implications of the Massachusetts decision, Frank Keith, the IRS Chief of Communications and Liaison, represents the IRS's position as follows: "Because of [the DOMA], only married individuals under this definition could elect to file a joint tax return"; see asp?ARTICLE_ID=38989 and article=95. Although a state may acknowledge two people of the same gender as united in marriage for state purposes, they will not be considered married under Federal law.

He goes on to say that taxpayers in same-sex relationships are not allowed to file as a married couple on a Federal income tax return. As a result of this determination, same-sex couples married in Massachusetts will likely have a different filing status for Federal and for state purposes; see MA Dep't of Rev. (DOR) Technical Information Release (TIR) 04-17 (7/7/04) and Day, Tax Clinic, "Tax Implications for Massachusetts Same-Sex Marriages," p. 742, this issue.

The DOR acknowledges the complexities that will certainly arise, noting in the TIR, "[w]here elements of Massachusetts taxation derive from Federal law, such as the definition of gross income, or state deductions that are based on a Federal counterpart, same-sex spouses may need to perform special calculations to arrive at the proper Massachusetts tax figure. "The DOR highlights several issues that are complicated by the inconsistent filing status, such is dependency exemptions, deductible care expenses, passive activity losses and student loan interest deductions. The DOR directs taxpayers and practitioners to various worksheets and explanatory bulletins available on its website.

Although the Federal position clearly prevents same-sex couples from filing a joint return, the Congressional Budget Office prepared a report analyzing the potential result of such couples filing jointly for Federal purposes. According to the most recent U.S. Census of the total adult population, only 0.6% identify themselves as same-sex partners; see "The Potential Budgetary Impact of Recognizing Same-Sex Marriages," available at 559&sequence=0.The report uses this figure in evaluating the potential for increased revenue generation from a scenario in which same-sex couples file jointly and found that the effect on total revenue would be minimal.

The two primary areas affected would be individual taxation and estate taxes. If same-sex marriages are legalized on a Federal level, revenues from income taxes would increase slightly, but by less than 0.1% of total Federal revenues. This assumed that the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) and the Jobs Growth and Tax Relief Reconciliation Act of 2003 would not be extended and the marriage penalty eventually increased. However, because the EGTRRA provision reducing the marriage penalty was not allowed to expire, the additional revenue from same-sex marriages would be even smaller.

The report also addresses the effect Federally legalized same-sex marriages would have on estate tax revenue, which it claims is "almost certain to be small" The primary effect of such marriages in this area would be the unlimited spousal exemption. Additionally, marriage can delay estate tax payment until the second spouse dies, potentially postponing revenue for years. This is also subject to adjustment by the EGTRRA, because the estate tax is presently scheduled to be diminished "steadily" until 2010, when it "return abruptly to its pre-2001 levels." This "shift could increase revenues by moving taxation from a relatively low tax year (through 2010) into a higher tax year (Her 2010)."

Application by the SSA

Social Security is another area potentially affected by state allowance of same-sex marriages. The Congressional Research Service (CRS) released a report analyzing the effect same-sex marriages in Massachusetts would have on the Social Security Administration (SSA); see "The Effect of State-Legalized Same-Sex Marriage on Social Security Benefits and Pensions," available at

There had been some question as to whether the SSA was tied to the Federal definition of marriage. According to the CRS report, "[t]he Social Security Act generally defers the determination of whether a marriage is valid for the purpose of qualifying for spousal or survivor benefits to the state residence of the worker." Some argue that this deference should also apply to state definitions of marriage in determining Social Security eligibility for a married spouse. Yet, the report points out, "the definitions of 'wife' and 'husband' in the Social Security Act rely on gender-specific pronouns." Further, the report indicates that regardless of the gender-specific pronouns, the SSA is legally bound by the Federal definition of marriage established in the DOMA.

So, same-sex marriage at the state level is irrelevant to the SSA's determination of the legitimacy of marriage for benefit eligibility purposes.


No court has yet to uphold the DOMA'S constitutionality. As long as the DOMA remains the Federal standard in defining marriage, the Massachusetts court decision will not affect the individual Federal filing status or Social Security eligibility of same-sex couples.

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Author:Downer, Abigail L.
Publication:The Tax Adviser
Date:Dec 1, 2004
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