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Refund Opportunities and Joint Returns for Same Sex Couples

Several months ago, I wrote a quick post to alert our readers to potential refund opportunities if the Supreme Court found in favor of Ms. Edie Windsor’s argument that she should be entitled to receive a refund for estate taxes that she had to pay. Ms. Windsor had married her long-time fiancée, Thea Spyer in Canada before Ms. Spyer’s death in 2009. Earlier this week, in an historic opinion, the Supreme Court ruled that Section 3 of the federal Defense of Marriage Act (“DOMA”) is invalid. At the time of the original blog post, I encouraged taxpayers to consider filing protective refund claims if they were married and filing separately or as individuals due to DOMA. Although several federal agencies have issued statements in the last 24 hours, we have yet to receive guidance about when the IRS anticipates paying out the refunds it owes to taxpayers who filed protective refund claims for years as far back as 2009. The initial filing deadline for 2009 has passed; however, many of our clients do elect to extend the deadline to file their tax returns. So, if you filed your 2009 personal income tax return on extension, it may still be worthwhile to investigate whether filing a joint 2009 personal income tax return would allow you and your spouse to claim a refund.

Also, if you were married in a state that recognizes same sex marriage and have since moved to another state that does not (e.g., Oregon), a 1958 revenue ruling may support your filing a joint federal income tax return. In Rev. Rul. 58-66, the Internal Revenue Service looked at common law marriages to determine how the taxpayers should file their personal income tax return. In that ruling, it considered the situation of a couple that establishes a common law marriage in a jurisdiction that recognizes common law marriage. The couple later moves to a state that does not recognize common law marriage, where a ceremony is required to initiate the marital relationship. The IRS ruled that it would continue to recognize the couple as husband and wife. It’s important to note that there are some cases that look at the domicile jurisdiction of the taxpayer to determine whether they are entitled to file joint personal income tax returns. However, those tend to focus on whether a taxpayer’s divorce was final under state law by the last day of the tax year. So they may not apply to the case of a same sex couple who are married and have not gotten divorced in any jurisdiction.

The Supreme Court’s opinion in United States v. Windsor only addressed married, same sex taxpayers’ rights for federal purposes. I expect that we will see activity at the state level to evaluate whether the equal protection and due process arguments that Justice Kennedy articulated in Windsor are applicable to state tax filings and rights under the due process and equal protection clauses contained in most states’ constitutions. We also anticipate that the courts will be called upon address questions related to the full faith and credit clause (Article IV, Section 1) of the United States Constitution. This clause requires states to respect the “acts, records, and judicial proceedings” of other states. Specifically, to the extent that a marriage in one state is deemed valid, will another state be able to disregard that marriage?

It will be very interesting to see how these questions are answered and how the issues evolve. Stay tuned – we’ll update you as developments occur.