The Lay of the Land Post-Windsor and -Perry
By Kinna Crocker With marriage equality now coming to Illinois and Hawaii, nearly 40% of the country lives in a marriage equality state. But just how federal and state governments will navigate the still-unsettled reality (and consequences) of marriage equality remains an open question. The Supreme Court’s decisions in U.S. v. Windsor and Hollingsworth v. Perry vastly expanded the rights of the LGBT community by mandating same gender married couples have access to the over 1,000 federal rights and benefits (Windsor) associated with marriage. In Windsor, the Court held that Section 3 of the federal Defense of Marriage Act (DOMA), defining marriage as between a man and a woman, violates basic due process and equal protection rights. As a result of the Court’s decision invalidating this definition, the federal government must treat same gender married couples the same as opposite gender married couples for purposes of access to federal benefits. In Perry, the Court held the sponsors of Proposition 8, California’s constitutional ban on same gender marriage, did not have standing to appeal favorable lower court rulings on behalf of the state of California, effectively allowing same gender marriages to resume in California. In August, the Supreme Court denied Proposition 8 sponsors a final petition for review. Although Windsor invalidated Section 3 of DOMA, it left Section 2 in place, which allows states to refuse to recognize same gender marriages performed in other states. Marriages are not judgments or orders, and are therefore not entitled to equality under constitutional principles of full faith and credit among the states. If a same gender couple legally marries in a “marriage equality state” and moves or travels to a “non-equality state” (a state that does not recognize same gender marriage), the marriage has no legal meaning and ceases to exist as a matter of law in the non-equality state. This lack of uniformity in marriage equality among the states creates many questions regarding the availability of federal benefits for same gender married couples. By statute, certain federal benefits are available only if the couple is validly married under the laws of the state in which they reside, the so-called “place of residence” rule. Other federal benefits are available if the couple is considered to be validly married where the marriage license was obtained, the so-called “place of celebration” rule. The “place of celebration” rule is more expansive because the couple can obtain benefits regardless of the laws of the state in which they live. Although President Obama acted swiftly in calling on federal agencies to adopt the “place of celebration” rule to provide uniformity in the treatment of benefits for same gender couples, some federal agencies have not yet declared official positions and some have implemented the “place of residence” rule. For example, the Social Security Administration indicated Social Security benefits are available to same gender married couples if they live in a state that recognizes their legal union (the “place of residence” rule). It is unclear whether Social Security benefits will be available to same gender couples who were married in a marriage equality state and now live in a non-equality state; those applications are currently being held and not processed. Until further notice from the Social Security Administration, some same gender couples are waiting anxiously to learn whether they are entitled to benefits. Alternatively, some federal agencies clearly provide certain benefits to same gender married couples regardless of where they reside, endorsing the “place of celebration” rule. The Department of Defense, for instance, announced its plan to extend spousal and family benefits to same gender spouses of uniformed service members. Because some service members live in or are stationed in non-equality states, the Department of Defense is allowing military personnel ten days of non-chargeable leave for the purpose of traveling to a jurisdiction where same gender marriage is available in order to marry. Although six states have withheld issuing spousal cards to same gender spouses of national guard troops, the others (whether equality states or not) have begun issuing them. The Treasury Department recognizes marriages of same gender couples, regardless of where the couple lives. This adoption of the “place of celebration” rule provides for uniform treatment of all same gender married couples with respect to the filing of federal tax returns. These same gender couples can use the status of "married" on their federal returns and all federal tax provisions where marriage is a factor, including employee benefits, IRA contributions, earned income, child tax credits, and gift and estate taxes, will apply to same gender married couples. The policy explicitly does not apply to couples who are registered as domestic partners or who are in civil unions. Although the “place of celebration” rule provides uniformity in federal filing status for same gender married couples, it highlights the conflict present in non-equality states. Couples living in non-equality states must use the single filing status for state tax returns and the married filing status for federal tax returns. Since the information on federal and state returns is interconnected, these couples expend more in accountant fees in order to file tax returns correctly. The Supreme Court decisions also greatly affect the practice of family law. For example, a bizarre phenomenon now occurs where same gender couples legally married in marriage equality states, but living in non-equality states, are unable to divorce in their state of residence. This unusual circumstance has been dubbed “wedlocked” and is clearly causing problems for many couples. For example, a same gender couple married in California cannot obtain a divorce in Alaska without some creative legal maneuvering. Some Alaska attorneys are requesting annulments of these marriages, since neither marriage nor divorce is available to same gender couples, despite the fact that the elements of annulment are not satisfied. An annulment is objectionable to many same gender couples because, in effect, they are agreeing and representing to the court they were never married. Further, any federal spousal benefits to which those spouses may have been entitled after divorce are lost. For some couples, the state of domicile can resolve property division issues through property laws (although the applicability of community property laws becomes an issue) and custody disputes through laws applicable to unmarried parents. However, these couples are forced to maintain their marital status for federal purposes. The lack of uniformity among the states causes confusion and the potential for married couples to be stuck in their legal relationships with no apparent recourse. In California, the Perry decision grants legal marriage rights to same gender couples in the state. Same gender couples who were married in another state or country do not have to remarry in California to avail themselves of California spousal benefits and protections. Proposition 8 is deemed to be unconstitutional so all marriages validly performed in any marriage equality state or country, are recognized as valid marriages in California. Although parentage presumptions will apply equally to same and opposite gender married couples in California, post-Perry, it remains advisable for a non-biological parent to adopt the children of the marriage or domestic partnership. If LGBT families intend to travel across state lines, or decide to move to a non-equality state, there is no guarantee that parentage would be recognized based solely on the couple’s marital status as defined by a marriage equality state. As compared to a marriage license, a formal adoption order is a stronger legal document to possess should parentage be challenged in a non-equality state or in a state that refuses to recognize any and all rights flowing from a same gender relationship. As the law changes and government agencies provide guidance with respect to rights and responsibilities of individuals in same gender marriages, domestic partnerships and civil unions, it is important for LGBT families to continue to educate themselves. The uncertainty over when we will achieve marriage equality in all 50-states only makes this more imperative. Edited and reprinted with permission from the Bar Journal of the Sonoma County Bar Association.
Guest Post: Community Property and Federal Tax Returns
[caption id="attachment_368" align="alignleft" width="112"] Boyce Hinman[/caption] Authored by Boyce Hinman, founder and director of the California Communities United Institute, and member of Marriage Equality USA. Hinman has been writing and posting a series, "Monday Morning Marriage Memo," as part of his Anatomy for Justice blog. This article was first published there, and is republished here with the author’s permission. Hinman resides in and serves California, therefore the posts sometimes have a California slant. NOTE: Marriage Equality USA is not a legal firm or a tax/accounting firm. No action should be taken based solely on the content of our news blog or website. The federal government requires that all same sex married couples either file joint federal income tax returns or file as married filing separately. This includes same-sex married couples. However, in 2010, the Internal Revenue Service (IRS) issued a ruling that affects the filing of federal income tax returns by registered domestic partners, as well. The key wording in that ruling is as follows: “For tax years beginning after December 31, 2006, A California registered domestic partner must report one-half of the community income, whether received in the form of compensation from personal services or income from property, on his or her federal income tax returns.” Note: I am not an attorney or a qualified tax expert. No action should be taken based solely on the content of these memos. However, I hope the memos will help you ask the right questions of people who are qualified in these issues. The ruling says the income of California domestic partners must be split evenly because California is a so called “Community Property” state. Under California law income earned while a couple is in a registered domestic partnership is community property. All that income is owned by both of them regardless of who earned it. There is at least one exception to the requirement of splitting the household income on the federal tax return. That exception has to do with when the income was earned, or when the property was purchased. If, for example, one of the partners retired before entering the partnership, and that person is receiving a pension, then that pension income is separate property and does not need to be divided and half shown on each federal tax returns. Similarly, if one of the partners bought a rental property, prior to entering the domestic partnership, the rental income from that property is not community property. The income from that property should be reported only on the federal income tax return of the person who bought it prior to the domestic partnership. Sadly, the IRS staff does not seem to be informed of the ruling. Once we heard of the ruling Larry and I started dividing our community income in half and each reported half of it on our federal returns. Each year the IRS responded with a letter saying I had under reported my bank account interest income and so I owed more taxes than I had paid. However, the issue was that our joint savings accounts had only my Social Security number attached to them. Each year I cleared up the problem by sending them a copy of the IRS ruling, plus a copy of our registration as domestic partners. You can see, and download, a copy of the IRS ruling by clicking on the following link and then scrolling down to and clicking n the link at the bottom of the web based copy of this article. Here is the link to get you started. IRS Ruling These are complicated matters. Anyone wanting to act on this information should definitely consult an expert on income taxes before taking that action.