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U.S. gov’t to recognize same-sex marriages for tax purposes

Even legally wed couples in non-marriage equality states will be eligible for tax benefits

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Jeff Zarillo, Paul Katami, Sandy Stier, Kris Perry, David Boies, Chad Griffin, gay marriage, same-sex marriage, marriage equality, Proposition 8, Defense of Marriage Act, DOMA, Prop 8, California, Supreme Court, gay news, Washington Blade
Jeff Zarillo, Paul Katami, Sandy Stier, Kris Perry, David Boies, Chad Griffin, gay marriage, same-sex marriage, marriage equality, Proposition 8, Defense of Marriage Act, DOMA, Prop 8, California, Supreme Court, gay news, Washington Blade

The U.S. government will treat married same-sex couples as equal in the aftermath of the court ruling against DOMA (Washington Blade photo by Michael Key).

The legal same-sex marriages of gay couples — whether or not they reside in a state that observes their union — will now be recognized for tax purposes in the wake of the Supreme Court decision against the Defense of Marriage Act.

Treasury Secretary Jacob Lew announced the change on Thursday in a joint statement with the Internal Revenue Service.

“Today’s ruling provides certainty and clear, coherent tax filing guidance for all legally married same-sex couples nationwide,” Lew said. “It provides access to benefits, responsibilities and protections under federal tax law that all Americans deserve. This ruling also assures legally married same-sex couples that they can move freely throughout the country knowing that their federal filing status will not change.”

The decision, which brings the Obama administration into compliance with the ruling against DOMA, means gay married couples will be able to file federal taxes jointly each year. The announcement also means married gay couples be treated the same as opposite-sex married couples for income and gift and estate taxes.

These couples, according to the joint statement, will now be treated equally in terms of claiming personal and dependency exemptions, taking the standard deduction, employee benefits, contributing to an IRA and claiming the earned income tax credit or child tax credit.

LGBT advocates applauded the Obama administration for instituting the change, which they said would help bring relief to married gay couples throughout the country.

Evan Wolfson, president of Freedom to Marry, said the announcement makes today “a day of celebration and relief for married same-sex couples all over America.”

“At long last, the IRS will treat them as what they are: married,” Wolfson said. “Freedom to Marry commends the administration’s swift implementation of the Supreme Court’s landmark ruling for federal equality in an area that will have a direct, tangible impact on families’ financial health.”

Chad Griffin, president of the Human Rights Campaign, also praised the Obama administration for implementing the change.

“With today’s ruling, committed and loving gay and lesbian married couples will now be treated equally under our nation’s federal tax laws, regardless of what state they call home,” Griffin said.  “These families finally have access to crucial tax benefits and protections previously denied to them under the discriminatory Defense of Marriage Act.”

The issue of unequal federal taxation for gay married couples was the reason why the Supreme Court struck down Section 3 of DOMA. Plaintiff Edith Windsor, a New York lesbian, sued the U.S. government because she had to pay $363,000 in estate taxes upon the death of her spouse, Thea Spyer.

According to the statement, the federal government will now recognize for tax purposes any legal same-sex marriage — even if the couples resides in a state that doesn’t observe the union. However, the new policy doesn’t apply to domestic partnership or civil unions.

Troy Stevenson, executive director of the New Jersey-based Garden State Equality, said the decisions demonstrates why his state needs to enact marriage equality. New Jersey offers civil unions, but not same-sex marriage.

“While this is great news for couples who have been married in the 13 states that recognize full marriage equality; let us be clear, New Jerseyans should not be required to cross state lines to be afforded the dignity of marriage,” Stevenson said. “This decision by the IRS makes it crystal clear that civil unions are not now, and never will be equal to marriage.”

Additionally, gay couples may file an amended return if they feel they would’ve receive a refund in one or more prior tax years still open under the statute of limitations. That means these couples generally can file a refund claim for up to three years in the past: 2010, 2011, and 2012. Under some circumstances, such as signing an agreement with the IRS to keep the statute of limitations open, they may be able to seek a refund from an earlier time.

Further, gay employees who receive same-sex spouse health insurance coverage from their employers on an after-tax basis may treat the amounts paid for that coverage as pre-tax and excludable from income.

Pending legislation in the Senate that would have eliminated the federal tax on employer-provided health insurance for same-sex couples is known as the Tax Parity for Health Plan Beneficiaries Act.

Sen. Charles Schumer (D-N.Y.), the sponsor of the bill, said in a statement to the Washington Blade he welcomes the new policy from the administration, but still seeks passage of his bill cover individuals in civil unions or domestic partnerships.

“Today’s ruling is an important part of implementing the Supreme Court’s historic decision to overturn DOMA,” Schumer said. “I still strongly believe that couples in civil unions and domestic partnerships should receive the same tax treatment as all married couples and will continue to push for exactly that.”

Senior Treasury officials lay out new policy

In a conference call with reporters, senior Treasury officials, speaking on condition of anonymity, laid out the reasoning by which the administration determined that married gay couples living in non-marriage equality states would be recognized for federal tax purposes.

“We have a federal tax code that applies to all 50 states,” officials said. “The thought process was that from tax administration standpoint, it made sense to have rules to apply across the entire nation. So, same-sex couples that are married under federal law in one state should get similar treatment regardless of where they live. On the flip side, from the administration’s standpoint, it would be very difficult to administer a situation it was dependent on where a taxpayer lived on what the state was in that time.”

Officials said the reasoning was analogous to the administration’s previous determination that common law marriages, or some kind of irregular marriage, would be recognized as a union for federal tax purposes.

It’s possible that under some circumstances, married gay couples will have to pay more in taxes than they were paying with DOMA in place. Officials didn’t have an exact number for how many gay couples would pay more in taxes, but expected it would be proportionate to the number of straight couples.

While gay couples may file an amended tax return for up to three years in the past, officials said there’s no obligation to do so — even if they should have had to pay more in taxes under the new policy.

“It’s basically the taxpayers option to that, to go back and file an amended return,” officials said. “There are instances in which a taxpayer would find it advantageous to file an amended return claiming a joint filing status for a previous tax year, but it’s not a requirement.”

In the event that an employer offers domestic partner health benefits to gay employees, but doesn’t recognize same-sex marriage, officials said federal tax immunity would also apply to these benefits. That would be a situation to similar to Walmart, which is set next year to offer domestic partner health benefits to gay employees in same-sex relationships, but won’t recognize same-sex marriages.

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Congress

Ritchie Torres says he is unlikely to run for NY governor

One poll showed gay Democratic congressman nearly tied with Kathy Hochul

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U.S. Rep. Ritchie Torres (D-N.Y.) (Washington Blade photo by Michael Key)

Gay Democratic Congressman Ritchie Torres of New York is unlikely to challenge New York Gov. Kathy Hochul (D) in the state’s next gubernatorial race, he said during an appearance Wednesday on MSNBC’s “Morning Joe.”

“I’m unlikely to run for governor,” he said. ““I feel like the assault that we’ve seen on the social safety net in the Bronx is so unprecedented. It’s so overwhelming that I’m going to keep my focus on Washington, D.C.”

Torres and Hochul were nearly tied in a poll this spring of likely Democratic voters in New York City, fueling speculation that the congressman might run. A Siena College poll, however, found Hochul leading with a wider margin.

Back in D.C., the congressman and his colleagues are unified in their opposition to President Donald Trump’s signature legislation, the “Big Beautiful Bill,” which heads back to the House after passing the Senate by one vote this week.

To pay for tax cuts that disproportionately advantage the ultra-wealthy and large corporations, the president and Congressional Republicans have proposed massive cuts to Medicaid and other social programs.

A provision in the Senate version of the bill that would have blocked the use of federal funds to reimburse medical care for transgender youth was blocked by the Senate Parliamentarian and ultimately struck from the legislation, reportedly after pressure from transgender U.S. Rep. Sarah McBride (D-Del.) and lesbian U.S. Sen. Tammy Baldwin (D-Wis.).

Torres on “Morning Joe” said, “The so-called Big Beautiful Bill represents a betrayal of the working people of America and nowhere more so than in the Bronx,” adding, “It’s going to destabilize every health care provider, every hospital.”

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Congress

House Democrats oppose Bessent’s removal of SOGI from discrimination complaint forms

Congressional Equality Caucus sharply criticized move

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Treasury Secretary Scott Bessent (Washington Blade photo by Michael Key)

A letter issued last week by a group of House Democrats objects to Treasury Secretary Scott Bessent’s removal of sexual orientation and gender identity as bases for sex discrimination complaints in several Equal Employment Opportunity forms.

Bessent, who is gay, is the highest ranking openly LGBTQ official in American history and the second out Cabinet member next to Pete Buttigieg, who served as transportation secretary during the Biden-Harris administration.

The signatories to the letter include a few out members of Congress, Congressional Equality Caucus chair and co-chairs Mark Takano (Calif.), Ritchie Torres (N.Y.), and Becca Balint (Vt.), along with U.S. Reps. Nikema Williams (Ga.), Hank Johnson (Ga.), Raja Krishnamoorthi (Ill.), Delia Ramirez (Ill.), Joyce Beatty (Ohio), Lloyd Doggett (Texas), Eleanor Holmes Norton (D.C.), Josh Gottheimer (N.J.), and Sylvia Garcia (D-Texas).

The letter explains the “critical role” played by the EEO given the strictures and limits on how federal employees can find recourse for unlawful workplace discrimination — namely, without the ability to file complaints directly with the Employment Opportunity Commission or otherwise engage with the agency unless the complainant “appeal[s] an agency’s decision following the agency’s investigation or request[s] a hearing before an administrative judge.”

“Your attempt to remove ‘gender identity’ and ‘sexual orientation’ as bases for sex discrimination complaints in numerous Equal Employment Opportunity (EEO) forms will create unnecessary hurdles to employees filing EEO complaints and undermine enforcement of federal employee’s nondiscrimination protections,” the members wrote in their letter.

They further explain the legal basis behind LGBTQ inclusive nondiscrimination protections for federal employees in the EEOC’s decisions in Macy v. Holder (2012) and Baldwin v. Foxx (2015) and the U.S. Supreme Court’s decision in Bostock v. Clayton County (2020).

“It appears that these changes may be an attempt by the department to dissuade employees from reporting gender identity and sexual orientation discrimination,” the lawmakers wrote. “Without forms clearly enumerating gender identity and sexual orientation as forms of sex discrimination, the average employee who experiences these forms of discrimination may see these forms and not realize that the discrimination they experienced was unlawful and something that they can report and seek recourse for.”

“A more alarming view would be that the department no longer plans to fulfill its legal obligations to investigate complaints of gender identity and sexual orientation and ensure its
employees are working in an environment free from these forms of discrimination,” they added.

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Congress

Senate parliamentarian orders removal of gender-affirming care ban from GOP reconciliation bill

GOP Senate Leader John Thune (S.D.) hoped to pass the bill by end-of-week

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(Washington Blade photo by Michael Key)

Restrictions on the use of federal funds for gender-affirming care will be stripped from the Republican-led Senate reconciliation bill, following a ruling by the Senate parliamentarian on Tuesday that struck down a number of health related provisions.

The legislation banned coverage for transgender medical care through Medicaid and the Children’s Health Insurance Program, language that was also included in the House version of the bill passed on May 22 with a vote of 215-214.

The parliamentarian’s decision also rejected Republican proposals for a Medicaid provider tax framework, which allows states to charge health care providers and use the funds to support their programs, along with broader cuts to Medicaid.

Amid calls to override Tuesday’s ruling from Republicans like U.S. Rep. Greg Steube (Fla.), GOP Senate Majority Leader John Thune (S.D.) told reporters “That would not be a good outcome for getting a bill done.”

He also acknowledged that the timing and schedule might have to be adjusted. Senate Republicans had hoped to pass the reconciliation bill by the end of this week, though this was not a legal or procedural deadline.

Dubbed the “one big, beautiful bill” by President Donald Trump, the legislation would extend tax breaks from 2017 that overwhelmingly benefit the wealthiest Americans and corporations. To cover the cost, which is estimated to exceed $4 trillion over 10 years, the bill would make drastic cuts to social welfare programs, particularly Medicaid.

Democrats are not in a position to negotiate across the aisle with Republicans holding majorities in both chambers of Congress, but for months they have been calling attention to the effort by their GOP colleagues to strip Americans of their health insurance to pay for the tax breaks.

The Congressional Budget Office estimates that 10.9 million people would lose their coverage, either through Medicaid or the Affordable Care Act marketplaces. Some Republicans like U.S. Sen. Josh Hawley (Mo.) are pushing back against the deep cuts to Medicaid, arguing they would be devastating for many of their constituents and also to hospitals, nursing homes, and community health care providers in rural areas.

In a statement emailed to the Washington Blade on Tuesday, U.S. Senate Democratic Whip Dick Durbin (Ill.) said, “Anti-trans extremists are attempting to use the full power of the government to hurt kids, and recent Supreme Court decisions in Skrmetti and Medina are enabling their quest.”

While today’s ruling by the Senate parliamentarian is a temporary win, I will keep pushing back on these shameful attempts to harm trans kids and their families for trying to live authentically,” said the senator, who also serves as ranking member of the powerful Senate Judiciary Committee.

U.S. Rep. Mark Takano (D-Calif.), who is gay and chairs the Congressional Equality Caucus, also shared a statement with the Washington Blade addressing the parliamentarian’s ruling:

“This ruling by the Senate Parliamentarian is a win for the transgender people who rely on Medicaid and CHIP to access the healthcare they need to live fuller, happier, and healthier lives—but the fight is not over yet,” the congressman said.

 “Republican Senators must abide by her ruling and remove the ban from the final version of Trump’s Big Ugly Bill,” he said. “Yet, even with this provision removed, this bill is terrible for the American people, including trans Americans. Every Equality Caucus member voted against it in the House and we’re ready to do so again if the Senate sends it back to the House.”

The Human Rights Campaign issued a press release with a statement from the organization’s vice president for government affairs, David Stacy:

“The fact remains that this bill belongs in the trash. It continues to include devastating cuts to health care programs — including Medicaid — that would disproportionately harm the LGBTQ+ community, all so the already rich can receive huge tax cuts,” Stacy said.

“While it comes as a relief that the Senate parliamentarian concluded that one provision in the nightmarish reconciliation bill that would have denied essential, best practice health care to transgender adults does not belong, we aren’t done fighting,” he said. “With attacks on our community coming from many directions, including the Supreme Court, we will work to defeat this bill with everything we’ve got.”


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