Ceremony v Residency: IRS’s post-DOMA tax complexities yet to be ironed out


For the Internal Revenue Service, the troublesome horizon in the wake of US v Windsor has only just emerged. Experts says the IRS must give advice to the public very soon and fundamentally get to grips with one question: which marriages will count at a federal level.

In legal circles, this is described as the argument over whether to apply the “place of celebration” or “state of domicile” rule. Put simply, the debate is over whether the IRS should recognize all same-sex marriages performed in states which offer these unions, or if a couple’s residency should enter the equation.

Professor Pat Cain of Santa Clara University argues that “marital status should not change by crossing a state line.”

“I’ve been suggesting they adopt a place of celebration rule rather than state of domicile. Most pundits are saying that IRS has always used state of domicile to determine marital status but that isn’t totally true,” Cain told 429Magazine.

Historically, similar problems were faced when certain states had legal divorce and others didn’t.

A federal judge has stated that Ohio’s equal marriage ban does “likely violate the United States Constitution.” A court ruling from Ohio on Monday may provide an indication of the IRS policy, says Valparaiso School of Law professor David Herzig.

“Ohio has recognized marriages solemnized in other states. This is a federal court, not the IRS, but I think it gives credence to the place of ceremony argument,” Herzig said, in an interview with 429Magazine.

“While states nominally retain the right to bar recognition of strongly disapproved marriages, in practice the modern trend has been in favor of validating marriages whenever possible,” he added.

Some of the other questions being asked include whether the Windsor decision will be applied retroactively (given DOMA was ruled as unconstitutional from the outset), if rebates will be given on payroll taxes and when exactly will the IRS advise the public?

Regarding the former, Cain called on the IRS to do what is equitable. This means allowing those who wish to amend their tax return to do so, but not forcing those who filed taxes in accordance with the law at the time to re-visit the issue.

The problem of tax refunds is potentially a bigger one as there is a larger pool of money involved, claimed Herzig. The question is: “does the government have the money to rebate?”

“The Service has to act quickly in order to update employers and employees on a quarterly basis. I would say they need to provide guidance in the next month,” said Herzig on the issue of timing.

“Everyone is struggling with what to do now. There’s no clear-cut answer,” he added.

Experts say that ideally the IRS would clear up every tax implication resulting post-DOMA in one go. However, there are the fundamentals to be established first.

“Which marriages will be recognized and whether or not they will apply Windsor retroactively. I think those are the two big general questions,” Cain concluded.


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