The IRS vs. same-sex couples

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The Internal Revenue Service recently issued guidance letting same-sex couples know how their marriages, civil unions and domestic partnerships will be treated for federal tax purposes in the wake of the Supreme Court's decision striking down part of the federal Defense of Marriage Act. Newspaper editorial boards and commentators applauded the IRS for taking quick and decisive action that promised same-sex couples certainty, clarity and a coherent approach.

But before congratulating the IRS for a job well done, they should have taken a closer look at the guidance. For some same-sex couples, it is good news. For many others, however, it either creates uncertainty by raising unanswered questions or treats them unfairly through the adoption of incoherent and unjustified positions. Rather than cause for celebration, this guidance will more often be cause for calling a lawyer.

In a nutshell, the IRS has chosen to recognize same-sex marriages that were "validly entered into." These marriages will be recognized even if a couple later moves to a state that does not recognize their marriage. So, if a same-sex couple living in Massachusetts marries in Massachusetts, their marriage will continue to be recognized for federal tax purposes even if they move to a state like Pennsylvania that refuses to recognize their marriage. Couples in civil unions and domestic partnerships, however, are out of luck because their relationships lack the magic "marriage" label.

The IRS guidance raises questions for the many same-sex couples who have entered into "evasive" marriages. What is an evasive marriage? An evasive marriage occurs when a couple living in a state that does not recognize same-sex marriage travels to a state that does, marries there and then returns to their home state to live. For instance, a Pennsylvania same-sex couple can try to evade Pennsylvania's prohibition against same-sex marriage by traveling across the border to New York or Maryland to marry and then return to Pennsylvania to live as a couple. But how will this "evasive" marriage be treated for federal tax purposes?

Under legal rules that have been applied in Pennsylvania and other states, an evasive marriage is invalid if the couple's home state has a strong public policy against same-sex marriage. Many (but not all) states with their own DOMAs -- including Pennsylvania -- have enacted statutes designed specifically to trigger this rule. Same-sex couples in evasive marriages will now need to pay for expensive advice from their lawyers to find out whether their relationships were "validly entered into" and will be recognized for federal tax purposes. So much for the promise that the IRS guidance would provide much-needed certainty and clarity regarding the tax treatment of same-sex relationships.

Couples living in states that permit them to enter into only civil unions or domestic partnerships should be picking up the phone to have a different conversation with their lawyers. Just two years ago, the IRS said that it was open to recognizing different-sex couples' civil unions and domestic partnerships for federal tax purposes -- so long as those relationships were the legal equivalent of a marriage under state law. At the time, some expressed surprise at this position, believing that the most important factor in determining whether a couple is married for federal tax purposes is whether their legal relationship carries the "marriage" label under state law.

In the guidance issued last week, the IRS reversed course and decided that the "marriage" label is important after all. Without providing any explanation, the IRS decided to ignore all civil unions and domestic partnerships, whether entered into by same-sex or different-sex couples. Quite frankly, this position is surprising and even a bit shocking.

If any area of federal law is going to recognize domestic partnerships and civil unions as "marriages," I would expect it to be tax law. One of the basic principles in tax law is that we look through the labels that are applied to relationships or transactions to see what is really going on. Looking past the labels to the nature of the legal relationships involved, domestic partnerships and civil unions that are marriages all but in name should be treated as marriages for federal tax purposes.

What makes the IRS position shocking is the complete lack of an explanation. The IRS guidance for same-sex couples is quite detailed. It contains pages of analysis explaining why the gendered labels "husband" and "wife" should not control the tax consequences of married same-sex couples. Instead, the IRS concluded that the legal equivalence of different-sex and same-sex marriages should control tax consequences.

In contrast, the IRS provided no similar legal analysis regarding the tax treatment of civil unions and domestic partnerships. Indeed, they did not give couples in these relationships the courtesy of any legal analysis at all.

There is no sound tax policy justification for treating couples -- whether same-sex or different-sex -- who have entered into a civil union or a domestic partnership any differently from married couples. Couples from New Jersey, Illinois, Oregon, Nevada and Colorado who entered into civil unions or domestic partnerships should not accept the IRS's change in its position and its unfair treatment of them -- even if they have since moved to a state, like Pennsylvania, that refuses to recognize their legal relationship. These couples, too, should find a good lawyer and fight to overturn the IRS's unjustified position on the tax treatment of civil unions and domestic partnerships.


Anthony C. Infanti is associate dean for academic affairs and professor of law at the University of Pittsburgh School of Law (


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