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New IRS rules will benefit married same-sex couples in Missouri, Illinois

This article first appeared in the St. Louis Beacon, Aug. 30, 2013 - Same-sex couples living in Missouri and Illinois can file tax returns as married couples if they were legally married elsewhere, according to an IRS rule issued on Thursday.

The rule states that the IRS will recognize marriages celebrated in states or countries that recognize same-sex marriage, even if the couples live in states that do not recognize their marriages.

Susan Frelich Appleton of Washington University Law School said the action is "significant, but certainly not surprising, given the Obama administration's response to other issues that can be handled by the executive branch."

The IRS rule is the latest action by the Obama administration taken in the wake of the U.S. Supreme Court's decision invalidating the 1996 Defense of Marriage Act (DOMA). That law had denied federal benefits to same-sex couples, including those whose marriages were legally recognized in 12 states and the District of Columbia.

The IRS decided to use the "place of celebration" rather than the "place of domicile" as the location to determine whether it recognizes a marriage for tax purposes. So a couple legally married in Iowa is considered married for federal tax purpose even if its permanent residence is Missouri or Illinois, which do not recognize their marriages.

This couple would end up filing federal taxes as a married couple but would have to file individual state taxes.

(Click here to read the IRS' FAQ about same-sex couples.)

Patricia Cain, a Santa Clara law professor who is an expert on the impact of sexuality on tax law, wrote in her blog that the IRS action was not unexpected because every part of the federal government that has not had its hands tied by a statute has taken this broad view of same-sex marriage.

She explained that the new rule means that "any same-sex couple that enters into a valid same-sex marriage in California or Washington or D.C. or any of the places that authorize such marriages will be married for federal tax purposes even if they are living in non-recognition states like Virginia or Texas or Georgia."

But she cautioned that couples contemplating same-sex marriages should be careful in choosing a state for their celebration because some of those states do not have provision for same-sex couples to get divorced.

She gives the decidedly unromantic advice that "when marrying for tax purposes, choose the place of celebration for possible divorce purposes."

Two jurisdictions that recognize same-sex marriages and also grant divorces are California and the District of Columbia.

Ironically, same-sex couples could end up paying more income tax under the rule recognizing their marriages. The so-called marriage penalty often requires married couples with similar incomes to pay more than if they weren't married. 

On the other hand, same-sex couples who would have paid less in taxes in recent years will be able to file for a refund for the past three tax years.  

Under the new IRS rule, same-sex married couples in Missouri and Illinois will be filing federal taxes as a married couple, but they will have to continue to file state taxes as unmarried individuals.

This could open the way for state legislatures that oppose gay marriage to impose new rules on same-sex couples.  But Appleton wrote in an email that she did not think states like Missouri could undo the IRS ruling.

The IRS ruling stated that that Registered Domestic Partners (RDPs) and Civil Union Partners (CUPs) will not be treated as spouses -- a ruling that affects same-sex households in Illinois, which recognizes same-sex partners but not marriages. (Click here to read ACLU legal basics about civil unions.)

The Department of Human Services issued a similar ruling on Thursday relating to Medicare. It said it would use the place of celebration rather than residence in determining who was legally married for Medicare coverage in nursing homes. A same-sex spouse will have the same right as a traditional spouse under the Medicare Advantage program to get access to a nursing home where his or her spouse resides.

HHS explained that before the change, "seniors with Medicare Advantage ... may have faced the choice of receiving coverage in a nursing home away from their same-sex spouse or dis-enrolling from the Medicare Advantage plan, which would have meant paying more out-of-pocket for care in the same nursing home as their same-sex spouse."

PROMO, a Missouri groups that favors equal treatment of gays, applauded the two federal rules as the "most significant response" to the June Supreme Court ruling.

A.J. Bockelman, executive director of PROMO, said in a statement: “Ever since the Supreme Court ruled in favor of Edith Windsor, striking down a key discriminatory provision of DOMA, the LGBT community has waited patiently to see movement such as this. These statements continue the public dialogue to educate the general population just how discriminatory DOMA actually was, but also greatly continues to show the disparity between states recognizing marriages for same sex couples and states such as Missouri. We at PROMO are committed to assist the community with understanding what these announcements mean for LGBT Missourians. It also strengthens our resolve to work for marriage rights here at home.”

William H. Freivogel is director of the School of Journalism at Southern Illinois University Carbondale and a professor at the Paul Simon Public Policy Institute. Previously, he worked for the St. Louis Post-Dispatch for 34 years, serving as assistant Washington Bureau Chief and deputy editorial editor. He covered the U.S. Supreme Court while in Washington. He is a graduate of Kirkwood High School, Stanford University and Washington University Law School. He is a member of the Missouri Bar.

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