What are the Real Implications of the Supreme Court’s Ruling on DOMA?
The Federal Defense of Marriage Act, usually called DOMA, is a multi-section law enacted in 1996 permitting states to make legal decisions concerning same-sex marriages. Section 3 of DOMA related specifically to federal benefits and until June of 2013, barred same-sex spouses from receiving the benefits for which other married couples qualified. By striking down DOMA, the Court ordered the federal government to leave the definition of marriage to the States. The Supreme Court ruling was in response to a specific case, but its implications were a major step toward equalizing the availability of federal benefits. However, there are still challenges for same-sex married couples depending on the state in which they live and whether or not that state recognizes their marriage. Many couples have traveled out of state to be married, but continue to live in states where same-sex marriage is not allowed. According to the Human Rights Campaign there are 1,138 benefits, rights, and protections provided on the basis of marital status in federal law. Many federal agencies determine whether or not spouses are entitled to benefits based on whether their state of residence recognizes the couple as legally married.
The biggest tax implication of the Supreme Court’s DOMA decision is that the marital deduction now applies to same-sex couples, and spouses are permitted to transfer assets to each other tax-free when they are living or after they die. Same-sex couples are also entitled to file a joint tax return. Couples might also be permitted to amend previous tax returns within the statute of limitations. These changes mean same-sex couples are also vulnerable to the tax penalties that come with marriage. Higher tax rates kick in lower for married couples than they do for singles. Additionally, issues might arise due to recent tax changes regarding the Affordable Care Act, changes to the maximum tax rates under the fiscal cliff deal, and the recent resuscitation of the limitation on personal and itemized deductions of high earners. Now, same-sex couples will struggle with the same marriage tax penalty pitfalls as male-female couples. It is important to consult with an experienced accountant to better understand the tax implications benefits and pitfalls.
Implications for Employers
Additionally, federal benefits that apply to an employee’s spouse now extend to same-sex spouses in marriages that are legally recognized. Employers employing people who are part of same-sex marriages will need to evaluate their current retirement benefits, health benefits, and family leave programs. Federal tax law now treats health benefits for same-sex couples the same as the employee’s health insurance – meaning it is tax-free and no longer requires payroll tax deductions. It might also be necessary for employees to change beneficiaries since legal spouses are default beneficiaries. COBRA and family medical leave benefits also now extend to same-sex couples. There are state-to-state variations, so it is important for same-sex couples and those working with same-sex couples to ensure they fully understand the effects of the new law. If you have questions, consult an attorney familiar with DOMA regulations.
Have questions about Family Law or need help in this area, then feel free contact attorney SPIRIO at 631-277-8844.