Maryland Bar Bulletin
Publications : Bar Bulletin : September 2013

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On June 26, 2013, in United States v. Windsor, the Supreme Court struck down as unconstitutional Section 3 of the Defense of Marriage Act (DOMA), which provided that for federal government purposes, marriage was defined as solely between a man and a woman. Edie Windsor had been assessed over $363,000 in federal estate tax, even though she was validly married in Canada to her partner of 40 years, Thea Spyer. Other parts, however, of DOMA remain, including Section 2, which says that states do not have to recognize valid marriages between same-sex couples from other states.

The decision did not impact the 30 states with constitutional amendments and laws prohibiting marriage equality as it dealt solely with the federal definition of marriage. Nonetheless, Windsor opened the door for challenges to those laws, and for arguments that states must recognize valid marriages between same-sex couples. There has been immediate and significant litigation in this area, including cases in Virginia, New Mexico, Michigan, New Jersey, Nevada, North Carolina, Pennsylvania, Ohio, and Oklahoma.  Many of these cases involve questions of divorce and intestate succession.

Following Windsor, the federal government is in the process of determining how it will define “spouse” for the purpose of providing federal benefits. Currently, some federal agencies define spouse based on “place of celebration” (where the couple got married), and others define spouse based on “place of residence” (where the couple lives). It is expected that the federal government will come up with a consistent definition of “spouse,” but for now, these definitions appear to depend on the benefit actually extended by the government.

A standard and comprehensive federal policy will give same-sex married couples access to over 1,000 rights and responsibilities on the federal level. (For an overview of those benefits, visit www.hrc.org/resources.)

The Office of Personnel Management (OPM) has already issued a “Guidance” that says federal employees in same-sex marriages will be found to be married no matter where they live, which includes marriages from other countries. This is the “place of celebration” rule. Accordingly, a federal employee who lives in a “nonrecognition” state, like Virginia, who is married to a same-sex partner, is married for federal government purposes. That means health insurance, retirement benefits, long-term disability, time off for spouses and children, everything that a spouse is entitled to.

Other agencies of the federal government have also made determinations of how they will treat same-sex married couples. For example, the military has adopted the “place of celebration” rule, as has the U.S. Citizenship and Immigration Services.

But, the Internal Revenue Service has yet to issue its policy for recognizing same-sex married couples. It has said that it is studying the issue. In the meantime, taxpayers should take steps to preserve claims they may have for refunds in a number of tax-related areas. For taxpayers in Maryland, the District of Columbia, and Delaware, the three local jurisdictions that have marriage equality, these claims may well be successful since the “place of celebration” and “place of residence” rules both support the legality of their marriages.

The IRS has a three-year statute of limitations for amending tax returns. However, a case can be made that if DOMA is unconstitutional, it was unconstitutional when passed, therefore any application of DOMA was unconstitutional and should not be subject to any statute of limitations. Nonetheless, taxpayers should immediately file their claims in order to maintain the possibility of amending their income tax returns, estate tax returns, gift tax returns, and any other filing required by the IRS that would be impacted by marriage status.

Some areas that should be reviewed include the estate tax unlimited marital deduction (like Edie Windsor); health benefits for a same-sex spouse that were considered income to the spouse receiving the benefit; and transfers between spouses that will no longer be considered “gifts” under federal law. These changes may also impact state taxes.  Maryland, for example, piggybacked on federal tax law even after Maryland was required to recognize valid marriages between same-sex couples pursuant to Port v. Cowan. Accordingly, Maryland residents who were unable to take advantage of the unlimited marital deduction, or who were required to report “gifts” to their same-sex spouses, may be able to amend their Maryland tax returns.

Same-sex spouses should also consider retitling their real estate holdings to tenants by the entireties, a type of tenancy only available to married couples. Of course, for the present, Virginia residents are unable to to do so because of Virginia’s laws disallowing recognition of same-sex marriages. Same-sex spouses may also be able to change inherited IRAs to rollover IRAs now that the federal government recognizes same-sex marriages.

Spouses should also review beneficiary designations, Last Wills and Testaments, and Trust provisions in light of the Windsor decision. Spouses should also review their spousal beneficiary designations on retirement policies. Same-sex spouses of deceased spouses may be eligible to receive the deceased spouse’s social security benefits. This list goes on and on. 

This article has attempted to highlight some of the important issues to be addressed by same-sex married spouses after DOMA, but is not at all intended to be completely definitive. Practitioners should continue to review both federal government and state policies as they evolve.

Michele Zavos is a partner at Zavos Juncker Law Group, PLLC.

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Publications : Bar Bulletin : September 2013

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