In a revenue ruling issued on August 29, the US Department of Treasury has announced that it will treat legally married same sex couples as qualified to file joint federal income tax returns without regard to whether their state of residence gives legal recognition to that status. The key element is that the couple must have married in a state which gives legal recognition to same sex marriage. States that merely recognize civil unions or other forms of domestic partnership do not appear to meet the test.
The government also announced that couples who have a legal marriage formed in a state that authorizes same sex marriage will also qualify for the unlimited federal estate tax exemption for estate provisions favoring that spouse. Thus, where a legally married same sex partner dies and leaves his or her estate to someone to whom they were validly married in a state recognizing these marriages, there is no estate tax due upon the death of the spouse.
No matter what your views on same sex marriage these changes in federal policy are huge. If two women marry in Maryland and resume living in Pennsylvania, the federal government has announced that they may file jointly and may claim unlimited spousal exemption from federal estate tax should one of them die, even though domiciled and resident in this state, which has a statute forbidding recognition to same sex couples.
Last but not least, it appears that same sex couples who were married on the last day of Tax Years 2010, 2011 and 2012 are eligible to amend their returns from single to joint. In many cases this will trigger significant tax refunds.
In similar news but in a different vein, the Commonwealth of Pennsylvania announced that Pennsylvania couples who marry here using licenses issues by the Register of Wills in Montgomery County will be treated as unmarried for all purposes involving state regulation. They may, be treated as married by employers or even certain municipalities. But the state has declared these marriages have no consequence to state matters including income or estate tax due to Pennsylvania, worker’s compensation, unemployment and the like. While lawsuits are pending to challenge the statute, the law remains valid although the Pennsylvania Attorney General has indicated that she does not intend to defend challenges to the statute.