Originally published on Passive Activities and Other Oxymorons on February 24th, 2011.
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In a quick bonus post yesterday I noted that the Obama administration has decided to no longer defend the Defense of Marriage Act against constitutional challenges. As it turns out that was a bit of an overstatement. I usually don’t write on things that “everybody else” is writing about, but the tax issues surrounding same sex couples have been one of my themes. Also I offer a somewhat different perspective. My general attitude toward tax law is “It is what it is. Deal with it.”
So here are some practical observations. If you are intensely interested in the nuts and bolts of same sex tax issues, I recommend you follow Santa Clara Law – Same Sex Tax. That blog may be a little West Coast focused, but I recommend it regardless. In Massachusetts the exciting decision in 2010, was Gill v OPM. The case which had several plaintiffs was managed by Gay and Lesbian Advocates and Defenders. Although GLAD’s statement on the administration’s decision is positive, it is less than celebratory, because the decision isn’t quite as sweeping as some media reports make it out to be. There are two caveats. The first is that the administration only said it will not defend DOMA in the Second Circuit where it would be subject to “strict scrutiny”. It is still possible that they may continue to defend in the First Circuit which covers Gill v OPM where the standard is “rational basis”. The holding in Gill was that the law did not have a “rational basis” (In other words, it doesn’t even make good nonsense). That question may be still up for grabs. The other caveat is that the executive branch will continue to enforce DOMA until it is either repealed or declared definitively unconstitutional. That means, I would think, that there will be no helpful guidance from the IRS.
The Mass Family Institute, which did not take a positive view of the administration’s decision, did not focus on those nuances in its statement. It did point out that either house of Congress could appoint counsel to defend DOMA and that the Institute, itself, will seek standing to defend it in Gill v OPM. As noted by GLAD, though, the administration has not thrown in the towel on Gill, at least not yet.
The best overall coverage I have seen on the story has been from the Keen New Service.
So what should Robin and Terry do ? (Robin and Terry are a couple of indeterminate gender and marital status who were invented to help me deal with awkward pronoun problems) In today’s manifestation they are of the same gender and married in Massachusetts in 2007. In 2007, they each filed returns as single. Robin is on Terry’s health insurance and Terry’s employer included the related costs as part of Terry’s wages. If Robin and Terry were my clients, I’d be looking at their 2007 returns right now and what they could do is wait for my call. I would rough out two pro-forma amended returns. One would be a joint return of Robin and Terry. The other would be Terry, married filing separately, with income reduced by the denied medical insurance exclusion. The chance that the latter would produce a meaningful refund strikes me as improbable, but it would be pretty easy to do. I would tell them that they should extend their 2010 returns. This won’t be sorted out by September (Yes I know the extended due date is in October, but I don’t like being a “Last Minute Louie”, as my mother used to say), but we might know more by then.
If an amended 2007 return would produce a significant refund, they should consider filing it. Let me emphasize – Consider filing it. Despite the bad advice of a legion of divorce attorneys, the decision to file a joint return is not a simple numbers exercise. Filing jointly, as I have pointed out, involves the acceptance of joint and several liability. If Robin thinks that Terry may have omitted to report substantial income then Robin should not join in an amended return.
Assuming that an amended return is a good idea, the other practical tip is to not delay too long. Here is why. For returns that are required to be filed there is a “timely mailed, timely filed” rule. The Service noted however in CCA 201052003 that an amended return is not a return that is “required” so the 2007 amended return needs to be received by the IRS before the statute expires for 2007. Please don’t get into an argument about how Emancipation Day and Patriots Day might play into that determination. Get it to them sometime in March.
For later years, the thing to do is to wait and see.
POSTSCRIPT
The government followed up with a withdrawal in Gill v OPM, but the release on it from GLAD indicates some ambiguity in the statement. This in no way affects my advice on getting amended returns in to preserve rights.