Category Archives: Legislation

DOMA is Dead – To Wed or Not to Wed; that is the Question

28 Sunday Jul 2013

Posted by in Legislation, Marriage, RDP Tax Returns, Taxes

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With the fall of DOMA has come a rush of same-sex couples (SSCs) converting their partnerships into marriages.   It is an emotional time, especially for those who have waited for over thirty years to make that change.  I have been to three weddings since the fall of DOMA and have five more between now and the first week of September. Put simply, it is inspiring and I am proud of these couples.  Despite the pride and emotion we are all feeling, though, I urge all couples to proceed with caution.  The right to marry, and to be recognized as a spouse, comes with changes that are worth consideration.

The media has been quick to discuss a few of the enormous benefits of marriage, particularly in the context of health, retirement and Social Security benefits.  There has even been the occasional reference to the presumed right to file as married filing jointly (MFJ) in 2013. However, there are still questions on how, and to whom, these changes will be applied.

Despite the IRS’ immediate promise to “move swiftly,” they have not yet issued any statements about how they will implement the Supreme Court decision. We can be confident that the IRS will allow SSCs to file jointly if they have a valid marriage license by the end of 2013. The question then is what will be considered a valid marriage license. The answer hinges on whether the IRS will use the state of domicile or the state of marriage in determining who has a valid marriage license. While we wait for the IRS to make an official statement, the more pressing question for many is whether or not to get married at all, and if so, when.  Emotion and celebration aside, the tax implications of marrying in 2013 are significant.

The ability to file MFJ will not be beneficial across the board. Some couples will realize a benefit in their total income tax and others will not.  Generally, if there is only one earner, MFJ status will be financially beneficial.  Others will experience what is known as the “marriage penalty” and end up with a higher tax bill when filing MFJ. This usually occurs when each spouse is an earner and the combining of income pushes the couple into a higher tax bracket.

The combining of incomes may also push many couples to an adjusted gross income (AGI) level that excludes them from tax deductions and credits that they have been able to claim in the past. For example, in 2012, many single taxpayers were eligible for the Child Tax Credit as long as their AGI was below $75,000, the beginning phase-out amount for a single taxpayer. If in an RDP couple each partner had a child and each partner had an AGI of $60,000, it’s possible that they could each claim the credit.  The 2012 AGI phase-out for married taxpayers began at $110,000. In this example, if the couple was married, their AGI would be $120,000 and they would only be eligible for a reduced credit or, in some cases, none at all. Eligibility for many deductions and credits are determined by AGI and, unfortunately, the MFJ phase-out amounts are not equal to double the single amounts.

It is important to remember, too, that some of the discriminatory tax laws actually benefit unmarried couples. Perhaps the most significant is the adoption credit. My earlier post, The Adoption Tax Credit – One Good Thing the Defense of Marriage Act did for Registered Domestic Partners, goes into the details of why registered domestic partners benefit from the adoption credit in a way that spouses do not.    If you are planning on adopting a child, and are not yet married, you may want to consider completing the adoption in 2013. If the potential tax benefit of the adoption credit exceeds the combined benefit from other changes, it may behoove you to adopt in 2013 and marry in 2014.

No matter when you decide to tie the knot, it is important to be prepared.  A quick review of your tax situation can give you the information you need to be ready for the changes to come.  A small amount of planning can go a long way.

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Supreme Court to Hear DOMA Case on March 27th: Same-Sex Married Couples Able to File Jointly in 2013?

23 Saturday Mar 2013

Posted by in Law Suits, Legislation, Marriage, RDP Tax Returns, Taxes

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The time has finally come. On March 27th, the Supreme Court will hear a case challenging the constitutionality of DOMA. Many have come forward over the last year in support of overturning the Act. Support has ranged from progressive LGBT rights advocates to President Barack Obama himself. Most recently Bill Clinton, the man who signed DOMA into law in the first place, has come forward.

When I signed the bill, I included a statement with the admonition that “enactment of this legislation should not, despite the fierce and at times divisive rhetoric surrounding it, be understood to provide an excuse for discrimination.” Reading those words today, I know now that, even worse than providing an excuse for discrimination, the law is itself discriminatory. It should be overturned.

So, what if it is overturned? How would such a decision impact same-sex married couples’ tax position and how long will it take for those changes to take place? Frankly, I expect the implementation be slow and burdensome. The IRS made a small change for a small portion of same-sex coupled taxpayers three years ago and we still don’t have official rules.

Not only will it take time for Congress to amend laws and regulations, it will take the IRS time to amend tax forms and procedural guidelines.  Furthermore, if spouse is no longer defined to only include opposite sex partners but applies to all couples who have a valid marriage, how will “valid marriage” be defined and how will the IRS know who has one? The easy answer would be any couple married in a legal marriage state. Only it’s not that simple, is it?  Many couples hold marriage licenses from legal marriage states but live in states without same-sex marriage. The issue is further convoluted when considering the varying recognition laws in each state.

I can only hope that the fall of DOMA will lead to blanket legal marriage across all states. Until then, I truly don’t understand how the IRS will determine which couples have the right to file jointly and I fear that they are no better prepared for such a change than they were for community property income splitting. I suppose the upside of this is that the delay in implementation will provide same-sex married couple taxpayers ample time for tax planning.

Just as it is with community property income splitting, the change will benefit some taxpayers and harm others.  For those of you that will not see a tax benefit from joint filing it may behoove you to start planning now. For those that will benefit, the question of amended returns arises. If DOMA is ruled unconstitutional it means it was always unconstitutional. To me, this suggests the right to amend prior year returns with married filing jointly status in order to cash in on the refunds you should have already received.

Only time will tell how this will all unfold, but my fingers are crossed.  I am grateful to witness and be part of such inspiring and historic accomplishments in equal rights.

National Taxpayer Advocate Urges the IRS to Issue Guidance to Domestic Partners and Same-Sex Married Couples

19 Tuesday Feb 2013

Posted by in Community Property, Legislation, RDP Tax Returns, Taxes

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The National Taxpayer Advocate Center is an office within the IRS designed to aid taxpayers in resolving their tax issues. They share responsibility with the IRS for evaluating systems and procedures. Each year the Taxpayer Advocate issues an annual report to Congress in which they make recommendations for improvements and identify systematic deficiencies.

The 2012 Annual Report submitted to Congress once again contained a request that the IRS provide authoritative guidance to domestic partners (DP) and same-sex couples (SSC). They have made this request each year since 2010 when new filing requirements were first implemented for DPs and SSCs living in community property states (CA, WA and NV).

To date, the only guidance the IRS has provided is an FAQ page that is periodically updated. The FAQ page is sadly insufficient however.  It excludes several issues that many DPs and SSCs face. Additionally, since the FAQ page is not authoritative it leaves over a million taxpayers in the position of being required to follow procedures to which there are little to no official rules. These taxpayers are thus forced to attempt to interpret the requirements on their own, or seek professional help from a tax advisor.

Each year the IRS has responded to the National Taxpayer Advocate Center with a claim that issuing guidance would be premature.  Their reasoning is that the political landscape surrounding DPs and SSCs is changing too rapidly and it would affect an “insignificant” number of taxpayers. While I do understand that until the Supreme Court rules DOMA unconstitutional the IRS’ rule making abilities are limited, I find it highly offensive to disregard the needs of over a million taxpayers because they are deemed “insignificant.” Meanwhile, the IRS has delayed tax return processing for the majority of Americans because of disputes on legislation that affects the small amount of taxpayers earning over $400,000/year.

The Taxpayer Advocate report also noted that data from the 2010 Census revealed an increase of documented DPs and SSCs of 100%. Since then, over five states have enacted legislation enabling Domestic Partnerships and/or Same-Sex marriages.  How many couples must there be before the IRS will help taxpayers? How many times must the Taxpayer Advocate urge Congress to enable the IRS to establish and implement authoritative guidance? Despite its apparent lack of effectiveness, it’s nice to know that someone is speaking up for DPs and SSCs. Thanks Taxpayer Advocate.

LGBT Equality Cliff (Not) Averted: Highlights of 2012 LGBT Rights Accomplishments

08 Tuesday Jan 2013

Posted by in Law Suits, Legislation, Marriage, Washington

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Congress may have averted the fiscal cliff but I doubt they can curb the fall of anti-LGBT legislation. In 2012 we saw monumental achievements in equality. The momentum is still growing and I do not expect it to slow in 2013. Instead, we may see a Supreme Court rule DOMA unconstitutional. Such a decision would have countless and far-reaching positive consequences; I call this potential roll out of rights the LGBT Equality Cliff.

The progress in 2012 was seen across the board, not just legislatively. Television shows had unprecedented growth in LGBT characters, actors and athletes came out as LGBT and allies, and musicians and Fortune 500 companies came out in support of marriage equality. There are positive shifts everywhere. The way that Americans think about the LGBT community is changing. Here are some of the many, many, achievements of 2012.

State Marriage

  • Maine, Maryland and Washington legalize gay-marriage
  • Rhode Island begins recognizing marriages from other states
  • Minnesota rejects a constitutional amendment denying marriage equality
  • New Hampshire blocks repeal of same-sex marriage
  • 9th Circuit Court of Appeals rules California’s Prop 8 is unconstitutional

DOMA

  • Federal District Court for the Southern District of New York rules DOMA unconstitutional
  • 1st Circuit Court of Appeals rules DOMA unconstitutional
  • Supreme Court agrees to hear two cases challenging constitutionality of DOMA

Elected Officials

  • Tammy Baldwin is elected as first openly lesbian or gay US Senator
  • Kyrsten Sinema is elected to House of Representatives and becomes the first openly bisexual member of Congress
  • Number of state legislatures with no openly LGBT members drops from 17 to 10
  • Michael Fitzgerald becomes 4th openly gay federal judge, the 1st outside of New York
  • Mark Takano becomes first openly gay person of color in US Congress

Military

  • Tammy Smith becomes first openly gay active duty general in American history
  • Sgt. Erwynn Umali and his partner Will Behrens become the first gay couple to marry on a military base
  • Pentagon hosts first-ever LGBT Pride event

Transgender Rights

  • US Citizenship and Immigration Services announces that US will recognize valid marriages for immigration purposes regardless of a spouse’s subsequent gender transition
  • U.S. Equal Employment Opportunity Commission rules unanimously that employment bias based on transgender status is tantamount to discrimination based on sex, which violates the Civil Rights Act of 1964
  • Massachusetts passes transgender anti-discrimination bill
  • American Psychiatric Association removes “gender identity disorder” from the DSM-5[i]

Media

  • Nordstrom’s, JC Penny, Microsoft, Amazon, General Mills, Macy’s, Starbucks, Viacom, Boeing, and Google announce support for marriage equality
  • NAACP announces support for marriage equality
  • President Obama and Vice President Biden announce support for marriage equality; so do Jay Z, Brad Pitt, Jason Mraz, Morgan Freeman, and Bruce Springstein
  • Anderson Cooper, Wade Davis, Orlando Cruz, Frank Ocean, and Sally Ride come out
  • San Francisco 49ers become the first NFL team to join the “It Gets Better” campaign
  • Keelin Godsey becomes the first openly transgender Olympic contender

Other

  • First PTA specifically for LGBT students is created in Long Island NY
  • Department of Justice publishes final regulations creating national standards directly addressing LGBT needs in an attempt to eliminate sexual abuse in America’s prisons, jails and local detention facilitates

As great as this list is, there are still 2012 achievements not listed.  I can only imagine what 2013 will bring. We’ve already had one victory this year when the American Civil Liberties Union secured severance pay for those discharged from the military under Don’t Ask Don’t Tell.  

What to Watch For in 2013

  • January vote on gay marriage bill expected in Illinois
  • February vote on gay marriage bill expected in Rhode Island
  • Supreme Court will review two DOMA cases in March

Happy New Year everyone!

[i] Gender Dysphoria remains in the DSM.

Progress in Perspective: Germany Leads in Same-Sex Tax Rights

05 Friday Oct 2012

Posted by in International, Legislation, Marriage, Taxes

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In just a few days I will be traveling to Europe, the land of ‘better’ rights, but, not necessarily equal ones.  I wanted to leave you with an entry before I left and that has led me to exploring German tax rights for same-sex couples.

Germany has had Civil Unions for same-sex couples since 2001. While Civil Unions are not technically marriages, Germany’s federal recognition, as early as 2001, frankly embarrasses me. Here we are, in 2012, fighting tooth and nail so that a mere portion of our states might legalize marriage or enact its state equivalent.  

It’s true that progress in the U.S. seems to be coming more rapidly, and I don’t think that federal recognition is far away, but it is only that.  My use of the word ‘recognition’, instead of ‘equality’, is quite intentional.  As illustrated by the development of same-sex rights in Germany, recognition of same-sex couples does not necessarily equalize rights.

Since 2001, Germany has had to make significant expansions to Civil Union rights in order for them to be more equal to marriages.  As with the United States, many of the rights have been granted by the courts.  In Germany, the decisions have predominately been made by the Federal Constitutional Court which is in some ways similar the U.S. Supreme Court. 

Naturally, of particular interest to me has been the extension of income and tax rights to German same-sex couples. The first such extension came in 2008 when a surviving partner was refused a Widow’s Pension Fund.  The court that heard the case ruled that the refusal violated the prohibition of discrimination on the grounds of sexual orientation; a logical argument that I wish had more clout in the United States.  We seem to have to resort to technicalities and loopholes just to prove a point of common sense and decency.  

Next, in 2010, the court ruled it unconstitutional to treat same-sex couples differently than heterosexual couples in a case related to inheritance tax.  This is similar to the famous case Windsor v United States.  Although the lower courts have ordered that Edie Windsor be given a refund of the taxes she paid, the case is still facing appeals and is likely heading to the Supreme Court.  Meanwhile, Germany’s case ruling not only relieved same-sex couples of a tax that their straight counterparts were exempt from, it also ordered that the government compensate surviving partners that had previously paid the tax; a respectful move that, dare I say, will never happen here.

There is speculation that the German government is close to making further changes that will equalize tax rights across the board.  What’s interesting about this development is who supports it and who opposes. 

The current Chancellor of Germany, Angela Merkel, is expected to support the expansion of rights.  She is part of the Christian Democratic Union (CDU), a conservative party whose members have recently released a statement calling for equal tax treatment.  The CDU is in coalition with the Free Democratic Party (FDP), a party typically supporting business interests. They are also in coalition with the Christian Social Union (CSU), a predominately Catholic party.  While the FDP has long supported equal rights for same sex couples, the CSU is, unsurprisingly, unsupportive.   What is surprising is that the other opposing party is the Social Democratic Party (SDP), a historically liberal party.

At first I found it strange that the conservative, business minded parties were in support of same-sex rights while the liberal party was in opposition.  That sort of landscape is nearly opposite of what we are used to here.  Then I remembered that it’s politics.  As it turns out, Angela Merkel is suspected of merely trying to save face for her upcoming re-election campaign.  She and her party have developed a reputation of opposing legislation only to have the Federal Constitutional Court rule against their position.  As a result, Merkel is expected to support the tax right expansion, just so she can do it before the court does.   As for the SPD, they are apparently not as liberal as they once were. An emerging liberal party, the Left Party, has recently poached many SDP members after the party supported grossly unpopular welfare cuts.

Regardless of the motivations behind these legal changes, the result is the same.  If Germany extends equal tax rights to its citizens, progress has been made, both in Germany and abroad.  I should be happy about all of this, and a part of me is, but there’s just one thing I can’t get past.  Germany’s path to providing equal rights to all couples seems to be a foreshadowing of what is to come in the US. Our road has been similarly marked with case after case arguing that there exists a discrepancy of rights when it comes to partnerships and marriages.  Well, of course there is. We as a nation have proclaimed that partnerships and marriages are not the same thing, even if the rights should be.  But, didn’t we determine, in 1954, that “separate but equal” doesn’t work?  Please, someone tell me how the marriage issue is any different.

“The impact is greater when it has the sanction of the law, for the policy of separating … is usually interpreted as denoting the inferiority of the… group.” – The Supreme Court of the United States, 1954, Brown V. Board of Education.

“The words (separate but equal)….. it is true, are prohibitory, but they contain a necessary implication of a positive immunity, or right, most valuable…..,—the right to exemption from un-friendly legislation against them distinctively,…—exemption from legal discrimination, implying inferiority in civil society, lessening the security of their enjoyment of the rights which others enjoy, and discriminations which are steps towards reducing them to the condition of a subject race.”  – The Supreme Court of the United States, 1954, Brown V. Board of Education.

Will the Supreme Court kill DOMA in 2013?

07 Tuesday Aug 2012

Posted by in Law Suits, Legislation, Marriage

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Court cases challenging DOMA are popping up across the nation with increasing frequency.  Over the last two years, the legislative momentum has grown dramatically. We are now at a point where we can expect at least one of these cases to be heard by the Supreme Court.  The implications of the Supreme Court hearing such a case are enormous. We could be within a year of undefining, as opposed to redefining, marriage.  If we are successful in broadening the federal definition of spouse to include partners of the same sex, many currently unavailable federal benefits will become accessible to our partners.

There are two key cases currently making their way through the courts.

Perry v. Brown (California) 

This is the infamous Prop 8 case formerly known as Perry v Schwarzenegger.  In February of 2012 a three judge panel, in a monumental decision, held that prop 8, which amended the state constitution to disallow same-sex couples from becoming married, was unconstitutional.  The judges found that there was no “rational basis” to restrict same-sex couples from the right to marry.  Judge Reinhardt, who authored the opinion, declared that Prop 8 violated the Equal Protection Clause stating:

“Proposition 8 singles out same-sex couples for unequal treatment by taking away from them alone the right to marry… the People of California may not, consistent with the Federal Constitution, add to their state constitution a provision that has no more practical effect than to strip gays and lesbians of their right to use the official designation that the State and society give to committed relationships, thereby adversely affecting the status and dignity of a disfavored class.”

Golinski v Office of Personnel Management (California)

This case stems from a from a 19-year old woman’s complaint after her application to include her wife under her employer-provided health coverage was denied. While this case may not be as well-known as the Prop 8 case, it is widely considered to be the one with most potential for success.  In July, the Department of Justice filed a writ of certiorari, basically a request that the Supreme Court hear the case. Many expect the Supreme Court will accept despite the fact that these requests are rarely granted.  This is especially noteworthy since the request asks that the Supreme Court hear the case before it makes its way through the remaining lower court appeals.  This unusual writ also includes a request to combine the case with two others challenging DOMA’s constitutionality.

Between the two cases, there is widespread conjecture that Golinski not only has a better chance of being heard by the Supreme Court but also has a better chance of being upheld.  At a conference I recently attended[i], Oregon attorney Cynthia L Barrett speculated that a win in the Brown case could require that the court issue a blanket decision allowing same-sex marriage in all 50 states. The Golinski case may instead only require a decision allowing federal benefits on a state by state basis. The expectation is that the benefits would only be available to those holding a valid sate marriage certificate in one of the six states[ii] that allow gay marriage.

Considering the pace with which states are attempting to pass same-sex marriage legislation, perhaps a Supreme Court decision of this magnitude will serve to further that drive.  In the current environment, where it is no longer possible to stand against same-sex marriage without significant backlash, as evidenced by the recent Chik-Fil-A controversy, we can, finally, imagine an attainable and expedient move towards federal marriage equality.

[i] Barrett, C.L. Ask. Tell. LGBT Estate Planning Developments, Multnomah Athletic Center, Portland, Oregon; OHSU Foundation: June 2012

[ii] Gay marriage is also legal in Washington DC and is pending in the State of Washington.

Washington to Legalize Same-Sex Marriage?

29 Sunday Jan 2012

Posted by in Legislation, Marriage, Washington

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The State of Washington may be on its way to becoming the seventh state, in addition to Washington D.C, to legalize same-sex marriage.  In 2007 Washington legalized domestic partnerships, then, in 2009 it expanded the rights of registered domestic partners to include “everything but marriage” as the passing bill became known.  Now, in 2012, Governor Christine Gregoire has announced her support for legal same-sex marriage in Washington State.

Shortly after Gregoire’s announcement, House Bill 2516 and Senate Bill 6239 were introduced by Representative Jamie Pederson and Senator Ed Murray respectively. The legislation would allow for same-sex couples to apply for and receive marriage licenses in Washington. Also in the bills is an amendment providing religious officials an exemption from performing services for such marriages.  Interestingly, this amendment changes the language from:  “minister or priest of any religious denomination” to “minister or a priest, imam, rabbi, or similar official of any church or religious organization.” Perhaps my favorite part of the bill though is an added section that includes the term “gender neutral:”

Where necessary to implement the rights and responsibilities of spouses under the law, gender specific terms such as husband and wife used in any statute, rule or other law must be construed to be gender neutral and applicable to spouses of the same sex.”

Since January 23rd, when Senator Mary Margaret Haugen, the deciding vote, announced her support, the bills have been expected to pass both the House and the Senate.  Upon passage, opponents will begin soliciting signatures in an attempt to get a challenging referendum on the ballot for public vote.  To do so, they need only collect 120,577 signatures by July 6th.

This is reminiscent of what took place in 2009 when the “everything but marriage” bill was passed. Opponents collected the required number of signatures and placed Referendum 71 on the ballot. I recall my time working as co-coordinator of the Olympia chapter Approve Referendum 71 campaign and fear that some of the same confusion will occur.  Because of the wording of the referendum, the beginning of the campaign was dedicated almost entirely to explaining that voting in support of the referendum actually meant voting in support of the original “everything but marriage” bill.  The number of voters unaware that voting against the referendum, brought by opponents, was in fact siding with them was astonishing.

Last night, just as I sat down to write about this, I received a phone call from an Equal Rights Washington phone bank volunteer. His script began by notifying me that I had donated during the Referendum 71 campaign and that they were now looking for support for ERW’s campaign for marriage equality.  I soon found myself in a long and emotional conversation as I jabbered on about how I was, at the very moment, writing a blog about the bills and, also, about the tax work I now do with registered domestic partners. He told me of his partner of 14 years who passed 22 months ago.  He explained that he did not understand, until his partner’s death, the breadth of the impact of not having the very rights he was fighting for.  

His partner was a dedicated worker who refused to begin drawing social security and preferred instead to continue working. By the time he passed he had accumulated significant social security benefits. Because their relationship is not federally recognized, the surviving partner is ineligible for the same social security survivor benefits afforded spouses.  As a result of losing half of his household income, and not being eligible for the same federal benefits married couples receive, this ERW volunteer will likely lose his home.  It is these nuances of the law that have a tangible and often life-changing impact on the lives of people that do not have the right to marry.  Unfortunately, legalization of same-sex marriage in Washington State will have no immediate effect on such federal rights. We can only hope that with each state that passes similar legislation we will be one step closer to federal marriage equality.

If you do plan to marry in the State of Washington, there are some things to consider. For those who are already in a registered domestic partnership, your registration will not immediately and automatically turn into a marriage. Registered domestic partners will need to apply for a separate marriage license.  Once married, the partnership will be automatically dissolved. This will remain true until June 30th 2014 at which time, if you are in a registered domestic partnership and have not yet applied for a marriage license, your partnership will automatically be deemed a marriage. For legal purposes, the date of marriage will become the date of your domestic partnership registration.