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Supreme Court Issues Two Landmark Decisions On Same-Sex Marriage

On June 26th, the US Supreme Court issued two landmark decisions. 1) United States v. Windsor requires the federal government to recognize same-sex marriage in states where it's legal. 2) Hollingsworth v. Perry may have the effect of allowing same-sex marriage in California. These 5-4 decisions could dramatically affect tax and estate planning for same-sex married couples, as well as the employee benefit plans employers and the federal government provide to such couples.

Marriage definition struck down. Windsor concerned the constitutionality of Section 3 of the 1996 Defense of Marriage Act (DOMA), which defined marriage for federal benefits purposes as being between a man and a woman, thus denying federal benefits to same-sex married couples. The Court struck down Sec. 3 as a violation of the U.S. Constitution's guarantee of equal protection under the law.

The female defendant-respondent was married to a woman in Canada at a time when the laws of that country recognized the legality of same sex marriage. The couple subsequently moved to New York and resided in New York, where same-sex marriage is legally recognized. One of the women subsequently died. The survivor sued the government to claim the federal estate tax marital deduction available to heterosexual surviving spouses. As a result of the Supreme Court's decision, she'll be able to claim a $363,000 tax refund. The Court's ruling, however, was not so broad as to hold that same-sex couples have a fundamental right to marry. As a result, the more than thirty states that don't recognize same-sex marriage will not be required to do so at this time. Nevertheless, the Court has opened the doors for same-sex married couples - in states where same-sex marriage is recognized - to claim numerous federal benefits and rights, as well as be subject to some tax burdens, related to marital status.

Proposition 8 left hanging.Hollingsworth involved Proposition 8, a voter-approved California state law prohibiting same-sex marriage. That law was struck down by a federal district court which held that the law was unconstitutional. The Supreme Court avoided issuing a decision on Proposition 8, instead finding that the private parties who had intervened to defend the law (after the state of California had declined to do so) did not have standing to do so. The Court remanded the case to the U.S. Court of Appeals for the Ninth Circuit to dismiss. As a result, the lower-court ruling will stand, in effect permitting same-sex marriage in California, though additional litigation may ensue. Thus the effect of both decisions is that same sex marriage is legally recognized in those states that take the legislative or judicial steps to recognize it. Furthermore, legal experts opine that under the full faith and credit clause of the Constitution, if a same sex couple is legally married in a state that recognizes same sex marriage and subsequently moves to a state that does not, at least for some purposes, the couple will be legally married.

Tax and benefits implications.Same-sex marriage has already been made legal in 12 states and the District of Columbia. If California, the most populous state, is included as the 13th state, about one-third of Americans would reside in jurisdictions where same-sex marriage is legally recognized. Same-sex married couples in these states should review their tax and estate planning strategies to ensure they're taking advantage of all of the opportunities now available to them as married couples and plan for any new burdens to which they could now be subject. Employers will need to consider how these developments affect the benefits they're providing. It will take some time for all of the implications to emerge, but we would be pleased to provide some assistance regarding these developments.

THE ABOVE INFORMATION IS NOT INTENDED TO PROVIDE SPECIFIC ADVICE OR RECOMMENDATIONS. To ensure compliance with requirements imposed by the IRS under Circular 230, we inform you that any U.S. federal tax advice contained in this communication (including any attachments), unless otherwise specifically stated, was not intended or written to be used, and cannot be used, for the purpose of (1) avoiding penalties under the Internal Revenue Code or (2) promoting, marketing or recommending to another party any matters addressed herein.

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The above is intended to provide general information not specific legal advice or a recommendation. Legal advice can only be rendered to clients who have a retainer relationship with the law firm. To ensure compliance with requirements imposed by the IRS under Circular 230, we inform you that any U.S. federal tax advice contained in this communication (including any attachments), unless otherwise specifically stated, was not intended or written to be used, and cannot be used, for the purpose of (1) avoiding penalties under the Internal Revenue Code or (2) promoting, marketing or recommending to another party any matters addressed herein.





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