In a series of three letter rulings – here, here, and here – issued in May, the Internal Revenue Service has reached conclusions that flout the plain meaning of the Defense of Marriage Act (DOMA).
The rulings involve California’s domestic partnership law, which dates to 1999 and has been expanded by the legislature on several occasions over the past decade. The result of the IRS interpretations is that domestic partners in California and several other states will be treated as the equivalent of married couples for the purpose of assessing their federal income tax liability, a substantial benefit.
California first adopted its registered domestic partner (RDP) law in 1999. The law made RDP status available to all same-sex couples and to some heterosexual couples, namely those age 62 or over. The inclusion of older heterosexual couples was designed to extend a set of civil and property rights to seniors who choose to cohabit rather than marry because of the prospective penalty of losing some of their social security benefits.
The California law at first did not affect the state income tax treatment of domestic partners’ earnings, but two later enactments by the General Assembly, in 2003 and 2006, expanded the scope of the law until, effective in 2007, the state tax code allowed RDP’s the same filing status and income-splitting options as a husband and wife. Under the new law, if one person in the domestic partnership earned $50,000 in a given year and the other person earned nothing, the income could be treated as community property so that each filer could report $25,000 in income.
If applied to the federal income tax code, allowing cohabiting individuals to claim the tax status of married couples, for example, would reduce their income tax liability by $3,000. Enacted by Congress in 1996 and signed into law by President Bill Clinton, DOMA simply states, “In determining the meaning of any Act of Congress, or of any ruling, regulation, or interpretation of the various administrative bureaus and agencies of the United States, the word ‘marriage’ means only a legal union between one man and one woman as husband and wife, and the word ‘spouse’ refers only to a person of the opposite sex who is a husband or a wife.”
In January, 2004 the General Accounting Office supplied the Senate Majority Leader with a letter updating a prior report and identifying 1,138 instances in federal law to which DOMA applied, including federal income tax filing statuses.
Clearly, the Internal Revenue Service is one of the “various administrative bureaus and agencies of the United States,” and just as clearly DOMA applies to its determination of the meaning of the word “married” as applied to federal income tax filing statuses. The IRS’s decision to “go a-Maying” and ignore DOMA is without legal support. The IRS says in defense of its rulings that “federal law generally respects state property law characterizations and definitions.” This is certainly true – except when federal law specifically bars such characterizations and definitions, which DOMA definitively does.
The proper ruling for the IRS would have been to maintain the status quo and treat California and other states’ domestic partners as two individuals under the tax code. That was the intent of Congress and preserving legislative intent demands Congressional attention.
Co-authored by JD Foster.
