IRS Clarifies Federal Tax Regulations for Same-sex Spouses

On Oct. 21, 2015, the U.S. Department of Treasury and the Internal Revenue Service (IRS) released proposed regulations implementing the Supreme Court’s same-sex marriage decisions for federal tax purposes.

The proposed regulations were issued to confirm that federal tax code provisions relating to marriage should be interpreted to include same-sex spouses as well as opposite-sex spouses.

The proposed regulations would apply to all federal tax provisions where marriage is a factor, including:

  • Filing status;
  • Claiming personal and dependency exemptions;
  • Taking the standard deduction;
  • Employee benefits;
  • Contributing to an IRA; and
  • Claiming the earned income tax credit or child tax credit.

However, the proposed regulations would not treat registered domestic partnerships, civil unions or similar relationships not designated as marriage under state law as marriage for federal tax purposes.

While the proposed regulations do not contain new tax guidance for employers, they confirm the tax rules that apply to same-sex couples following the Supreme Court’s decisions on same-sex marriage.

Implications for Employers

The proposed regulations confirm for employers that employees in same-sex marriages should be treated the same as employees in opposite-sex marriages for purposes of federal tax laws.

The proposed regulations will become effective when they are published in final form. Until then, employers may continue to rely on the guidance the IRS issued following the Supreme Court’s DOMA ruling, including Revenue Ruling 2013-17. Under this guidance, for example:

  • An employer should not impute additional income to an employee who covers his or her same-sex spouse as a dependent under the employer’s health plan;
  • An eligible employee may pay for a same-sex spouse’s health coverage on a pre-tax basis through a cafeteria (or Section 125) plan in the same way as an employee with an opposite-sex spouse; and
  • An eligible employee may receive tax-free reimbursements for expenses of his or her same-sex spouse through a health flexible spending account (FSA), health reimbursement account (HRA) or health savings account (HSA).

 

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The information provided is for informational purposes only and does not constitute legal advice. The information above contains only a summary of the applicable legal provisions and does not purport to cover every aspect of any particular law, regulation or requirement. Depending on the specific facts of any situation, there may be additional or different requirements. This is to be used only as a guide and not as a definitive description of your compliance obligations.