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Entries in DOMA (7)

Tuesday
Aug012017

Return to Windsor: A Novel Tax Code Correction

Tax Law Certified SpecialistCalifornia Bar Certified Specialist in Tax Law

 

by Michael Hackman

818.907.3279

 

 

 

Here’s the next chapter in the saga known as Edith Schlain Windsor v. The United States of America. (For a quick recap, please read Tax & Estate Planning – Small Win for Same Sex Couples?)

Tax Refund for Same Sex Married Couples

Two representatives of the state of Massachusetts, Senator Elizabeth Warren and Congressman Richard Neal, have introduced a new bill, the Refund Equality Act, to allow same-sex married couples to amend their tax returns as far back as the date of their marriage. But what does this mean, exactly?

The backstory:

Current law allows any married couple who previously filed tax returns as individuals, to amend their returns to file jointly. They may amend up to three years of filings.

The U.S. Supreme Court’s decision to overturn the Defense of Marriage Act (DOMA) in 2013 (this time it was the U.S. v. Windsor), and its follow-up landmark decision in Obergefell v. Hodges in 2015 (which recognized same-sex marriage as a fundamental right protected by the U.S. Constitution), meant, among other important considerations, that gay married couples in any U.S. state could finally match their straight counterparts when it came to yearly tax savings.

But the three year cap created a problem. Same sex couples were out of luck when it came to tax refunds for the years prior to the 2013 Windsor decision, if they were married before then – even though DOMA and bans on gay marriage were deemed unconstitutional.

Revising Tax Code A Matter of Equal Rights

Proposed Bill Tax Refund for Gay Married CouplesThe Refund Equality Act of 2017 seeks to make amends, literally and figuratively. In a press release, Congressman Neal stated:

This bill would codify into law an important correction that would enable same-sex married couples to go back and claim the tax refunds and credits for which they qualify. The Supreme Court has ruled as such, and now it's time for Congress to act and make sure all Americans are treated with the fairness and equality they deserve under the law.   

Before and after the Windsor decision, the Internal Revenue Service lacked the authority to override time limitations in the tax code, but exceptions for other groups did exist. The Refund Equality Act attempts to fix the disparity by creating an exemption specifically for same-sex couples to apply for adjustments dating back to the date of marriage.

The Joint Committee on Taxation estimates $67M would be returned to the qualifying couples.

Every good story has a bit of irony, and this one does as well. Edith Windsor and her spouse may not qualify for a tax refund under this new bill. Why? Under Section 2 of the current bill, an amendment to Internal Revenue Code 1986 would stipulate regarding spouses:

“Who were married under state law (as such term is used in Revenue Ruling 2103-17). . . .”

Windsor married in 2007, which could mean six years of amended returns between then and 2013. But the couple married in Canada!

 

Michael Hackman is the Chair of both our Tax, and Trust & Estate Planning Practice Groups.

Disclaimer:
This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only, to provide general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for obtaining legal advice from a licensed professional attorney in your state.

 

Friday
Jun262015

Supreme Court: 14th Amendment Requires Recognition of Same-Sex Marriage

Gay Marriage LawCalifornia Bar Certified Specialist, Family Law

 

 

by Vanessa Soto Nellis
818.907.3274

 

 

 

 

In 1883 the Supreme Court of the United States (SCOTUS) ruled that couples engaging in interracial sex (Pace v. Alabama) are not in violation of the Fourteenth Amendment to the United States Constitution, which was ratified just 15 years previously. Amendment XIV addressed citizenship rights and equal protections in a post-Civil War era when former slaves struggled for recognition.

In 1967 SCOTUS went a step further in Loving v. Virginia, invalidating state laws prohibiting marriages between interracial couples.

Nearly 50 years later, the Supreme Court in a 5-4 decision re Obergefell v. Hodges, invalidated 13 state's laws prohibiting same-sex marriages. SCOTUS cited Confucius: "marriage lies at the foundation of government" and Cicero, "The first bond of society is marriage; next, children; and then the family."

…history is the beginning of these cases. The re­spondents say it should be the end as well. To them, it would demean a timeless institution if the concept and lawful status of marriage were extended to two persons of the same sex. . . The petitioners acknowledge this history but contend that these cases cannot end there. Were their intent to demean the revered idea and reality of marriage, the petitioners’ claims would be of a different order. But that is neither their purpose nor their submission. . .it is the enduring importance of marriage that underlies the petitioners’ contentions.

History circles back. SCOTUS rulings for Pace, Loving and Obergefell relied heavily on the 14th Amendment which attaches a Due Process Clause, upholding the Bill of Rights, or first 10 amendments to the Constitution. In Obergefell, Justice Anthony Kennedy states that the Bill of Rights gives protections for "personal choices central to individual dignity and autonomy, including intimate choices defining personal identity and beliefs."

Further, a judicial responsibility exists, which may sometimes be guided by traditional views:

That method respects our history and learns from it without allowing the past alone to rule the present. . .The generations that wrote and ratified the Bill of Rights and the Fourteenth Amendment did not presume to know the extent of freedom in all of its dimensions, and so they entrusted to future generations a charter protecting the right of all persons to enjoy liberty as we learn its meaning.

The SCOTUS opinion for Obergefell is a landmark ruling. The respondents claimed there hasn't been enough rhetoric for the courts to make such an important decision. But the opinion announced today disagreed, listing countless referenda, debates, studies and an untold number of court cases. There have been more than 100 amici briefs ('friend of the court' filings) from businesses, labor unions, religious organizations, etc., all stating their opinions or agendas regarding same-sex marriage. There has been the Defense of Marriage Act (DOMA) defining marriage as a union between one man and one woman, and then the repeal of DOMA.

Despite the respondent's appeal to wait, the Obergefell opinion contends that the Constitution allows for asserting a fundamental right without waiting for legislative action. Therefore, the SCOTUS opinion concludes:

No union is more profound than marriage, for it embodies the highest ideals of love, fidelity, devotion, sacrifice and family…Their (plaintiffs') hope is not to be condemned to live in loneliness, excluded from one of civilization's oldest institutions…The Constitution grants them that right.

 

Vanessa Soto Nellis a California State Bar Certified Specialist in Family Law. Contact her via email: vnellis@lewitthackman.com; or by phone: 818.907.3274.

 

Disclaimer:
This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only, to provide general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for obtaining legal advice from a licensed professional attorney in your state.

Wednesday
May142014

Retirement Planning for Same-Sex Married Couples

Trusts & Estate Planning Attorney

by Kira S. Masteller
818.907.3244

 

In September, the Internal Revenue Service issued Revenue Ruling 2013-17 which clarified when, for federal tax purposes, the IRS will recognize same-sex marriages.

As of September 16, the Department of the Treasury and IRS recognized a same-sex marriage if the couple was married in a state where it is legal. It became the state of celebration that mattered to the feds, rather than the state of domicile.

Now the IRS has released further guidance, which addresses questions regarding certain retirement plans for same-sex married couples. Revenue Ruling 2014-19:

1. Describes when marital status is relevant to the payment of retirement benefits;

2. Outlines how tax requirements for same-sex married couples should be satisfied following the Supreme Court's decision in United States v. Windsor – in which Section 3 of the Defense of Marriage Act (marriage declared to be between one man and one woman) was deemed unconstitutional – and  Revenue Ruling 2013-17; and  

3. Provides guidance regarding when retirement plans should be amended for compliance.

 

Same-Sex Retirement Benefits: The Basics

Now is a good time to review your retirement plan, check your beneficiary designations, and check with your employer to see if the retirement plan will be amended to provide additional benefits to same-sex surviving spouses.

Keep these three things in mind:

1. Ruling 2014-19 is retroactive, applying the 2013-17 definitions of married couples for tax purposes to retirement plans. Remember, it's the state of celebration, rather than the state of residence that is important now.

So if a same-sex couple married in California and later moved to a state where gay marriage is not recognized – the surviving spouse will still be eligible to receive benefits according to the IRS. 

 

2. If a spouse passes away on or after June 26, 2013, the same-sex surviving spouse will be entitled to profit-sharing and stock bonus plans, and other potential benefits, if the spouse is named the primary or partial beneficiary.

If the deceased participant did not designate a beneficiary, the plan administrator must recognize the spouse (gay or straight) as the default beneficiary.

 

3. If someone other than the spouse is the designated beneficiary, the surviving spouse whether straight or gay, must have provided written consent to that effect.

If you need more information regarding who to designate as beneficiary for your estate's assets, please read Designated Beneficiary Assets: Consider Your Income, Capital Gains & Estate Taxes.

 

Kira S. Masteller is a Gift Tax and Estate Planning Attorney at our firm. Contact her by phone: 818.907.3244 or email: kmasteller@lewitthackman.com for more information.

Disclaimer:
This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only, to provide general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for obtaining legal advice from a licensed professional attorney in your state.

Thursday
Jul252013

How Does the DOMA Ruling Affect Estate Planning?

Trusts & Estate Planning Attorney

by Kira S. Masteller
818.907.3244

 

 

The United States Supreme Court's ruling on Section 3 of the Defense of Marriage Act (DOMA) on June 26, declaring the definition of marriage as a union between one man and one woman unconstitutional, means same-sex couples in several states can now take advantage of certain tax savings when estate planning. For federal tax purposes, homosexual married couples will now be treated the same as heterosexual married couples.

Granted, the IRS is still struggling to determine how they will deal with individual and joint tax returns for same-sex couples. But federal estate planning benefits may now apply to same-sex married couples in California:

  1. Company Retirement Plans: The Employee Retirement Income Security Act of 1974 gives spouses the right to be sole beneficiaries of certain accounts.

  2. IRA Rollover Rights: When a spouse inherits funds from an IRA or other qualified plan, s/he can roll those assets into her or his own IRA account to postpone the required minimum distributions.

  3. Annual Exclusion Gifts: Any individual taxpayer can gift up to $14K per year, to as many beneficiaries as needed, without triggering gift taxes. Together, spouses can gift up to $28K either from individual or joint accounts.

  4. Lifetime Gift Tax Exclusion: This one amounts to $5.25M for individuals, and $10.5M for married couples – significant savings for your estate.

  5. Portability: Speaking of the gift tax exclusion, portability allows the widow or widower to add the deceased spouse's unused exclusion to their own exclusion, totaling up to the limit of $10.5M.

  6. Other Tax Breaks: Using a marital deduction, spouses can make transfers to each other during life or at death.

Keep in mind that a same-sex spouse who moves to a state where gay marriage is not recognized, may not qualify for these benefits. The ruling in United States v. Windsor simply says the federal government will recognize a couple's marriage if the state where they reside recognizes the union.

Remember too, that the Prop 8 and DOMA rulings broke new ground in the legal landscape, and that for same sex couples in California and other states that recognize gay marriage, estate planning may be constantly changing for a while. Contact me if you need help keeping track of the current benefits and financial liabilities.

Kira S. Masteller is an Estate Planning Attorney and Shareholder at our firm. Email her at kmasteller@lewitthackman.com for more information.

 

Disclaimer:
This Blog/Web Site is made available by the lawyer or law firm publisher for educational purposes only, to provide general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for obtaining legal advice from a licensed professional attorney in your state.

Thursday
Jun272013

Post-DOMA for Employers

Lawyer for EmployerWage and Hour Defense

 

by Nicole Kamm
818.907.3235

 

 

 

 

With the dust just settling on Wednesday’s ruling on the Defense of Marriage Act, or DOMA, and Proposition 8 federal court opinions, now is the time for employers to consider the potential impact on their businesses.

Among the workplace-related issues raised in the cases are: continuation of benefits under the Consolidated Omnibus Budget Reconciliation Act (COBRA), eligibility for leave under the Family Medical Leave Act (FMLA), taxation of spousal health benefits, eligibility for spousal retirement benefits, and surviving spouse social security benefits.  And there are more.

In view of this, let's take a look at what the court opinions will mean for business.

 

Part of DOMA Definition of Marriage Unconstitutional

 

The U.S. Supreme Court ruled in a 5-4 decision in United States v. Windsor, that Section 3 of DOMA is unconstitutional. This is the section that defines marriage as the union of one man and one woman only, excluding same-sex marriages and polygamy.

Chief Justice John Roberts delivered the 5-4 opinion:

By seeking to injure the very class New York seeks to protect, DOMA violates basic due process and equal protection principles applicable to Federal Government…Its unusual deviation from the tradition of recognizing and accepting state definitions of marriage operates to deprive same-sex couples of the benefits and responsibilities that come with federal recognition of their marriages.

 

By applying the DOMA definition of marriage, over 1,000 federal benefits were denied to same-sex married couples. Many same-sex spouses were left without healthcare, pension and retirement benefits, tax benefits (see Kira S. Masteller's blog regarding Edith Schlain Windsor's claim, when her partner Thea Spyer passed) and leaves of absence privileges when a spouse serves in the military, has a child, or needs medical care – to cite just a few examples.

 

Proposition 8 & DOMA - Employer Checklist

 

Now that the U.S. Supreme Court has deemed the definition of marriage under DOMA void, you may need to:

  1. Review employee handbooks
  2. Review employee benefit packages
  3. Revisit retirement plans, since many define marriage by DOMA standards
  4. Prepare to garnish wages in the event of an employee's divorce or child support obligations, when s/he has been unable to meet those demands.
  5. Ensure employees know their spouses may qualify for benefits

If your company has staff outside of California, consider the possible implications of having employees who live and/or work in states that do not authorize gay marriage.

To the extent they already provide benefits to same-sex spouses or domestic partners, employers should consider whether further changes are required.  Finally, employers can expect to hear from workers wanting to add a spouse to a benefit plan.  Be ready to promptly handle such requests.

There are still many open questions.  In the meantime, make sure you take steps to comply with the law, including treating same-sex employees and their spouses the same way you would treat any other employee or spouse – without discrimination in pay, working conditions, or benefits.

Nicole Kamm is an Employment Defense Attorney at our Firm. If you have questions regarding compliance with state and federal employment law, contact her via email: nkamm@lewitthackman.com. 

LEWITT HACKMAN | 16633 Ventura Boulevard, Eleventh Floor, Encino, California 91436-1865 | 818.990.2120