A Belated Review of the DOMA Supreme Court Case

For over a year, I have watched Windsor make its way through the United States District Court, Southern District of New York (see trial court case here); the U.S. Court of Appeals for the Second Circuit (see 2nd Circuit Opinion here); and ultimately to the U.S. Supreme Court.  As a tax lawyer, I have been particularly interested in this case and its implications because it involved a tax issue and because so many tax laws address the concept and status of marriage.  On June 26, 2013, I was particularly excited to learn that the Supreme Court had reached a ruling in Windsor v. U.S.  Until now, I have not have the opportunity to blog about the ruling for a couple of reasons.  First, I was busy babysitting my niece and nephew while my sister gave birth to her third child, a beautiful girl.  My new niece's name is Musya and, as you can see from the picture below, she is very cute. Second, the complexity of the case required me to review it several times over the past couple of weeks.  Despite the delay, however, I believe that a review (no matter how brief) of this case is necessary.1) OverviewIn 2007, Edith Windsor and Thea Spyer became married in Ontario Canada.  The state of New York recognized this marriage.  Spyer died in 2009 and left her entire estate to Windsor.  Windsor attempted to claim a federal estate tax exemption for surviving spouses, and this exemption would have eliminated any estate taxes.  Nevertheless, the Defense of Marriage Act ("DOMA") barred Windsor from receiving the exemption, as §3 of DOMA defined "marriage” as “only a legal union between one man and one woman as husband and wife."  Windsor paid $363,503 in estate taxes.  She then sought a refund from the IRS, but the IRS denied it.  As a result, Windsor sued for a refund and argued that DOMA violated equal protection, as guaranteed under the Fifth Amendment of the U.S. Constitution.In June 2012,  the trial court held that a same-sex surviving spouse is entitled to an estate tax refund, as the definition of “marriage” under DOMA deprived the surviving spouse of equal protection, as guaranteed under the Fifth Amendment to the U.S .Constitution.  DOMA's definition of "marriage” as “only a legal union between one man and one woman as husband and wife” was thus held unconstitutional.  The trial court ordered the Treasury to refund the estate tax paid.   During the trial, the presidential administration decided to refrain from further defense of the constitutionality of §3, although it continued to enforce it.  Because the administration continued to enforce §3, it refused to comply with the trial court judgment.  As a result, the Bipartisan Legal Advisory Group of the U.S. House of Representatives ("BLAG") intervened in the litigation to defend the constitutionality of §3.In October 2012, the Second Circuit affirmed the lower court ruling and held that the surviving spouse was entitled to a marital deduction from federal estate taxes and to a refund of estate tax paid after the death of her spouse.  In December 2012, the Supreme Court granted  Cetiorari and thus agreed to review the case.2) Overview of the Court's RulingIn addition to holding that the Court had jurisdiction to consider the merits the case and that BLAG had standing in the case, Justice Kennedy (joined by Ginsburg, Breyer, Sotomayor, and Kagan) affirmed DOMA to be unconstitutional.  The Court held that DOMA was a deprivation of the equal liberty that the Fifth Amendment protects.  The majority opinion noted that marriage is defined and regulated by the states.  DOMA, as a Federal statute, intervenes into states and impinges upon state laws that concern marriage.  As a result,  DOMA denies federal benefits to residents of New York and other states that hold same-sex marriage as legal.  The Court held that these restrictions and disabilities, and resulting injury and indignity, that DOMA imposes is a deprivation of the liberty protected by the Fifth Amendment.  It creates two contradictory marriage regimes (a state regime and a federal regime), and would force same sex couples to live as married for state-law purposes, but not for federal law purposes.The Court thus affirmed the lower courts' rulings, but neither legalized same-sex marriage in states that do not recognize it nor provided federal benefits of marriage to same-sex couples in those states.Justices Roberts, Scalia, and Alito each provided dissenting opinions.3) Consequences of the RulingSame-sex marriages are thus legal for state and federal purposes, and thus federal benefits of marriage are available, only in states that hold same-sex marriages to be legal.  Thus, Federal and state law on this issue is consistent in each individual state, but not across state lines.   How are the IRS and other federal agencies going to address these issues?   My concern (which was addressed in the dissenting opinions) is what the next steps will be.  Will a future statute or court opinion hold illegal (perhaps even unconstitutional) discrepancies in marriage law among different states?  Will federal benefits of marriage be available to a same-sex couple who are married in a state that recognizes same-sex marriages but that lives in a state that does not recognize same-sex marriages?  In other words, which state law is applicable: the law of the state in which the marriage ceremony occurred (the state of "ceremony" or "celebration") or the law of the state in which the couple resides (the state of "domicile" or "residence")?  Should the couple be allowed to file amended tax returns as a married couple for previous tax years?  If so, what is the earliest tax year  for which a tax return may be amended?*  On August 9, 2013, the IRS and Treasury, in their 2013-2014 Priority Guidance Plan, announced that guidance relating to this case is a priority for allocation of their resources over the next year. 4) My previous Blog Postings on This Case:Court Grants Same-Sex Surviving Spouse Estate Tax Refund; Holds DOMA Definition of “Marriage” Unconstitutional (June 11, 2012)Appeals Court Upholds Estate Tax Refund to Surviving Spouse in Same-Sex Marriage (October 19, 2012)U.S. Supreme Court to Review Defense of Marriage Act in Estate Tax Refund Case (December 9, 2012) *George Karibjanian addresses these issues in detail in his July 18, 2013 comments to the Department of Treasury.  See "Attorney Offers Advice on Federal Tax Treatment of Same-Sex Marriages," 2013 TNT 142-25, July 24, 2013.  See also "Firm Comments on Tax Implications of Supreme Court's DOMA Decision," 2013 TNT 153-10, August 8, 2013 (providing August 1, 2013 comments from Derek B. Dorn of Davis & Harman LLP to the IRS with regard to tax consequences of this decision).UPDATED ON AUGUST 12, 2013.