The Internal Revenue Service (“IRS”) has recognized that marriages of couples of the same sex should be treated the same as marriages of couples of the opposite sex for federal tax purposes. On September 2, 2016, the IRS issued final regulations — in furtherance of the Supreme Court’s decisions in Obergefell v. Hodges and Windsor v. United States, as well as Revenue Ruling 2013-17 — defining marriage for federal tax purposes. The IRS’s final regulations generally adopt the rules proposed by the IRS in October 2015 and amend the Income Tax Regulations, Estate Tax Regulations, Gift Tax Regulations, Generation-Skipping Transfer Tax Regulations, Employment Tax and Collection of Income Tax at Source Regulations and the Regulations on Procedure and Administration.

Under the final rule, the terms “spouse,” “husband” and “wife” apply to same-sex marriages for federal tax purposes, if the marriage is recognized in the state where the couple was married, regardless of where they live. However, the term “marriage” does not include registered domestic partnerships, civil unions, or other similar relationships recognized under state law that are not denominated as a marriage under that state’s law, and the terms “spouse,” “husband and wife,” “husband,” and “wife” do not include individuals who have entered into such a relationship.

Employers should be aware of these new rules and should also be aware that their employees who are married to same sex spouses may be amending their tax returns for open years to reflect the change of status for federal tax purposes.

The Final Regulations can be found at 81 FR 60609 [TD 9785].