Return to Windsor: A Novel Tax Code Correction

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Lewitt Hackman

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?)

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

The 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!

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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