Roll Call: Latest News on Capitol Hill, Congress, Politics and Elections
November 30, 2015

Cardin: Should Gay Couples Get Tax Refunds?

(ill Clark/CQ Roll Call File Photo)

Cardin is inquiring about taxes for gay couples since the DOMA ruling. (Bill Clark/CQ Roll Call File Photo)

Sen. Benjamin L. Cardin, D-Md., wants to know if couples in same-sex marriages can file prior years’ tax returns to recoup tax money from the government they may now be owed.

It’s just one of the questions Cardin has asked the IRS to outline in wake of the Supreme Court’s decision to overturn the Defense of Marriage Act.

The landmark Supreme Court case was, at its core, about the application of the estate tax to a married same-sex couple. In a letter, Cardin is seeking details from Treasury Secretary Jacob J. Lew and acting IRS Commissioner Daniel Werfel about how the case will be interpreted in implementation.

Among the interesting technical questions is whether people who were in same-sex marriages must reside in a state that recognizes the union for it to apply as a matter of federal tax law. Another question is how the ruling will be applied to tax returns from prior years.

“It would appear also that Windsor has retroactive effect, at least for open tax years. The Service should allow impacted taxpayers to voluntarily elect to amend returns and receive any refunds, credits, or carry-forwards that may be available because of a newly filed return,” Cardin wrote. “However, given that pre-Windsor, married same-sex couples were prohibited from filing joint returns, it would be inappropriate for the Service to audit, make assessments, or otherwise challenge such a couple’s decision not to amend their returns.”

There’s also a broader question of the effect on civil unions that aren’t defined as marriages under state laws. Cardin cites “the importance of predictability” in calling for swift rule-making by the IRS.

Text of the letter appears below:

Dear Secretary Lew and Acting Commissioner Werfel:

In the wake of the Supreme Court’s historic decision in United States v. Windsor (“Windsor” or “Decision”), which ruled the Defense of Marriage Act (“DOMA”) unconstitutional, I am writing to urge you to consider the Decision’s tax implications for same-sex couples. Specifically, I urge that you resolve the issues outlined below.

1. Need for clear guidance. Pursuant to Windsor, same-sex couples who hold a valid marriage license issued by a U.S. state or a foreign country are now considered married under federal law, including for federal income tax purposes. Likewise, each party to such a marriage is considered a spouse wherever that term is found in the Tax Code. The Decision must be applied prospectively from when it was issued on June 26, 2013. Especially for taxpayers in same-sex marriages who, perhaps anticipating the Windsor decision, filed extensions for their 2012 returns, it is critical that the Internal Revenue Service promptly issue guidance confirming their filing status. Given the scope of impacted taxpayers, the IRS’s guidance should be issued as soon as possible and, eventually, be made into a separate IRS Publication, and should address each of the points further below.

2. State of celebration rule. While some have suggested uncertainty as to whether Windsor requires federal agencies, including the IRS, to recognize only same-sex marriages that are recognized in the couple’s state of domicile, we reject such a theory. Rather, the Service should continue to follow its own precedent, Revenue Ruling 58-66, which extends recognition to a marriage that is lawful in the state of creation, irrespective of whether the spouses’ state of domicile recognizes the marriage. This precedent for recognizing marriages despite a couple’s move to a state without similar marriage laws is essential not only for fairness, but also to ensure administrability of the tax laws.

3. Retroactivity. It would appear also that Windsor has retroactive effect, at least for open tax years. The Service should allow impacted taxpayers to voluntarily elect to amend returns and receive any refunds, credits, or carry-forwards that may be available because of a newly filed return. However, given that pre-Windsor, married same-sex couples were prohibited from filing joint returns, it would be inappropriate for the Service to audit, make assessments, or otherwise challenge such a couple’s decision not to amend their returns. You should use your statutory authority to make clear that Treasury and the Service will not pursue such actions.

4. Civil unions. While the Windsor Court did not address civil unions, eight states allow such unions and have generally understood them to provide same-sex couples with the same legal rights and responsibilities as those that apply to opposite-sex married couples. In fact, parties to a civil union are generally considered “spouses” under the laws of those states that sanction civil unions. Therefore, it is important for the Service to address whether civil unions in states that consider parties to such unions as spouses will be treated as marriages for federal tax purposes.

Given the importance of predictability and clarity in the application of our tax rules for financial planning, I urge the Service to move as expeditiously as possible to issue guidance as to how the law will be applied to married same-sex couples.

  • John Allegro

    Standing against the injustice of plunder in no way implies that one regards advancement of the less fortunate as an unworthy cause.

  • JMH21

    Under the logic of Senator Cardin a heterosexual couple that lived together for several years before getting married should also be able to file for back taxes. In fact there would be hundreds of laws that have been changed and we should then allow people to go back and refile their taxes to recoup funds. At a time when we continue to amass deficits and increase the national debt I would hope Sen. Cardin would focus on reducing the debt and reduce spending before he offers up more money from the federal coffers.

    • Tom

      No it’s not the same as a heterosexual couple living together for several years trying to file for back taxes. My partner and I have been legally married in the state of CT for over 6 years. The Federal Government did not recognize us as married for all of those years and subsequently taxed us on the workplace healthcare benefits provided for my spouse. That averaged about $3,000 a year in extra taxes that none of my heterosexual coworkers had to pay. I will certainly try to get that back in a refund – we were married and it wasn’t fair.

    • ExRepug

      You don’t seem to understand tax law, so please refrain from posting misinformation.

      A couple’s filing status (“joint”, “single”, “married filing separate”) is determined by whether they were married or not married on December 31 of any given tax year. For a couple to file an amended return for a prior year — whether they are a heterosexual couple or same-sex partners — they would have to have been married during that earlier year.

      So, no, an unmarried same-sex couple that lived together for several years before getting married cannot rush out and get married and then file amended joint returns for the years they were not married. Neither can an unmarried hetero couple who lived together.

      • JMH21

        I do understand the tax code very well as a tax lawyer. If same-sex couples can file for retroactive tax returns without having been legally married in that time then logic says that non same-sex couples could make the same claim. My point is that passage of retroactive laws comes with all kinds of problems.

        • Randy

          Only the legally married same sex couples can apply for refunds (not “returns”).

          • JMH21

            Randy, you don’t “apply for refunds” you file returns and the bottom line of your 1040 tells you whether you owe taxes or get a refund. My point in this discussion was that unless you are recognized as legally married at the time the return was due then you cannot start allowing retroactive returns. That opens up a dangerous window in tax policy. As one has pointed out why not pass a tax increase and make it retroactive? That is simply not how the tax system works.

          • Randy

            You should check IRC 7805.

          • JMH21

            Again, they are not “tax credits”. The tax code has a very exact list of filing statuses. You are either single, married filing jointly, married filing separately, etc… The key issue here is whether you were eligible for that status you desire at the time you filed the return. If you were not legally married at the time you filed the return (legally meaning in the eyes of the IRS) then you cannot file as “married filing jointly”. That would reduce your tax burden if you filed as two single returns but my point is that you cannot open pandora’s box and start changing the tax code retroactively because of some social position you now advocate. Where do you stop once you begin this practice?

            If the IRS wants to now recognize same sex marriages for tax purposes they are free to do so prospectively.

            In summary, get your terms correct. You file returns and the numbers tell you whether you either owe taxes or are due a refund. You don’t file for refunds and you claim legitimate tax credits that are in the code. Credits are very different than deductions and filing as “married filing jointly” gets you a higher deduction but not any tax credits.

          • Randy

            I am quite proficient with the terms. I know the rules for different filing statuses, S vs. HOH vs. MFJ, vs. MFS. I know the difference between deductions (above the line and below the line) that reduce taxable income vs. credits that can reduce tax to zero vs. refundable credits that can reduce tax below zero and be refunded to the taxpayer. An instance where MFJ vs. single that would result in a tax credit is if one spouse is a student with earned income, but no taxable income. When filing Single, since he doesn’t have taxable income, he couldn’t take advantage of any of the education credits. Filing MFJ, he could, if the spouse had taxable income (thus tax) to apply the credit against.

            You may think that applying regulations retroactively would open a pandora’s box, but IRC 7805 allows for regulations to apply retroactively. That is simply how the tax code works. Especially to correct something that was deemed illegal, i.e. not recognizing legal marriages. I highly doubt that you’re a tax lawyer, but even if you are, I would trust ExRepug before you, and I always verify ExRepug’s citations. You simply do not know what you are talking about.

          • JMH21

            There are changes in the code every year but they do not make them retroactive. You have a social agenda and that is fine but I am only looking at the code and yes, if you start making laws retroactive you are opening pandora’s box. I guess you would support reparations to African Americans because we eventually ruled slavery illegal. It is only legal when the law says it is legal.

            Regulations are not statute. Congress will have to make the change and that is why Cardin suggested it but it has no chance of passing either the Senate or the House.

          • Randy

            Whether I have a social agenda or not, this is not a change to the tax code. I am not in favor of reparations, since the country has long since atoned for slavery. You’re right. Regulations are not statute, but the statute provides for regulations, so they have the effect of law. However, I digress. It’s a Revenue Ruling that will allow amendment of prior year tax returns or claims for abatement or refunds so long as the statute of limitations hasn’t expired. Here’s the link:


            And thank you for not continuing to proclaim to be a tax lawyer.

        • ExRepug

          You claim to be a tax lawyer yet you cannot correlate two provisions of the regulations? I stand my contention that you are dispensing misinformation.

    • Randy

      That’s not where his logic is going.

  • David

    No, that would be kind of silly. When the top marginal tax rate went up as a result of the fiscal cliff deal, did we make everyone who has made more than 400k in the last 10 years go through and pay back-taxes? No, of course not. You pay taxes based on the law at the time.

  • camdenme2

    Hell NO you idiot !

  • George Ramos

    Great thinkers, such as Hume, Smith, and Bastiat, helped discover and refine the principles of individualism and its associated liberty.

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