On August 29th, the U.S. Department of the Treasury and the Internal Revenue Service ruled that same-sex couples who were legally married will be treated as married for federal tax purposes, including the pre-tax treatment of a spouse’s health insurance coverage, in all 50 states and the District of Columbia. Revenue Ruling 2013-17 will apply regardless of where the couple lives—in a state that recognizes same-sex marriage or in a state that does not.
The ruling comes following the June 26th Supreme Court decision in United States v. Windsor which found a key provision of the 1996 Defense of Marriage Act unconstitutional. Revenue Ruling 2013-17 covers any same-sex marriage legally entered into in one of the 50 states, the District of Columbia, a U.S. territory or a foreign country. The ruling does not apply to registered domestic partnerships, civil unions or other formal relationships recognized under state law.
Under the ruling, same-sex couples will be treated as married for all federal tax purposes. The ruling applies to all federal tax provisions where marriage is a factor including employee benefits. Those who purchased same-sex spouse health insurance coverage from their employer on an after-tax basis may treat the costs of that coverage pre-tax and excludable from federal income tax.
The Treasury and the IRS intend to issue streamlined procedures for employers who wish to file refund claims for payroll taxes paid on previously taxed health insurance and other benefits provided to same-sex spouses. They also intend to issue further guidance on cafeteria plans and on how qualified retirement plans and other tax-favored arrangements should treat same-sex spouses for periods prior to the effective date of this ruling which is September 16th.
OneDigital will continue to provide updates to our clients as more information is released with regard to this ruling and the potential impacts that need to be considered. Employers are also encouraged to consult their legal counsel for guidance.