Gideon Alper, who publishes the Gay Couples Law Blog, which discusses new developments in same-sex family law and estate planning, writes:
The IRS should recognize gay marriages not just as a matter of equality, but also to encourage socially beneficial behavior in gay relationships.
Fred Silberberg, a Los Angeles attorney that has practiced family law for over 20 years, wrote in the Huffington Post about the unnoticed effects of the Defense of Marriage Act.
Specifically, he talked about a problem a male client was having with alimony payments to the client from the client’s same sex ex-partner. Because the IRS doesn’t recognize gay relationships, the alimony is not deductible. But if the client had been married to a woman, his wife would be able to deduct alimony payments she makes to him.
The government allows people to deduct alimony payments to encourage ex-spouses to make support payments. The deduction gives one spouse a financial incentive to support the other after a breakup. This behavior is socially beneficial—it lets someone who relied on her spouse’s income to maintain access to it. Fred writes:
“It is the tax-deductibility aspect of spousal support that allows us, as lawyers, to try to come up with creative ways to address the issue if at all possible. We try to maximize the tax benefit and use it in a way that reduces overall income tax liability to maximize the dollars that exist to benefit the now-separated family.”
The impact to Fred’s client and his ex-partner was particularly large because their income levels were high enough that they were paying federal income tax at the maximum rate. Because his ex-partner has no tax incentive to make alimony payments, the client may not receive the support he needs to continue his lifestyle after the dissolution.
But deducting alimony payments is just one of the many income tax deductions available to married (and divorced) couples. These deductions encourage couples to do things that the government believes are good for each other and society in general.
Because the IRS doesn’t recognize gay relationships, the government can’t give the same encouragement to same sex couples. Repealing DOMA, then, would not just put same sex and opposite sex couples on an equal footing–it would also allow the government to use tax laws to encourage gay couples to make socially beneficial choices.
Last year, while Californians were in the midst of a heated debate on the merits of Prop 8, Charles Merrill took activism into his own hands: he filed papers in Tax Court challenging the Defense of Marriage Act (DOMA). On July 13, the Tax Court ruled that Merrill was not entitled to relief. (Merrill v. Commissioner, T.C. Memo 2009-166).
Merrill is legally married in the state of California to Kevin Boyle, one of nearly 18,000 same-sex unions in state which remained valid after Prop 8 was upheld by courts earlier this year. His court challenge, however, had nothing to do with his marriage.
The question, according to the court was “whether petitioner, who was unmarried but in a committed relationship with another man during the years at issue, is entitled to married filing joint status.” The court found that he was not.
So it feels like the law is settled. Or maybe not.
This case wasn’t really about DOMA even though it was painted as a DOMA challenge. Merrill did not get married until 2008. His case, however, focused on the tax years 2004 and 2005, when he was single. Merrill believes that he should have been able to file as married while a resident of North Carolina since North Carolina does not recognize same sex marriages; the IRS said that he could not because he was not married. Additionally, Merrill believes that he should have been able to file as married when he moved to California; again, the IRS said that he could not because he was not yet married. The court agreed on both counts. In other words, Merrill wasn’t married, so the court found that he couldn’t file as married. Not groundbreaking stuff.
It wasn’t surprising, then, that the court refused to address the bigger issue of the constitutionality of DOMA, claiming that it was not relevant to Merrill’s case. Had they addressed that piece, that would have been interesting. The court would have been required to address DOMA had Merrill filed a federal joint return for 2008 (for which he was legally married). The IRS does not follow state law for recognizing same-sex marriages despite the fact that state law determines marital status for federal filing purposes, including the recognition of common law marriages and legal separations. However, DOMA, which defined marriage as “a legal union between one man and one woman as husband and wife” requires that the IRS not recognize same sex marriages.
In other words, you want to talk DOMA? File a bona fide DOMA challenge.
The rest of Merrill’s case is likewise a bit puzzling. Merrill had actually not filed with the IRS for either of the years in question (2004 and 2005). He has refused to file or pay federal taxes for the past several years as a protest. While I note that constitutional law isn’t my forte, I might have approached this case a little differently. It would make sense to me that, rather than file a case protesting filing status that Merrill never actually claimed (meaning that he never filed as married), a better route from a procedural standpoint would have been to file joint tax returns with his partner and then make the claim if opposed by the Service (which it certainly would have been). Would he have had a different result this way? Probably not. But I think it would have been a better argument and made a bigger statement.
This case may get talked up a bit at cocktail parties (on both sides) but for tax purposes, in the end, it really didn’t offer anything new.
(Hat Tip: Tax Prof Blog)
Melissa Etheridge is angry.
In an article posted on The Daily Beast, Etheridge railed against the passing of Proposition 8 in California. Proposition 8 is, as you may know, a law which defines marriage in California as between a man and a woman. The law supersedes gay marriages in parts of the state, effectively making them null.
In response to the bill, Etheridge wrote of her relationship: “…she and I are not allowed the same right under the state constitution as any other citizen. Okay, so I am taking that to mean I do not have to pay my state taxes because I am not a full citizen. I mean that would just be wrong, to make someone pay taxes and not give them the same rights, sounds sort of like that taxation without representation thing from the history books.”
Etheridge went on to say that she could find another use for the approximate $500,000 that she now pays in taxes to the State of California and hints that perhaps a little civil disobedience is called for within the gay community. In a budget crisis such as California is currently experiencing, she notes that lost revenue would certainly be a hardship. So maybe, just maybe, the gay community in California should say no along with Etheridge to paying taxes…
Umm, no.
I do not understand Proposition 8. I love my husband and I don’t understand how the relationship of any other person (except for Luke Wilson, as mentioned before) threatens my marriage at all. I don’t feel the need to define, clarify or defend the sanctity of marriage. And I certainly don’t feel that it needs to be done through legislation. If you don’t believe in gay marriage, don’t get gay married. I dunno, it all feels so silly.
All of that said, the idea of refusing to pay taxes as a result of the passage of Proposition 8 is equally silly (sorry, Melissa, love your records, hate your tax theory).
First of all, you don’t have to be a “full citizen” in the US (or most states) to be responsible for a share of the tax burden. The criteria in most taxing jurisdiction in the US is residency or source of income, not citizenship. So, from a tax compliance perspective, even if one could establish lack of citizenship, it would not excuse the need to file and pay taxes.
Even from a tax policy perspective, it’s not a good argument. The government is not perfect. There will always be unpopular legislation, courses of action that we feel are unfair and expenditures that we don’t agree with – consider the war in Iraq, for example. That doesn’t excuse us from paying for the services that we use – roads, schools, courts, police, fire and other infrastructure. Do I like it? No. But consider the potential chaos that we would face if we selectively paid taxes based upon how fair we think something is…
Yes, I get that this is a really big deal. I do. It does have the effect of legislating away rights that had been previously granted. And that sucks. But the voters did it, not the Governor, not the legislature. And the voters made it law.
And Etheridge and other members of the gay community in California have every right to be angry, to hate that this happened and to work to fix what they perceive as an infringement on their rights. And I’m sure that they will. We’ll see it again in court in California (a legal challenge has already been mounted) – as well as in Tax Court, where Charles Merrill has filed a challenge to the Defense of Marriage Act (DOMA).
But does that give the gay community a pass on paying their taxes in the meantime? No, it doesn’t.
Whereas civil disobedience has generally been regarded as an immediate method of attracting attention to a cause, Etheridge arguably has more wider and more efficient means of shining a light on her cause. Might I suggest she sing about it, talk about it, yell about it, write about it…? But not break the law for it. In this case, I can’t help but feel that two wrongs do not make a right.
Charles Merrill, cousin of the founder of Merrill Lynch, has filed a challenge in the US Tax Court against the Defense of Marriage Act (DOMA). Merrill is arguing that the Tax Code is discriminatory under the First Amendment Establishment Clause of the US Constitution since same sex couples are denied the same benefits as straight married couples.
Merrill knows a little something about both. Merrill was previously married to the late Evangeline Johnson, the Johnson & Johnson heiress; they were married from 1975 until her death in 1989. Now, Merrill is legally married to Kevin Boyle in the state of California; that marriage is not recognized by the federal government.
Merrill has said:
Marriage is a Federal issue for all citizens, not a state or religious one.
Merrill’s argument is basically two-fold:
1, that the federal definition of marriage is discriminatory and based on religion; and
2, federal tax benefits for married persons should not be limited to married couples as defined by DOMA.
His first argument has merit in that proponents of DOMA argue that “Marriage is only a union between one man and one woman under God.” In fact, the majority of those who support DOMA do so on religious grounds. DOMA, and similar proposals like California’s Proposition 8, have the backing of such religious organizations as the Catholic Church, LDS and Southern Baptists.
Merrill counts 1,138 federal benefits for married heterosexual couples but not allowed for homosexual couples. He claims that this violates the idea of a Constitutional guarantee of “Equality of All.”
It’s a gutsy argument. And one that someone as well-positioned financially as Merrill appears to be can afford to make. Any thoughts on what will happen?
(Hat Tip: Tax Prof Blog)
