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.
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.
This week, supporters of Proposition 8, which would ban gay marriage in California, released an ad, pictured above. The ad claims that under current law, gay marriage would be promoted in public schools and warned that churches which opposed same-sex unions would lose their tax exempt status. Richard Peterson, a law professor at Pepperdine University School of Law, appears in the ad, citing a newspaper article alluding to the loss of tax exempt status for those churches that oppose same sex marriage.
I never, ever, ever said anything about if churches do not perform same-sex marriages that you’ll lose your tax-exempt status.
DeKoven, who has never been contacted by the Yes on 8 campaign or Professor Peterson, authored an op-ed piece for the July 3 edition of the Gay & Lesbian Times entitled “Anti-Gay Clergy Should Fear Backlash.” Despite the title, DeKoven was not arguing that there might be tax consequences for those churches who oppose gay marriage; instead, he was arguing that it was not fair to allow tax deductions for donations to churches which are political but not allow tax deductions for donations to secular groups that are overtly political. That argument makes sense.
Issue advocacy on its face does not put tax exempt status at risk: it depends on the facts and circumstances. For example, the president of the Church of Latter Day Saints (LDS) issuance of a letter “from the pulpit” as was indicated in DeKoven’s piece, urging members to donate “means and time” to pass Proposition 8 is likely just a matter of issue advocacy. And to be clear, tax-exempt charitable organizations may take positions on public policy issues, even for those issues on which candidates have taken differing positions. However, encouraging voters to get behind an issue needs to be interpreted as simply that and not as intervention in a particular candidate’s campaign.
Even if a message from the charitable organization does not expressly encourage a vote for or against a specific candidate, there is a risk of violating the ban on political campaigning by a charitable group if the message appears to favor or oppose a candidate. That might include, for example, adding photos or statements from candidates in issue advocacy campaigns; directing voters to a particular candidate’s website; and literature that touts one candidate’s record on an issue. But simply advocating an issue is not a violation of the prohibition against politicking.
There is a fine line – and it’s clear to me that DeKoven was not implying that the line had been crossed in this circumstance. However, Professor Peterson and the folks at Yes to 8 apparently saw this as an opportunity to frighten taxpayers into believing that they couldn’t speak out against gay marriage under the current law. That’s just plain nonsense. It is short-sighted and narrow-minded of Professor Peterson to participate in such an ad campaign without arming himself with the facts – and if he had armed himself with the facts and moved ahead, shame on him.
Professor Peterson has not responded publicly to the criticisms against him. In the meantime, Pepperdine University School of Law has asked the Yes on 8 campaign to remove the Pepperdine affiliation from the ads; the campaign has not agreed to do so.
Funny. If the law actually were as Peterson has attempted to imply, he would have put Pepperdine’s tax exempt charitable status at risk for what appears to be taking a very public stance on a political issue… Only, Professor, that’s not the case, now is it?
Does the IRS discriminate against unmarried couples?
I’m specifically referencing same sex couples in this post because, while traditional unmarried couples may encounter the same kinds of difficulties with the Service, they have an “out” that same sex couples don’t have: marriage.
At my firm, we represent same sex couples in a number of tax and estate planning matters. It is an interesting practice because state laws vary from New Jersey to Pennsylvania – they are much more favorable to same sex couples in New Jersey. And though we often preach to “not let the tax tail wag the dog”, it often does. Since NJ has recognized same sex couples who register as domestic partnerships as “married” for tax and benefit purposes, I know same sex couples who have packed up and headed across the river in search of better circumstances.
It is difficult for me to wrap my head around the idea of suburban NJ as more progressive than Philadelphia. But with respect to taxes, it definitely is.
And yet, despite the classifications of same sex couples in New Jersey and other states as domestic partnerships or marriages, the feds view same sex couples the same way as they do all unmarried adults: as strangers.
Hold your fire… I’m not even talking about extending the economic benefits of married couples to same sex couples (that’s another post for another day). I’m talking about the most simple of tasks: just talking to the IRS.
There is a form (federal form 2848) that allows for another person to talk to the IRS on your behalf. The IRS requires any person who is speaking on your behalf or providing information – including your attorney or tax preparer – to execute this form. It makes sense.
But what doesn’t make sense are the limitations on who may act as your agent in front of the IRS. While a traditional Power of Attorney will allow any person to act on your behalf, the IRS imposes limits on who may interact with the IRS on your behalf.
The limitations are:
a) Attorney—Enter the two-letter abbreviation for the state (e.g., “NY” for New York) in which admitted to practice.
b) Certified Public Accountant—Enter the two-letter abbreviation for the state (e.g., “CA” for California) in which licensed to practice.
c) Enrolled Agent—Enter the enrollment card number issued by the Office of Professional Responsibility.
d) Officer—Enter the title of the officer (e.g., President, Vice President, or Secretary).
e) Full-Time Employee—Enter title or position (e.g., Comptroller or Accountant).
f) Family Member—Enter the relationship to taxpayer (must be a spouse, parent, child, brother, or sister).
g) Enrolled Actuary—Enter the enrollment card number issued by the Joint Board for the Enrollment of Actuaries.
h) Unenrolled Return Preparer—Enter the two-letter abbreviation for the state (e.g., “KY” for Kentucky) in which the return was prepared and the year(s) or period(s) of the return(s) you prepared.
I am particularly struck by item (f) which allows a spouse, parent, child or sibling to act on a taxpayer’s behalf – but no one else. I can’t quite get the public policy argument behind limiting a taxpayer’s right to ask any person to correspond with the IRS on his or her behalf. Clearly, this affects taxpayers other than domestic partners but the limitations (and the agents’ interpretation of same, trust me on this) seem to directly impact same sex couples disproportionately.
I’m baffled as to the reasoning behind such limitations. In any relationship, it is often true that one person is more “in the know” than the other about finances. It is also not unthinkable that a taxpayer may not be available due to incapacity, travel or other circumstances that would enable taxpayer to respond timely to IRS notices – many of which are deadline specific. You would think that IRS would do everything in its power to facilitate taxpayer’s resolution of outstanding matters rather than limit taxpayer’s options.
The restrictions imposed on this form – and the resulting interpretations and actions by many agents – inhibit, not help, taxpayer in the resolution of outstanding tax issues. I just don’t get it. Do you?
