Last week, the Internal Revenue Service published Revenue Ruling 2013-17, which announces the IRS's position that same-sex couples who are legally married in states that recognize their marriage will be treated as legally married for federal tax purposes regardless of whether the marriage is recognized in their current state of residence (the so-called "state of celebration" rule). This position applies for all purposes, including income and gift and estate taxes. It does not, however, apply to registered domestic partnerships, civil unions, and other similar formal relationships recognized under state law but not denominated as marriage.
This ruling applies prospectively as of September 16, 2013. Therefore, employers should begin applying it for employee benefit plan purposes, including with respect to employer-provided health coverage and other fringe benefits that are excludable from income based on marital status. Legally married same-sex couples must file their 2013 federal income tax returns as married (e.g., either married filing jointly or married filing separately). The IRS also announced that it intends to issue streamlined procedures for employers that wish to file refund claims for open tax years for payroll taxes paid on previously taxed health insurance and other benefits. The IRS indicated that it will issue guidance on how same-sex spouses should be treated under qualified retirement plans and cafeteria plans for periods before September 16, 2013.
The IRS guidance also includes information for individual taxpayers about filing refund claims for income, gift and estate taxes.
Revenue Ruling 2013-17 provides welcome guidance for administration of employee benefit plans going forward. It will help employers with locations in more than one state by providing uniform guidance for employee benefit plan treatment for federal purposes. However, employers may still need to be prepared to handle federal and state income tax issues differently for same-sex couples who reside in states that do not recognize their marriages.