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Written By: Casey L. Carhart, Esq.

Mandelbaum Salsburg

West Orange, New Jersey

When the Supreme Court struck down section 3 of the Defense of Marriage Act (“DOMA”) on June 26, 2013, the sounds of the cheers from our neighbors in New York, Connecticut, Delaware, Maryland and Massachusetts could be heard from across the borders.  But the decision left same-sex couples living in New Jersey asking, “What about us?”

Current New Jersey Law

The laws governing the rights of committed same-sex partners in New Jersey have undergone significant changes in recent years.  In 2006, the New Jersey Supreme Court, in its decision in Lewis v. Harris, acknowledged that committed same-sex couples must be afforded the same legal rights and financial benefits available to married couples.  This landmark decision gave the New Jersey Legislature the opportunity to expand the then-existing Domestic Partnership Law to create rights for same-sex couples that are essentially equivalent to the rights of opposite-sex couples.  This decision led to the enactment of the New Jersey Civil Union Act, which became effective on February 19, 2007.

The Act grants to same-sex couples the right to enter into civil unions, which entitles them to “all of the same benefits, protections and responsibilities under law, whether they derive from statute, administrative or court rule, public policy, common law or any other source of civil law, as are granted to spouses in a marriage.”  While the Act attempts to minimize the dichotomy between the rights afforded to same-sex couples and opposite-sex couples, it fails to carry out the Supreme Court’s mandate to create true legal equality.   Under New Jersey law, a civil union couple is entitled to all the rights of a married couple.  However, under Federal law, even after the repeal of section 3 of DOMA, a civil union couple is not entitled to the rights of a married couple because the New Jersey Legislature chose to use the term “civil union” rather than “marriage”.

New Developments in the Wake of DOMA’s Repeal

Since the Supreme Court’s landmark decision in United States v. Windsor, the legal landscape has changed dramatically, and it appears it will continue to change as both state and federal government agencies react to the ruling.

Federal Developments

In the weeks following the Supreme Court ruling, several government departments and agencies clarified the application of their respective rules to married same-sex couples or announced their intention to do so.

Immediately after the ruling, the Department of Defense acknowledged its support of the Supreme Court’s decision and its intention to extend full benefits to same-sex military families.  The Department of Health and Human Services as well as the Office of Personnel Management also confirmed that they would work swiftly to implement the DOMA decision.  Days later, Secretary of Homeland Security, Janet Napolitano, directed U.S. Citizenship and Immigration Services (USCIS) to review immigration visa petitions filed on behalf of a same-sex spouse in the same manner as those filed on behalf of an opposite-sex spouse.

On August 28, 2013, in Revenue Ruling 2013-17, the U.S. Department of Treasury and the IRS ruled that “individuals of the same sex will be considered lawfully married under the [Internal Revenue Code] as long as they were married in a state whose laws authorize the marriage of two individuals of the same sex, even if they are domiciled in a state that does not recognize the validity of same-sex marriages.”  This means that same-sex couples are free to live anywhere in the U.S. without fear that their marriage will not be recognized for federal tax purposes.  The IRS went on to state that same-sex couples may rely on Revenue Ruling 2013-17 retroactively with respect to filing amended tax returns (provided that the statute of limitations has not expired).

The Social Security Administration recently revised its website to state: “In the coming weeks and months, we will develop and implement additional policy and processing instructions. If you are in a same-sex marriage or other legal same-sex relationship, even if you live in a state that prohibits same-sex marriage, we encourage you to apply right away.”

It should be noted that there are still many questions to be answered in the wake of DOMA’s repeal.  As stated in Rev. Rul. 2013-17, “The Service intends to issue further guidance on the retroactive application of the Supreme Court’s opinion in Windsor to other employee benefits and employee benefit plans and arrangements.”  In addition, although the Social Security Administration, Department of Defense and Department of Health and Human Services have all acknowledged that they will be changing their rules, it is unclear when such changes will be announced, to what extent they will be retroactive and what impact they will have on same-sex married couples living in states which do not recognize their marriages.

Nevertheless, it appears at this time, that the federal departments are making every effort to carry out the mandates set forth in United States v. Windsor in a consistent manner.

New Jersey Developments

On September 27, 2013, a New Jersey Superior Court judge ruled that same-sex couples will have the right to marry in New Jersey as of October 21st.  Not surprisingly, Governor Christie has promised to appeal the decision all the way to the Supreme Court.  Christie will likely request that the October 21st date be postponed until his appeal rights are exhausted.

The Benefits at Stake

According to Justice Kennedy, DOMA had a “directive applicable to over 1,000 federal statutes and the whole realm of federal regulations”.  Following the repeal of section 3 of DOMA, married same-sex couples are entitled to all of the rights and privileges afforded to opposite-sex couples under such Federal statutes and regulations.  The following is summary of some of those entitlements.

  1. Joint Income Filing on Federal Tax Return.  Previously, married and civil union same-sex couples were permitted to file jointly under New Jersey law, but had to file separately with the IRS.  In addition to the inconvenience, the inequality had implications for other financial matters, including mortgages and education-related financial aid for the children of same-sex couples.  Following Windsor, married same-sex couples must file as married filing jointly or married filing separately.  Such couples are no longer permitted to file as unmarried, even if such status would present a tax advantage.
  1. Tax on Health Insurance.  When a married same-sex individual added a spouse to his or her health insurance plan, the employee used to have to pay Federal income tax on the employer contribution to their spouse’s health insurance premium.  This benefit is now tax-free.  In addition, taxpayers may now be entitled to refunds for taxes paid in prior years.
  1. Unlimited Marital Deduction.  The unlimited marital deduction allows a taxpayer to transfer an unlimited amount of assets to his or her spouse, during life or at death, without incurring any gift or estate tax liability.  Because DOMA prohibited the recognition of a same-sex marriage, the estate and gift tax marital deduction was not available to same-sex couples.  Following Windsor, same-sex spouses will be entitled to the unlimited marital deduction (provided other requirements are met).
  1. Portability.  Each person may give during life and at death up to $5.25M without incurring federal gift or estate tax.  This $5.25M exclusion is now portable.  This means that if one spouse dies without using all of his or her Federal exclusion amount, the unused portion of the exclusion may be transferred to the surviving spouse.  With the repeal of section 3, same-sex married couples are now entitled to this portability.
  1. Social Security.  Under the current social security regime, when one spouse passes away, the other can switch to the deceased spouse’s benefits if those benefits are higher. In addition, one spouse can take benefits early and later switch to spousal benefits. Both of these strategies are now available to same-sex married couples.
  1. Immigration.  Following the Windsor ruling, if a U.S. citizen marries a person of the same sex who is from a different country that spouse will now be able to live legally in the United States as they would if the couple were heterosexual.

The repeal of DOMA may entitle certain same-sex couples to tax refunds or other benefits that they were unable to claim in the past.  However, there are limitations on the time periods that claims and requests for refunds may be filed.  If you are married to a person of the same sex, we recommend that you meet with your legal advisor as soon as possible.  Don’t miss out on potential benefits and opportunities that may be available to you.

For more information, contact Casey L. Carhart, Esq. from Mandelbaum Salsburg by visiting www.msgld.com or the International Society of Primerus Law Firms.