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TAX
2013 Expert Analysis
2

to another, he added that “I’m speaking as a
president and not as a lawyer.”

ISSUES AT STAKE

In December 2012, the Supreme Court an-
nounced that it would take up two cases re-
lated to same-sex couples: Windsor, which
arose out of an estate tax dispute between a
surviving partner/spouse and the IRS; and
Hollingsworth v. Perry (CA-9, Feb. 7, 2012),
which addressed whether the equal protec-
tion clause of the Fourteenth Amendment to
the Constitution prohibits California from
defining marriage as the union of a man and
woman. The Supreme Court heard oral ar-
guments in both cases in March 2013.

IRS Denies Estate Tax Marital Deduction.
In Windsor, a long-time same-sex couple
married in Canada in 2007. They had previ-
ously registered as domestic partners in New
York City, where they made their home. One
spouse died in 2009. Because of DOMA, the
survivor did not qualify for the unlimited
marital deduction under the Internal Revenue
Code and as a result, the executor of the estate
paid $363,000 in federal estate tax that was
not otherwise due. The survivor as executor
and sole beneficiary filed a refund claim under
Code Sec. 2056(a) (under which property of
a surviving spouse generally passes free of fed-
eral estate tax). The IRS determined that the
survivor was not a spouse under Section 3 of
DOMA and, therefore, not a surviving spouse
under Code Sec. 2056(a). A federal district
court found that Section 3 of DOMA violated
the equal protection clause of the Fourteenth
Amendment because there was no rational
basis to support it. The Second Circuit Court
of Appeals affirmed the lower’s court decision,
finding that homosexuals are a protected class
and that Section 3 of DOMA was not sub-
stantially related to an important government
interest and violated Equal Protection.

SUPREME COURT’S
HOLDINGS

Writing for the majority in Windsor, Justice
Kennedy found that DOMA had departed

from the long standing tradition and his-
tory of reliance on state law to define mar-
riage. The State of New York had recognized
the validity of same-sex marriages, which
resulted in a status that “is a far-reaching
legal acknowledgment of the intimate rela-
tionship between two people, a relationship
deemed by the State worthy of dignity in the
community equal with all other marriages,”
Kennedy wrote. He reasoned that DOMA
sought to injure this class of persons whom
New York sought to protect, and by doing so
violated basic due process and equal protec-
tion principles applicable to the federal gov-
ernment and was therefore unconstitutional.

“The decision opens the
door for same-sex couples
to enjoy many tax-related
benefits previously
available only to opposite-
sex couples.”

DOMA’s operation in practice, Kennedy
continued, was to treat same-sex marriages as
second-class marriages for purposes of federal
law “by imposing a system-wide enactment
with no identified connection to any particu-
lar area of federal law.” DOMA’s principal
purpose was to impose inequality, not for
other reasons such as governmental efficien-
cy, Kennedy held. Therefore, the majority
found DOMA invalid for lack of a legitimate
government purpose that could overcome
the burden on those within the class whose
personhood and dignity New York had
sought to protect through its marriage laws.

COMMENT: The majority opinion
listed numerous ways in which DOMA
infringed upon the dignity of same-sex
couples. Among these is financial harm
caused by DOMA to children of same-sex
couples by raising the cost of health care
for families by taxing health benefits pro-
vided by employers to their workers’ same-
sex spouses. Another example, Kennedy
wrote, is that DOMA denies or reduces

benefits allowed to families upon the loss
of a spouse and parent, benefits that are
an integral part of family security.

COMMENT: Justice Kennedy qualified
the majority’s ruling at the end of the de-
cision, stating that its applicability was
“confined to those lawful marriages,”
meaning those recognized by the states
that currently allow same-sex marriag-
es. Kennedy observed that Section 2 of
DOMA, which allows States to refuse to
recognize same-sex marriages performed
under the laws of other States, had not
been challenged in Windsor and contin-
ues to be the law. On June 26, House
Democrats introduced legislation to re-
peal Section 2 of DOMA.

California’s Proposition 8. On the same day
the Supreme Court announced its decision in
Windsor, the Justices ruled, 5-4 (but with a dif-
ferent mix of Justices for and against), to send
Hollingsworth back to the California courts
rather than to directly decide on the constitu-
tionality of California’s ban on same-sex mar-
riage. There, the Supreme Court held that the
petitioners did not have the standing to chal-
lenge the lower court’s decision throwing out
Proposition 8, which denied same-sex couples
the right to marry in California. This decision
paves the way for same-sex marriage to begin
again in California sometime in late July.

FEDERAL TAX
CONSEQUENCES

Under federal income tax rules, same-sex
married couples can now presumably enjoy
benefits that had been unavailable to them
because of DOMA. On the other hand, cer-
tain strategic advantages previously enjoyed
by same-sex married couples who filed as
single individuals under the federal tax laws,
have now likewise ended.

COMMENT. Aside from the fact that it
was a federal tax refund claim in Wind-
sor that triggered the litigation that found
itself before the U.S. Supreme Court, the
opinion focused on Constitutional rights
and privileges, without any technical

CCH Tax Briefing
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