H. Jacob Lager

Same-Sex Marriage Tax Ramifications: A Look at Mass v. Dept. of Health and Human Services

In U.S. Tax policies on June 4, 2012 at 11:08 am

In a case where civil rights, election-year politics, and (yes!) tax policy meet, the First Circuit last week affirmed a district court’s holding that section 3 of the Defense of Marriage Act violates the equal protection clause by denying federal tax and other benefits to same-sex couples and surviving same-sex spouses who were lawfully married in Massachusetts.

At issue are basically all federal benefits available to spouses, including federal employee health insurance, Social Security benefits, and (wait for it) the right to file “joint federal tax returns, which can lessen tax burdens.” Although not mentioned in this decision, federal recognition of same-sex marriages will also touch on the following issues:

  • Eligibility for the unlimited estate tax exclusion for assets passing to a surviving spouse;
  • Ability to pass on assets to a foreign spouse via  Qualified Domestic Trust (QDOT);
  • A host of other immigration and naturalization issues for those multinational same-sex spouses.

Read more about the decision.


Remember our entry a few weeks ago about the administrative Microsoft decision that absolutely savaged the District of Columbia’s reliance on a specious third-party transfer pricing analysis?

The District is appealing.   Not sure how you appeal from a finding that the subject analysis was “useless in determining whether Microsoft’s controlled transactions were conducted in accordance with the arm’s-length standard” and its findings were “arbitrary, capricious, and unreasonable.” DC Office of Tax and Revenue Chief Counsel Alan Levine is quoted as noting that the “transfer pricing program, at issue in this case, and others, is important to the District of Columbia.” OTR has not yet revealed the substantive grounds for this appeal.

In other news, the Indian retroactivity saga continues.  While Indian Finance Minister, Mr Pranab Mukherjee has sought to reassure investors that “in cases where assessment proceedings have become final before the first day of April 2012, such cases shall not be reopened,” Vodafone remains a target.  According to the  Finance Ministry, the retroactive Vodafone assessment remains active because it involves an alleged default in fulfilling the withholding tax obligation.  More here.

Photo by Cynthia.Ess.

  1. In my opinion, this has always been an equal protection issue. In many ways, this issue is similar to the one in Loving v. Virginia. Thanks for the great update.

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