June 26th is an important day in LGBTQ history. On this day, two landmark civil rights Supreme Court cases were decided. It’s been six years since U.S. v. Windsor and four years since Obergefell v. Hodges. Windsor struck down the Defense of Marriage Act (DOMA) and mandated the federal government to recognize the marriages of same-sex couples. Obergefell confirmed the fundamental right to marry is guaranteed to same-sex couples under the constitution and effectively mandated states to both recognize and allow same-sex marriages. A new bill seeks to correct a lingering tax issue for these couples.
When DOMA was struck down by Windsor many same-sex couples were limited to three years of tax refund claims where they previously could not file jointly due to DOMA. This three-year limit did not consider the length of a couple’s marriage. Refund claims were limited to three years because the IRS statute of limitations generally bars taxpayers from amending tax returns more than three years after they have been filed.
Last week the House Ways and Means Committee approved a bill that would allow affected couples to apply for tax refunds for all years in which they could have filed jointly had the federal government recognized their marriage, effectively removing the statute of limitations for Windsor refund claims.
The bill, H.R. 3299, the Promoting Respect for Individuals’ Dignity and Equity (PRIDE) Act 2019, was sponsored by Rep. Judy Chu (D-California) and Rep. Andy Levin (D-Michigan). PRIDE consolidates language from two prior bills introduced earlier this year by both Chu and Levin. Sen. Elizabeth Warren (D-Massachusetts) recently re-introduced a similar bill addressing the statute of limitations for Windsor refund claims. She attempted similar legislation in 2017.
Besides the removal of the statute of limitations for Windsor refund claims, PRIDE would remove gendered language from the Internal Revenue Code, replacing words like “husband” and “wife” with “spouse,” addressing the need to update such language to be inclusive of all married couples as well as transgender and non-binary taxpayers. The bill follows the lead of municipalities like Philadelphia that have already legislatively addressed gendered language in city statutes and tax forms.
If either the House or Senate bill, or some combination of the two, passes and is signed into law, same-sex married couples that were legally married before 2010 will be able to file amended returns to request tax refunds beginning with the year they were legally married. Hopefully anyone affected still has the records needed to facilitate such claims!
Not every same-sex married couple will benefit from filing an amended tax return as “married filing jointly” due to the "marriage penalty." In Revenue Ruling 2013-17, the IRS clarified individuals in same-sex marriages may, but are not required to, file amended returns to file jointly. We assume this will continue to the be its position should the PRIDE Act 2019 become law.
In 2013, when questioned, the IRS correctly concluded it lacked the authority to remove the statute of limitations for Windsor refund claims. We are glad Congress is finally trying to address some of the injustice caused by the unconstitutional federal statute, DOMA.
If a bill becomes law to override the statute of limitations on Windsor refund claims, only those same-sex couples who were married legally in one of the 50 states, the District of Columbia, a U.S. territory, or a foreign country prior to 2010 will qualify to file amended returns. Those in registered domestic partnerships, civil unions or similar relationships recognized under state law will not be considered married for federal tax purposes.
As with any article that discusses tax treatment, the usual disclaimers apply: This is a generalized overview, does not represent advice, and may not apply to your situation. Do not use this article to make tax or investment decisions. Consult your tax expert or call us to be that expert.