On August 29^th, the Internal Revenue Service issued Revenue Ruling 2013-17, its first public guidance for taxpayers affected by U.S. v. Windsor (Docket No. 12-307; 133 S. Ct. 2675 (2013)). In Windsor, the Supreme Court held that Section 3 of the Defense of Marriage Act, which defines "marriage" as a relationship between a man and a woman for purposes of federal law, is unconstitutional. Although the Court's ruling obviously has great significance for same-sex couples and their advisors, until the issuance of Revenue Ruling 2013-17, it remained unclear how the IRS would implement the Windsor decision. More than two hundred provisions of the Internal Revenue Code and its Treasury Regulations depend on whether two individuals are deemed to be married, but, with the exception of the former rule under the Defense of Marriage Act, no definition of the term "marriage" exists under federal law. Revenue Ruling 2013-17 attempts to clarify all tax issues affected by theWindsor decision by laying out several key interpretive policies.

First, beginning on September 16, 2013 (the effective date of the Ruling), the IRS will interpret every use of the words "marriage," "spouse," "husband," and "wife" in the Internal Revenue Code and Treasury Regulations to include same-sex marriages, and, where necessary, in a gender-neutral manner. Consistent with the Windsor decision, the IRS will defer to the definition of marriage under state law.

Second, and more substantively, the IRS will recognize the validity of a same-sex marriage based solely on the law of the state where the marriage was entered into or "celebrated," regardless of the couple's current place of domicile. The Ruling specifically rejects a "state of domicile" rule — which would treat a couple as married for federal tax purposes only if they are currently living in a state that recognizes their marriage — by noting that this approach would present serious administrative difficulties. Had the IRS adopted a state of domicile rule, couples who moved from one state to another could have found their marital status changing for tax purposes, affecting not only their own tax reporting but also that of various third parties (such as employers offering retirement and insurance plans in which one spouse participates, businesses in which the couple has invested, and others).¹ Thus, under the Ruling, a same-sex couple deemed to be validly married in the state or country in which they married will be treated as married by the IRS, even after subsequently relocating to a state that does not recognize their marriage. Notably, even a couple who travels to another state solely for the purpose of being married, while maintaining their domicile elsewhere, apparently will be treated as married by the IRS if the marriage was recognized in the place where it was conducted.

Third, the Ruling draws a line between "marriage" and all other relationships, including civil unions and registered domestic partnerships. Notwithstanding the legal similarities — indeed, for state law purposes, civil unions and registered domestic partnerships are often akin to marriage in all but name — only a relationship denominated as "marriage" will be treated as such for federal tax purposes. Although this portion of the Ruling provides a clear standard for the IRS and taxpayers to follow, it raises questions about the utility of civil unions and registered domestic partnerships going forward. These relationships were created in a number of states as a legislative compromise, or for the express purpose of providing a non-marital alternative for same-sex couples, but the disparate tax treatment of these relationships as compared to same-sex marriage under the Ruling may undermine their attractiveness to individuals and to state legislatures, perhaps paving the way for more states to enact same-sex marriage.

Finally, the Ruling lays out the IRS position regarding timing, effectiveness, and the retroactivity of the changes affecting taxpayers — all key elements that must be considered when preparing and filing tax returns. As stated above, the Ruling recites that its effective date will be September 16, 2013. The effective date of the Ruling will require taxpayers to follow the guidance in the Ruling for any original tax returns, amendments or adjustments filed after September 16, 2013, along with any claims for credit or refund. The Ruling permits taxpayers to amend their previously filed tax returns in reliance on the Ruling, within the limits of the applicable statute of limitations. For most taxpayers, this means that income tax and other returns filed in the previous three years may be amended to take advantage of the Ruling. Although taxpayers must be consistent on any one return and cannot cherry-pick certain tax benefits of marriage while ignoring restrictions or downsides, there seems to be no requirement that taxpayers be consistent between years or between returns. A taxpayer should, for example, be able to file an amended income tax return for 2012 reflecting his or her marriage for that year, while leaving returns for prior years unchanged.

In addition, by stating that it will apply the Ruling prospectively after September 16^th, the IRS has apparently acknowledged that it will not audit or otherwise attempt to force taxpayers to update their prior tax returns. Importantly, however, taxpayers who extended the deadline to file their 2012 income tax returns until October 15, 2013, will be bound by the Ruling unless they file on or before September 15^th. Same-sex married couples who file their 2012 income tax returns on or after September 16^th must choose between "Married Filing Jointly" (filing a joint Form 1040), or "Married Filing Separately;" couples who file prior to the date still have the option to file as single taxpayers.

_{¹ Please see Schiff Hardin's newsletter from our Employee Benefits Practice Group entitled "IRS Releases Guidance on Treatment of Same Sex Spouses and Domestic/Civil Union Partners" for more specifics regarding the effect of the Ruling on qualified retirement plans.}