By Peter Schroeder - 08/29/13 06:36 PM EDT
The Treasury Department announced Thursday that it would recognize same-sex married couples as such for tax purposes, even if they live in states that do not.
The plaintiff who brought the challenge to the Supreme Court, Edith Windsor, challenged the law after trying to claim a federal estate tax exemption after her spouse died.
"Today’s ruling provides certainty and clear, coherent tax filing guidance for all legally married same-sex couples nationwide. It provides access to benefits, responsibilities and protections under federal tax law that all Americans deserve," said Treasury Secretary Jack Lew.
"This ruling also assures legally married same-sex couples that they can move freely throughout the country knowing that their federal filing status will not change."
Senior Treasury officials said Thursday that their decision made the most sense administratively, insisting that it would be easier to enforce an across-the-board, nationwide rule.
The change will not apply to domestic partners or civil unions, but legally married gay couples will begin filing 2013 federal income tax returns as either "married filing jointly" or "married filing separately." Same-sex married couples that filed extensions until October on their 2012 returns would have the same option.
Beyond income and estate taxes, the change will impact how same-sex couples approach hundreds of provisions in the tax code, including employee benefits, IRA contributions and claiming earned income and child tax credits.
Same-sex married couples will also have the option of filing amended returns for previous tax years in which they would like to be recognized for tax purposes as married.
Generally speaking, the statute of limitations for filing amended returns is three years from when the return was filed, or two years from when the tax was paid, whichever is later. Same-sex married couples would not have to amend their return if the result caused them to pay more.
Treasury officials said that they thought same-sex married couples would be about as likely to incur either marriage bonuses or penalties as other couples.
Roberton Williams of the Urban-Brookings Tax Policy Center said that a Clinton-era Congressional Budget Office study said that roughly half of couples got a tax benefit from marrying, while 42 percent sustained penalties. Williams added that it was likely that Bush-era tax cuts decreased the number of couples facing penalties.
The Treasury and IRS also announced they planned to set up a streamlined process to allow employers to file refund claims for payroll taxes paid on previously taxed health insurance and other benefits provided to same-sex spouses.
The agencies also plan to issue additional guidance detailing how other tax-favored arrangements should treat same-sex spouses before the change in policy.
"With today’s ruling, committed and loving gay and lesbian married couples will now be treated equally under our nation’s federal tax laws, regardless of what state they call home," said Human Rights Campaign President Chad Griffin.
"These families finally have access to crucial tax benefits and protections previously denied to them."
But the ruling also sets up other potential hurdles for same-sex couples, especially those who live in states that don’t recognize their marriage. Those couples will likely have to put in more work to file their state returns, which often use a taxpayer’s federal status as a starting point.
Still, the Tax Policy Center’s Williams said – from an economist’s sense – the ruling was the right move, given how frequently taxpayers can shift locations.
“It doesn’t make much sense for a couple’s tax status to change just because they move across state lines,” Williams told The Hill.
The National Organization for Marriage (NOM), which opposes same-sex marriages, accused the Treasury Department of “grossly overstepping its authority” with the decision.
NOM also tied the new Treasury rules to local officials they said had been flouting the law, and redefining who can marry.
"The Obama administration is intent on forcing same-sex 'marriage' on an unwilling public," Brian Brown, NOM’s president, said in a statement. "Congress alone has the responsibility of determining federal tax law."
--This report was updated at 3:23 p.m. and 5:26 p.m.
Bernie Becker contributed to this story.