The IRS has released final regulations that reflect the holdings of Obergefell v. Hodges, a 5-4 decision of the United States Supreme Court, which declared that same sex couples are guaranteed the right to marry by both the Due Process Clause and the Equal Protection Clause of the Fourteenth Amendment. The regulations define terms in the Internal Revenue Code describing the marital status of taxpayers for federal tax purposes. These regulations deal with the application of the same tax status and rules to lawfully married individuals whether of the same sex or of different genders.
Reg. § 301.7701-18(a) provides that the terms “spouse,” “husband” and “wife” mean an individual lawfully married to another individual, and the term “husband and wife” means two individuals lawfully married to each other. In addition, the final regulations provide that a marriage of two individuals will be recognized for federal tax purposes if that marriage would be recognized by the state, possession, or territory of the United States in which the marriage was entered into, regardless of the married couple’s domicile. Domicile is not the same as residence, and therefore, individuals who are merely living in a certain place for a period of time may not be recognized as being domiciled in that state or territory. This issue will often be of concern to individuals who are seeking to qualify for benefits or a less costly tax regime in one state, but have a place of residence in another state. Whether one qualifies as a domicilary of a particular state is determined by the laws of that state and must be considered on a case by case basis.
Reg. § 301.7701.18(b)(2) provides that two individuals entering into a relationship denominated as marriage under the laws of a foreign jurisdiction are married for federal tax purposes if the relationship would be recognized as marriage under the laws of at least one state, possession, or territory of the United States. In other words, a couple can be married in a foreign country which recognizes same sex marriages and that marriage will be recognized in the United States for federal tax purposes.
This rule allows couples who are married outside the United States to determine marital status for federal tax purposes, regardless of where they are domiciled and regardless of whether they ever reside in the United States.
Reg. § 301.7701-18(c) clarifies that the term “marriage” does not include registered domestic partnerships, civil unions, or other similar relationships recognized under state law that are not denominated as a marriage under that state’s law. Also, the terms “spouse,” “husband and wife,” “husband,’ and “wife” do not include individuals who have entered into such a relationship.