IRS and Medicare issue rules expanding recognition of same-sex marriage

by Rob Cullen on August 30, 2013 - 6:32 PM

same-sex couple

Here’s some (mostly) good news for your weekend: Two new rules, one from the IRS and one from Medicare, will expand federal recognition of same sex marriages. (We say “mostly” because another recent rule from Social Security will limit benefits.)  

The Supreme Court decision repealed only Section 3 of DOMA– that’s the part defining “marriage” as “between one man and one woman as husband and wife” and “spouse” as “a person of the opposite sex” for the purposes of federal law. Section 2 of the law, which says that states don’t have to recognize same-sex marriages performed in other states, still stands.

The issue here is that federal agencies have different rules as to which state they consider when deciding if a marriage is valid. Some, like the IRS and Social Security, look to the laws of the state where a couple lives (“place of domicile/residence”). Others, like immigration, look to the state where the marriage happened (“place of celebration”).

So when the Supreme Court struck down a major part of the Defense of Marriage Act in June, there were a bunch of questions about how federal agencies would treat LGBT couples who marry in a state that recognizes same-sex marriages, but then move to a state that does not.

The IRS

At the time of the DOMA decision, the IRS used place of residence in determining whether to recognize a marriage. That meant if a same-sex couple moved from New York (where gay marriage is legal), to Pennsylvania (where it’s not), their marriage would no longer be recognized by the IRS. But as the ACLU has noted, there’s no law saying they have to do it this way.

And so yesterday, the IRS announced that it will use a “place of celebration” standard instead. If your marriage was legal in the place where you got married, then to the IRS you’re married, regardless of how the state you currently live treats it.

There are two big ways this affects health benefits:

  • Taxation of health benefits: More and more private companies are providing benefits to same-sex partners (according to one study, 52% of employers do so). Health benefits received through your spouse’s employer isn’t taxable; however under DOMA that didn’t apply to same-sex couples, meaning they were stuck with higher tax bills– $1,069 per year on average. Post-DOMA, under the old “place of residence” rule, in many states same sex health benefits still would have been taxed; the new “place of celebration” rule means these benefits won’t be taxed by the IRS, no matter where a couple lives.
  • Obamacare: Under Obamacare, if your household income is less than 400% of the poverty line, you’re eligible for financial help to pay for coverage– but the poverty line varies based on family size. Under DOMA, a married same-sex couple would have been treated as two separate individuals applying for health benefits. Post-DOMA, under the old rule, it would depend on the state. Now all same-sex married couples, regardless of where they live, will be treated as a single family. Whether or not this makes your coverage cheaper depends on each person’s income (see our earlier coverage for more info).

Another nice thing is that these new rules are retroactive. The statement from the IRS says:

Generally, the statute of limitations for filing a refund claim is three years from the date the return was filed or two years from the date the tax was paid, whichever is later. As a result, refund claims can still be filed for tax years 2010, 2011, and 2012. Some taxpayers may have special circumstances (such as signing an agreement with the IRS to keep the statute of limitations open) that permit them to file refund claims for tax years 2009 and earlier.

Medicare

The Department of Health and Human Services issued its own rule adopting a “place of celebration” standard for Medicare Advantage coverage of treatment in nursing homes. HHS explains what that means:

Under current law, Medicare beneficiaries enrolled in a Medicare Advantage plan are entitled to care in the skilled nursing facility (SNF) where their spouse resides (assuming that they have met the conditions for SNF coverage in the first place, and the SNF has agreed to the payment amounts and other terms that apply to a plan network SNF). Seniors with Medicare Advantage previously may have faced the choice of receiving coverage in a nursing home away from their same-sex spouse, or dis-enrolling from the Medicare Advantage plan which would have meant paying more out-of-pocket for care in the same nursing home as their same-sex spouse.

Today’s guidance clarifies that this guarantee of coverage applies equally to all married couples.  The guidance specifically clarifies that this guarantee of coverage applies equally to couples who are in a legally recognized same-sex marriage, regardless of where they live.

They also say that this is only the first guidance from HHS in response to the DOMA ruling, and promise that upcoming rulings will also, “maximize federal recognition of same-sex spouses in HHS programs.”

Other agencies

Unfortunately, post-DOMA guidance hasn’t been all good news for same-sex couples, as the Washington Post’s Dylan Matthews points out:

Social Security uses a place of residence rule, and has issued instructions to personnel to deny claims for spousal benefits from same-sex couples living in states where such marriages are not recognized. But the overall trend is toward a federal government that offers benefits to as expansive a set of same-sex married couples as possible.

UPDATE 9/5/13: There’s a law separate from the Defense of Marriage Act– Title 38 of the U.S. Code– which has prevented same-sex spouses of veterans and some active-duty members of the military from receiving federal benefits. This week, Attorney General Eric Holder announced that while the Supreme Court’s DOMA decision didn’t directly address Title 38, “the reasoning of the opinion strongly supports the conclusion that those provisions are unconstitutional,” and said that the White House will be taking steps to extend federal benefits to same-sex spouses of veterans.

Stephen Peters, president of the American Military Partner Association, a nonprofit representing LGBT military families, said in a statement:

“No longer will Tracy Johnson, the surviving spouse of Staff Sergeant Donna Johnson who was killed in Afghanistan, be treated as if she doesn’t matter by the Department of Veterans Affairs. All of our veteran military families will finally be recognized and supported for their service to our nation.”

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