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Elder Law Prof Blog
Katherine C. Pearson, Editor, and a Member of the Law Professor Blogs Network on LexBlog.com

Same-Sex Couples and Federal Benefits-Another Update

By rmorgan

On August 27th, I posted an update on same-sex couples and federal benefits. Here are two more updates as the IRS issued a revenue ruling and CMS sent a memo to Medicare Advantage Organizations.

First–Medicare Advantage. On August 29th, 2013, CMS issued an “action” memo, titled Impact of United States v. Windsor on Skilled Nursing Facility Benefits for Medicare Advantage Enrollees–Immediate Action Required. This memo directs that Medicare Advantage organizations include skilled nursing facility (SNF) services for those same-sex spouses residing in a SNF if the organization would cover those services for heterosexual spouses. The memo discusses the circumstances under which a Medicare Advantage organization must provide SNF care for a Medicare Advantage member, reviews section 3 of DOMA and explains that CMS has determined that it is an error to exclude same-sex spouses from the term spouse.

The memo goes on to address the domicile question, providing that the key is the state where the  marriage took place rather than domicile of the married couple. The memo concludes that the Medicare Advantage organizations are immediately required to make this change to the coverage of  SNF services. See 42 C.F.R. 422.133(b) and Medicare Managed Care Manual, 4.10.9.

Now, for the IRS…

Also on August 29th, 2013, the IRS published two items: Revenue Ruling 2013-17 (effective date September 16, 2013) and a companion Frequently Asked Questions (FAQ), Answers to Frequently Asked Questions for Individuals of the Same Sex Who Are Married Under State Law. The Revenue Ruling runs 15 pages and covers three issues concerning federal taxes: (1) whether the words spouse, husband or wife include those same-sex spouses legally married in a state recognizing same-sex marriage and whether the word marriage includes same-sex marriages; (2) domicile; and (3) whether civil unions, domestic partnerships or other arrangements are included.

The revenue ruling (did I mention it was 15 pages long) is quite detailed and provides clear justifications for the Service’s conclusions on the three issues. After noting that there are more than 200 references to spouses in the Code and the Treasury regs, the IRS determined, for federal taxes, that a same-sex spouse is included when spouse, husband or wife is used and same-sex marriage is included when the word marriage is used. (see the Rev. Ruling at 4-9).

Asto marital status and domicile, the revenue ruling discusses significant issuesthat would arise by using domicile and thus the rule the Service will use isthe state of the marriage rather than domicile. (Rev. Ruling at 9-12). However,the Service declined to include domestic partnerships, civil unions, and otherrecognized relationships as a marriage or individuals in them as spouses,husbands or wives, regardless of whether the couples are same sex or oppositesex. (Rev. Ruling at 12).

The FAQ answers 19 questions (#19 being whether the IRS will issue further guidance on how Windsor will impact retirement arrangements-short answer–yes). The other 18 questions cover the gamut from rules, examples and the effective date of the ruling for retirement plans (September 16, 2013); to filing status and the conditions under which they apply; to the dependent child deduction; to adoption; to employer health coverage and taxes; etc. I’ve quoted FAQ #1 here:

Q.1 When are individuals of the same sex lawfully married for federal tax purposes?

A.1  For federal tax purposes, the IRS looks to state or foreign law to determine whether individuals are married.  The IRS has a general rule recognizing a marriage of same-sex spouses that was validly entered into in a domestic or foreign jurisdiction whose laws authorize the marriage of two individuals of the same sex even if the married couple resides in a domestic or foreign jurisdiction that does not recognize the validity of same-sex marriages.

Consider the impact of Revenue Ruling beyond taxes.  According to a blog post from Mary Agnes Carey on the Kaiser Health News Blog, IRS Ruling on Same-Sex Couples Has Implications for Health Law, a same-sex couple’s income will be considered for ACA’s expanded Medicaid eligibility as well as any subsidies. The post illustrates that individuals need to carefully consider how this Revenue Ruling will affect them.

Said it before, saying it again…stay tuned-we will keep you posted with further updates.

Becky Morgan