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Ti ».¢ Expert Analysis to another, he added that “Tm speaking as a president and not as a lawyer.” ISSUES AT STAKE In December 2012, the Supreme Court an- nounced that it would take up two cases re- lated to same-sex couples: Windsor, which arose out of an estate tax dispute between a surviving partner/spouse and the IRS; and Hollingsworth v. Perry (CA-9, Feb. 7, 2012), which addressed whether the equal protec- tion clause of the Fourteenth Amendment to the Constitution prohibits California from defining marriage as the union of a man and woman. The Supreme Court heard oral ar- guments in both cases in March 2013. IRS Denies Estate Tax Marital Deduction. In Windsor, a long-time same-sex couple married in Canada in 2007. They had previ- ously registered as domestic partners in New York City, where they made their home. One spouse died in 2009. Because of DOMA, the survivor did not qualify for the unlimited marital deduction under the Internal Revenue Code and as a result, the executor of the estate paid $363,000 in federal estate tax that was not otherwise due. The survivor as executor and sole beneficiary filed a refund claim under Code Sec. 2056(a) (under which property of a surviving spouse generally passes free of fed- eral estate tax). The IRS determined that the survivor was not a spouse under Section 3 of DOMA and, therefore, not a surviving spouse under Code Sec. 2056(a). A federal district court found that Section 3 of DOMA violated the equal protection clause of the Fourteenth Amendment because there was no rational basis to support it. The Second Circuit Court of Appeals affirmed the lower’s court decision, finding that homosexuals are a protected class and that Section 3 of DOMA was not sub- stantially related to an important government interest and violated Equal Protection. SUPREME COURT'S HOLDINGS Writing for the majority in Windsor, Justice Kennedy found that DOMA had departed CCH Tax Briefing from the long standing tradition and his- tory of reliance on state law to define mar- riage. The State of New York had recognized the validity of same-sex marriages, which resulted in a status that “is a far-reaching legal acknowledgment of the intimate rela- tionship between two people, a relationship deemed by the State worthy of dignity in the community equal with all other marriages,” Kennedy wrote. He reasoned that DOMA sought to injure this class of persons whom New York sought to protect, and by doing so violated basic due process and equal protec- tion principles applicable to the federal gov- ernment and was therefore unconstitutional. “The decision opens the door for same-sex couples to enjoy many tax-related benefits previously available only to opposite- sex couples.” DOMA’s operation in practice, Kennedy continued, was to treat same-sex marriages as second-class marriages for purposes of federal law “by imposing a system-wide enactment with no identified connection to any particu- lar area of federal law.” DOMAs principal purpose was to impose inequality, not for other reasons such as governmental efficien- cy, Kennedy held. Therefore, the majority found DOMA invalid for lack of a legitimate government purpose that could overcome the burden on those within the class whose personhood and dignity New York had sought to protect through its marriage laws. COMMENT: The majority opinion listed numerous ways in which DOMA infringed upon the dignity of same-sex couples. Among these is financial harm caused by DOMA to children of same-sex couples by raising the cost of health care for families by taxing health benefits pro- vided by employers to their workers’ same- sex spouses. Another example, Kennedy wrote, is that DOMA denies or reduces benefits allowed to families upon the loss of a spouse and parent, benefits that are an integral part of family security. COMMENT: Justice Kennedy qualified the majoritys ruling at the end of the de- cision, stating that its applicability was “confined to those lawful marriages,” meaning those recognized by the states that currently allow same-sex marriag- es. Kennedy observed that Section 2 of DOMA, which allows States to refuse to recognize same-sex marriages performed under the laws of other States, had not been challenged in Windsor and contin- ues to be the law. On June 26, House Democrats introduced legislation to re- peal Section 2 of DOMA. California’s Proposition 8. On the same day the Supreme Court announced its decision in Windsor, the Justices ruled, 5-4 (but with a dif- ferent mix of Justices for and against), to send Hollingworth back to the California courts rather than to directly decide on the constitu- tionality of Californias ban on same-sex mar- riage. There, the Supreme Court held that the petitioners did not have the standing to chal- lenge the lower court’s decision throwing out Proposition 8, which denied same-sex couples the right to marry in California. This decision paves the way for same-sex marriage to begin again in California sometime in late July. FEDERAL TAX CONSEQUENCES Under federal income tax rules, same-sex married couples can now presumably enjoy benefits that had been unavailable to them because of DOMA. On the other hand, cer- tain strategic advantages previously enjoyed by same-sex married couples who filed as single individuals under the federal tax laws, have now likewise ended. COMMENT. Aside from the fact that it was a federal tax refund claim in Wind- sor that triggered the litigation that found itself before the U.S. Supreme Court, the opinion focused on Constitutional rights and privileges, without any technical ©2013 CCH Incorporated. All Rights Reserved. HOUSE_OVERSIGHT_029306