Don't Mess With Taxes

The future of marriage is now in the hands of the U.S. Supreme Court. OK, maybe that's a bit of an exaggeration.

Marriage has been around for ages and, despite what some folks say, the definition of this legal contract between two people has changed many, many times.

But what the justices decide with regard to same-sex marriage could have dramatic effects on the lives of same-sex couples, both when it comes to their day-to-day lives and a variety of rights and benefits, including in the tax area.

The country's highest court today heard arguments in Hollingsworth v. Perry, which deals with the constitutionality of California's Proposition 8. This November 2008 ballot initiative overturned the Golden State's short-lived right of same-sex couples to marry.

Estate tax issue: Tomorrow the court will hear from attorneys in Windsor v. United States, and this is the case that I and other tax law aficionados will be closely following.

The Windsor case deals with the Defense of Marriage Act (DOMA) and its disparate and, according to the lawsuit, unfair treatment of same-sex married couples under the tax code, specifically the estate tax.

Edith Windsor and Thea Spyer were together for 44 years. They married in 2007 in Toronto and returned to their home in New York, which recognized the marriage.

When Spyer died in 2009, Windsor had to pay federal estate taxes of $363,053 because of DOMA's definition of marriage as between only one man and one woman. As such, it prevents the Internal Revenue Service from recognizing Windsor as a surviving spouse. If Spyer had been married to a man, her estate would have passed tax-free to her spouse.

I agree with Windsor and the lower courts that upheld her case. She was discriminated against because of her sexual preference.

The legal basis for the suit and Supreme Court appeal is that it was in violation of the Constitutional guarantee of equal protection under the law.

The real world basis is basic human decency.

Will the Supreme Court agree? Who knows? These nine justices are harder to predict -- remember the Obamacare decision? -- than Congressional actions.

Tax effects: But if the court does strike down DOMA, you can bet tax professionals with same-sex clients will be busy reworking years of tax returns. Three years of returns, to be precise. That's how long you have to amend a federal tax filing.

"If failure to recognize same-sex couples for tax purposes is unconstitutional, then it would be unconstitutional also to insist that it be a man and a woman — husband and wife — who file a joint return," Patricia Cain, a law professor at Santa Clara University in California, told NPR's Morning Edition.

And that, as many heterosexual married couples can attest, could be bad as well as good.

There is still a marriage penalty for some jointly filing higher income earners, especially when their salaries are roughly equal. And while Windsor would get back the estate tax bill she paid, very few couples regardless of sexual preference are affected by this law.

Still, the ability to file a joint tax return is something that, for better or worse, shouldn't be restricted to just men and women who are married to each other.

• Same-sex married couples denied appropriate federal tax filing status
• Defense of Marriage Act loses a defender
• Many marriage and divorce tax issues, regardless of couple's gender