On June 26, 2013, the United States Supreme Court issued their opinion in United States v. Windsor. In this case, a woman married in Canada to another woman was denied the same death (estate) tax benefits that married couples receive. The benefits were denied under a federal law called the Defense of Marriage Act (DoMA) passed in 1996. DoMA’s Section 3 defined a marriage for federal purposes being solely between a man and woman — hence why the federal government denied Edith Windsor the death tax benefits in her marriage. In a 5-4 ruling, the court declared that Section 3 of DoMA is unconstitutional.
New Jersey does not allow for same sex marriages but does have a civil union statute that resulted from Lewis v. Harris. In that 2006 case, the NJ Supreme Court unanimously declared that prohibiting same sex unions violates the equal protection clause but in a 4-3 decision left it up to the legislature to determine how best to give same sex couples equal rights of married couples. The legislature chose civil unions. I’ve covered this topic previously here and here.
Yesterday, the Internal Revenue Service updated their policies to reflect the invalidation of DoMA Section 3 in Revenue Ruling 2013-17. In a nutshell, the ruling mandates that legally married same sex couples must follow the same procedures as heterosexual marriages, regardless of where they live. So if a same sex couple marries and resides in a state that does not recognize same sex marriages, they will have to file as unmarried for state taxes and married for federal — ironically, the exact opposite of how it previously worked for same sex couples in a state that did recognize their union. Same sex married couples can also refile their taxes covering the last three years if beneficial to them.
For NJ (and other states) couples in civil unions, the ruling does not recognize a civil union (or domestic partnership) as equivalent to a marriage and thus for federal tax purposes civil union partners are not married. See the IRS’s FAQs. While it is not explicitly stated, presumably other aspects of federal tax law will not extend to civil unions. In a dissolution, this can impact equitable distribution of assets and liabilities (a tax free event for married couples but gift taxes may apply to civil unions) and alimony (where it may not be tax deductible for couples formerly in civil unions).
Post-Windsor, Garden State Equality filed an updated case against the state of NJ seeking a declaration that civil unions do not provide the same equality as marriage (see Garden State Equality v. Dow). This IRS Ruling certainly helps that case, and I would expect to see amended filings shortly.
If you are seeking to dissolve your civil union, be sure to find a mediator who has expertise in this area as it is quite different from a heterosexual divorce. Feel free to contact me with any questions.