Obergefell Adds New Dimension To Windsor, Perry Decisions For Same-Sex Couples

A reported decision from Ohio last week (Obergefell v. Kasich, 2013 U.S. Dist. LEXIS 102077 (S.D. Ohio July 22, 2013)) sets the stage for the continuing discussion about financial and tax planning for same-sex couples. Many advisers are uncovering the conflicts that exist between a federal system, with a definition of marriage that includes same-sex marriages, and certain state regimes that explicitly limit the definition of marriage to exclude same-sex marriages. The federal estate tax figured prominently in the recent U.S. Supreme Court decision in Windsor v. United States, __U.S.__, 133 S.Ct. 2675 (2013), which was issued on June 26, but was rarely mentioned in the intense public and political debates that resulted. The decisions in Windsor, and Hollingsworth, et al. v. Perry et al., __U.S.__, 133 S. Ct. 2652 (2013), issued on the same day as Windsor, sparked a national discussion about the rights of same-sex couples to marry. In the wake of those decisions, same-sex couples celebrated their eligibility for the many federal benefits available to married couples.

Windsor

Edith Windsor served as the executor of the estate of her deceased spouse, Thea Spyer. Windsor and Spyer had lived in a committed relationship for decades. The same-sex couple registered as domestic partners in the City of New York when that was made available to same-sex couples. They were legally married in 2007, in Ontario, Canada. At the time, New York recognized same-sex marriages performed in other jurisdictions, but the state did not allow same-sex couples to marry in New York until 2011. When Spyer died in 2009, Windsor filed an estate tax return claiming the full marital deduction for assets that passed to her under Spyer's estate plan. The Internal Revenue Service disallowed the deduction, and Windsor, as executor, paid the deficiency.

Windsor then filed a suit for refund of the federal estate tax on the basis that Section 3 of the federal Defense of Marriage Act (DOMA) violates the Equal Protection Clause of the Fifth Amendment of the United States Constitution. Section 3 of DOMA specifically provides:

In determining the meaning of any Act of Congress, or of any ruling, regulation, or interpretation of the various administrative bureaus and agencies of the United States, the word "marriage" means only a legal union between one man and one woman as husband and wife. The word "spouse" refers only to a person of the opposite sex who is a husband or wife.

In February 2011, the Justice Department announced that it would no longer defend DOMA's constitutionality because a heightened standard of scrutiny should apply to classifications based on sexual orientation and Section 3 is unconstitutional under that standard. As a result of the Justice Department's decision, the Bipartisan Legal Advisory Group of the U.S. House of Representatives (BLAG) moved to intervene in this case to defend the constitutionality of the statute.

Windsor moved for summary judgment, arguing that DOMA is subject to strict constitutional scrutiny. Windsor contended that DOMA fails under that standard of constitutional review because the government is unable to establish that DOMA is narrowly tailored to serve a compelling or legitimate government interest. In the alternative, Windsor argued that DOMA has no rational basis. The district court granted the motion for summary judgment, finding that Section 3 of DOMA violated...