The Supreme Court's DOMA Decision Raises More Questions Than It Answers

AICPA Tax Insider

With the Supreme Court's decision on the constitutionality of part of the Defense of Marriage Act, P.L. 104-199 (DOMA), Edith Windsor, the plaintiff, joins the likes of Beulah Crane (Crane, 331 U.S 1 (1947)), Mary Archer Morris (Mary Archer W. Morris Trust, 367 F.2d 794 (4th Cir. 1966)), and Evelyn Gregory (Gregory v. Helvering, 293 U.S. 465 (1935)), women whose names grace leading tax cases.

In Windsor, the Supreme Court, in a 5–4 decision, held that the definition of marriage in Section 3 of DOMA as a union between a woman and a man violated the principles of equal protection incorporated in the Fifth Amendment of the Constitution. The Supreme Court did not provide same-sex couples the right to marry in states that do not permit such marriages and it did not address Section 2 of DOMA, which allows states to refuse to recognize same-sex marriages entered into in other states.

Same-sex spouses living in states that recognize same-sex marriages are now entitled to, and eligible for, all of the federal benefits, rights, and privileges as opposite-sex spouses. After the Supreme Court decision was issued, the Department of Justice was directed to work with the IRS and the Department of Treasury to expeditiously implement the decision.

Factual background

Windsor and her wife, Thea Spyer, were married in Canada in 2007 after 40 years together as residents of New York. While New York did not permit same-sex marriages at the time, in 2008, the state recognized those marriages as valid if they were valid where they were performed (Directive of the Governor of New York, May 14, 2008, responding to a state appellate court decision, Martinez v. County of Monroe, 850 N.Y.S.2d 740 (2008)).

When Thea Spyer died in 2009, she left her entire estate to Windsor. Windsor sought to take the unlimited marital deduction on the federal estate tax return. However, because DOMA limited the federal definition of "marriage" to opposite-sex couples, the IRS disallowed the unlimited marital deduction. As a result, the estate incurred an estate tax liability of $363,053, which Edith Windsor paid. She then filed a refund claim on the grounds that DOMA unconstitutionally discriminated against same-sex couples. After her claim was denied, Edith Windsor sued for a refund of the estate tax, arguing that she would have received an unlimited marital deduction under Sec. 2056 for property passing to her, but for DOMA.

The U.S. District Court for the Southern District of New York granted the claim for refund on the grounds that DOMA violated the equal protection provisions of the Fifth Amendment; the Second Circuit affirmed (Windsor, 699 F.3d 169 (2d Cir. 2012), aff'g 833 F. Supp. 2d 394 (S.D.N.Y. 2012)). The Supreme Court, in a split opinion, agreed with the lower courts that DOMA's definition of marriage is unconstitutional.

Unanswered questions in Windsor

While Windsor made clear that same-sex married...