81 FR 60609 - Definition of Terms Relating to Marital Status
DEPARTMENT OF THE TREASURY
Internal Revenue Service Federal Register Volume 81, Issue 171 (September 2, 2016)
Internal Revenue Service
Federal Register Volume 81, Issue 171 (September 2, 2016)
| Page Range | 60609-60617 | |
| FR Document | 2016-21096 |
[Federal Register Volume 81, Number 171 (Friday, September 2, 2016)] [Rules and Regulations] [Pages 60609-60617] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2016-21096] ======================================================================= ----------------------------------------------------------------------- DEPARTMENT OF THE TREASURY Internal Revenue Service 26 CFR Parts 1, 20, 25, 26, 31, and 301 [TD 9785] RIN 1545-BM10 Definition of Terms Relating to Marital Status AGENCY: Internal Revenue Service (IRS), Treasury. ACTION: Final regulations. ----------------------------------------------------------------------- SUMMARY: This document contains final regulations that reflect the holdings of Obergefell v. Hodges, 576 U.S. ___, 135 S. Ct. 2584 (2015), Windsor v. United States, 570 U.S. ___, 133 S. Ct. 2675 (2013), and Revenue Ruling 2013-17 (2013-38 IRB 201), and that define terms in the Internal Revenue Code describing the marital status of taxpayers for federal tax purposes. DATES: Effective date: These regulations are effective on September 2, 2016. FOR FURTHER INFORMATION CONTACT: Mark Shurtliff at (202) 317-3400 (not toll-free number). SUPPLEMENTARY INFORMATION: Background This document contains amendments to the Income Tax Regulations (26 CFR part 1), the Estate Tax Regulations (26 CFR part 20), the Gift Tax Regulations (26 CFR part 25), the Generation-Skipping Transfer Tax Regulations (26 CFR part 26), the Employment Tax and Collection of Income Tax at Source Regulations (26 CFR part 31), and the Regulations on Procedure and Administration (26 CFR part 301). On October 23, 2015, the Department of the Treasury (Treasury) and the IRS published in the Federal Register (80 FR 64378) a notice of proposed rulemaking (REG-148998-13), which proposed to amend the regulations under section 7701 of the Internal Revenue Code (Code) to provide that, for federal tax purposes, the terms ``spouse,'' ``husband,'' and ``wife'' mean an individual lawfully married to another individual, and the term ``husband and wife'' means two individuals lawfully married to each other. In addition, the proposed regulations provided that a marriage of two individuals will be recognized for federal tax purposes if that marriage would be recognized by any state, possession, or territory of the United States. Finally, the proposed regulations clarified that the term ``marriage'' does not include registered domestic partnerships, civil unions, or other similar relationships recognized under state law that are not denominated as a marriage under that state's law, and the terms ``spouse,'' ``husband and wife,'' ``husband,'' and ``wife'' do not include individuals who have entered into such a relationship. Written comments responding to the proposed regulations were received, and one person requested a public hearing. A public hearing was held on January 28, 2016; however, the individual who requested the hearing was not able to attend, but did submit supplemental comments. When given the opportunity, no one who attended the hearing asked to speak. After consideration of the [[Page 60610]] comments, Treasury and the IRS adopt the proposed regulations as revised by this Treasury Decision. Summary of Comments and Explanation of Revisions The IRS received twelve comments in response to the notice of proposed rulemaking. All comments were considered and are available for public inspection at http://www.regulations.gov. The comments are summarized and discussed in this preamble. I. Comments on the Proposed Regulations Generally The majority of commenters strongly supported the proposed regulations. Many commended Treasury and the IRS for publishing proposed regulations that reflect the holdings of Obergefell v. Hodges, 576 U.S. ___, 135 S. Ct. 2584 (2015), and Windsor v. United States, 570 U.S. ___, 133 S. Ct. 2675 (2013), instead of relying on sub-regulatory guidance. In general, commenters applauded Treasury and the IRS for determining that, in light of the Windsor and Obergefell holdings, marriages of same-sex couples should be treated the same as marriages of opposite-sex couples for federal tax purposes. One commenter suggested that the regulations specifically reference ``same-sex marriage'' so that the definitions apply regardless of gender and to avoid any potential issues of interpretation. Treasury and the IRS believe that the definitions in the proposed regulations apply equally to same-sex couples and opposite-sex couples, and that no clarification is needed. Proposed Sec. 301.7701-18(a) states, without qualification, that, ``[f]or federal tax purposes, the terms spouse, husband, and wife mean an individual lawfully married to another individual,'' and that the ``term husband and wife means two individuals lawfully married to each other.'' The language is specifically gender neutral, which reflects the holdings in Windsor and Obergefell and is consistent with Revenue Ruling 2013-17. Similarly, the language in proposed Sec. 301.7701-18(b) refers to a marriage of two individuals, without specifying gender. Amending the regulations to specifically address a marriage of two individuals of the same sex would undermine the goal of these regulations to eliminate distinctions in federal tax law based on gender. For these reasons, the final regulations do not adopt this comment. One comment reflected an overall negative view of same-sex marriage. However, the comment did not recommend any specific amendment to the proposed regulations. Because this comment addresses issues outside the scope of these regulations, the final regulations do not address this comment. II. Comments on Proposed Sec. 301.7701-18(a) Regarding the Definition of Terms Relating to Marital Status Section 301.7701-18(a) of the proposed regulations provides that for federal tax purposes, the terms ``spouse,'' ``husband,'' and ``wife'' mean an individual lawfully married to another individual. The term ``husband and wife'' means two individuals lawfully married to each other. The preamble to the proposed regulations explains that after Windsor and Obergefell, marriages of couples of the same sex should be treated the same as marriages of couples of the opposite sex for federal tax purposes, and therefore, the proposed regulations interpret these terms in a neutral way to include same-sex as well as opposite-sex couples. The overwhelming majority of commenters expressed support for proposed Sec. 301.7701-18(a). However, one of the commenters recommended that the IRS update all relevant forms to use the gender- neutral term ``spouse'' instead of ``husband and wife.'' The commenter stated that updating the forms to use gender-neutral terms would be cost-neutral and would more accurately reflect the varied composition of today's families. The commenter further stated that updating the forms to be inclusive of same-sex couples would increase government efficiency by alleviating confusion, delays, and denials caused by current forms using outdated terms. The commenter's recommendation relates to forms and is therefore outside the scope of these final regulations. Nevertheless, Treasury and the IRS will consider the commenter's recommendation when updating IRS forms and publications. III. Comments on Proposed Sec. 301.7701-18(b) Regarding Persons Who Are Married for Federal Tax Purposes Section 301.7701-18(b) of the proposed regulations provides that a marriage of two individuals is recognized for federal tax purposes if the marriage would be recognized by any state, possession, or territory of the United States. The comments received on paragraph (b) are summarized below. A. Comment That Proposed Sec. 301.7701-18(b) is Redundant in Light of Obergefell and Should be Removed One commenter stated that proposed Sec. 301.7701-18(b) is redundant and unnecessary in light of Obergefell. According to the commenter, after Obergefell, same-sex marriage should be recognized in every state. Therefore, the commenter states that there is no need for a definition of marriage for federal tax purposes and proposed Sec. 301.7701-18 (b) should not be finalized. Treasury and the IRS disagree that proposed Sec. 301.7701-18(b) is unnecessary in light of Obergefell. The purpose of publishing these regulations is to ensure that, regardless of the term used in the Code, a marriage between two individuals entered into in, and recognized by, any state, possession, or territory of the United States will be treated as a marriage for federal tax purposes. The majority of comments supporting the proposed regulations agree with this view and specifically applaud Treasury and the IRS for publishing regulations to make this clear rather than relying on sub-regulatory guidance. Accordingly, the comment is not adopted and a definition of marriage for federal tax purposes is included in the final regulations under Sec. 301.7701-18(b). However, the definition in proposed Sec. 301.7701-18(b) is amended by these final regulations, as described below. B. Comment That the Language in the Proposed Rule Should be Clarified To Eliminate Unintended Consequences Another commenter recommended amending Sec. 301.7701-18(b) of the proposed regulations to simply state that the determination of an individual's marital status will be made under the laws of the relevant state, possession, or territory of the United States or, where appropriate, under the laws of the relevant foreign country (for example, the country where the marriage was celebrated or, if conflict of laws questions arise, another country). The commenter pointed out that this revision is needed to ensure that a couple's intended marital status is recognized by the IRS. Specifically, the commenter explains that the language in proposed Sec. 301.7701-18(b) makes it possible for unmarried couples living in a state that does not recognize common- law marriage to be treated as married for federal tax purposes if the couple would be treated as having entered into a common-law marriage under the law of any state, possession, or territory of the United States. Next, the commenter explains that the language of the proposed regulations could result in questions about the validity of a divorce. Under Revenue Ruling 67-442, a divorce is recognized for federal tax purposes unless the divorce is invalidated by a court of [[Page 60611]] competent jurisdiction. The language of the proposed regulations would undermine this longstanding revenue ruling if any state would recognize the couple as still married despite the divorce. Finally, the commenter states that the language of proposed Sec. 301.7701-18(b) could create a conflict with proposed Sec. 301.7701- 18(c) if at least one state, possession, or territory of the United States recognizes a couple's registered domestic partnership, civil union, or other similar relationship as marriage. The commenter points out that in such a situation, regardless of the couple's intention and where they entered into their alternative legal relationship, they could be treated as married for federal tax purposes under the language of proposed Sec. 301.7701-18(b) if any state, possession, or territory recognizes their alternative legal relationship as a marriage. According to the commenter, these examples demonstrate that the language in proposed Sec. 301.7701-18(b) could be interpreted to treat couples who divorce or who never intended to enter into a marriage under the laws of the state where they live or where they entered into an alternative legal relationship as married for federal tax purposes. Without a change to proposed Sec. 301.7701-18(b), these couples would be required to analyze the laws of all the states, possessions, and territories of the United States to determine whether any of these laws would fail to recognize their divorce or would denominate their alternative legal relationship as a marriage This was not the intent of the proposed regulations. Rather, the proposed regulations were intended to recognize a marriage only when a couple entered into a relationship denominated as marriage under the law of any state, territory, or possession of the United States or under the law of a foreign jurisdiction if such a marriage would be recognized by any state, possession, or territory of the United States. To address these concerns, Sec. 301.7701-18(b) is revised in the final regulations to provide a general rule for recognizing a domestic marriage for federal tax purposes and a separate rule for recognizing foreign marriages for federal tax purposes (discussed in section III.C. Comments on Marriages Entered Into in Foreign Jurisdictions of this preamble). Accordingly, under the general rule in Sec. 301.7701-18(b)(1) of the final regulations, a marriage of two individuals is recognized for federal tax purposes if the marriage is recognized by the state, possession, or territory of the United States in which the marriage is entered into, regardless of the married couple's place of domicile. This revision addresses the concerns raised by the commenter and ensures that only couples entering into a relationship denominated as marriage, and who have not divorced, are treated as married for federal tax purposes. By relying on the place of celebration to determine which state, possession, or territory of the United States is the point of reference for determining whether a couple is married for federal tax purposes, this rule is consistent with the longstanding position of Treasury and the IRS regarding the determination of marital status for federal tax purposes. See Revenue Ruling 2013-17; Revenue Ruling 58-66 (1958-1 CB 60). C. Comments on Marriages Entered Into in Foreign Jurisdictions Section 301.7701-18(b) of the proposed regulations generally provides that a marriage of two individuals is recognized for federal tax purposes if the marriage would be recognized by any state, possession, or territory of the United States. The preamble to the proposed regulations explains that under this rule, as a matter of comity, a marriage conducted in a foreign jurisdiction will be recognized for federal tax purposes if that marriage would be recognized in at least one state, possession, or territory of the United States. The rule in Sec. 301.7701-18(b) of the proposed regulations was intended to address both domestic and foreign marriages, regardless of where the couple is domiciled and regardless of whether the couple ever resides in the United States (or a possession or territory of the United States). One commenter suggested amending the proposed regulation to recognize marriages performed in any foreign jurisdiction, for federal tax purposes, if the marriage is recognized in at least one state, possession, or territory of the United States. Similarly, another commenter recommended amending the proposed regulation to reflect the discussion in the preamble to the proposed regulation regarding the recognition of marriages conducted in foreign jurisdictions. This commenter noted that the preamble to the proposed regulation states, ``[W]hether a marriage conducted in a foreign jurisdiction will be recognized for federal tax purposes depends on whether that marriage would be recognized in at least one state, possession, or territory of the United States.'' The commenter recommended that, rather than relying on the preamble, language should be included in the regulations' text making this recognition explicit. Proposed Sec. 301.7701-18(b) was drafted to apply to both domestic and foreign marriages. In light of the comments, the proposed rule has been amended to be more explicit. To clarify how foreign marriages will be recognized for federal tax law, Sec. 301.7701-18(b) has been amended to provide a specific rule for foreign marriages. Accordingly, a new paragraph (b)(2) has been added to Sec. 301.7701-18 to provide that two individuals entering into a relationship denominated as marriage under the laws of a foreign jurisdiction are married for federal tax purposes if the relationship would be recognized as marriage under the laws of at least one state, possession, or territory of the United States. This rule enables couples who are married outside the United States to determine marital status for federal tax purposes, regardless of where they are domiciled and regardless of whether they ever reside in the United States. Although this rule requires couples to review the laws of the various states, possessions, and territories to determine if they would be treated as married, it is sufficient if they would be treated as married in a single jurisdiction and there is no need to consider the laws of all of the states, territories, and possessions of the United States. In addition, unlike the language in Sec. 301.7701-18(b) of the proposed regulations, this rule incorporates the place of celebration as the reference point for determining whether the legal relationship is a marriage or a legal alternative to marriage, avoiding the potential conflict with Sec. 301.7701-18(c) identified by the commenter, above. Finally, this rule avoids the concern that a couple intending to enter into a legal alternative to marriage will be treated as married because this rule recognizes only legal relationships denominated as marriage under foreign law as eligible to be treated as marriage for federal tax purposes. This separate rule for foreign marriages in Sec. 301.7701- 18(b)(2) is consistent with the proposed regulations' intent, as described in the preamble to the notice of proposed rulemaking, and provides the clarity commenters request. D. Comment on Common-Law Marriages One commenter stated that some states that recognize common-law marriage only do so in the case of opposite-sex couples. Accordingly, the commenter recommended amending the regulations to clarify that common-law marriages of same-sex couples will be recognized for federal tax purposes. The [[Page 60612]] commenter further suggested that any same-sex couple that would have been considered married under the common law of a state but for the fact that the state's law prohibited same-sex couples from being treated as married under common law be allowed to file an amended return for any open tax year to claim married status. As discussed in the preamble to the proposed regulations, on June 26, 2013, the Supreme Court in Windsor held that Section 3 of the Defense of Marriage Act, which generally prohibited the federal government from recognizing marriages of same-sex couples, is unconstitutional because it violates the principles of equal protection and due process. On June 26, 2015, the Supreme Court held in Obergefell that state laws are ``invalid to the extent they exclude same-sex couples from civil marriage on the same terms and conditions as opposite-sex couples'' and ``that there is no lawful basis for a State to refuse to recognize a lawful same-sex marriage performed in another State on the ground of its same-sex character.'' Obergefell, 576 U.S. at _(slip op., at 23, 28). In light of these holdings, Treasury and the IRS determined that marriages of couples of the same sex should be treated the same as marriages of couples of the opposite sex for federal tax purposes. See 80 FR 64378, 64379. Neither the proposed regulations nor these final regulations differentiate between civil marriages and common-law marriages, nor is such differentiation warranted or required for federal tax purposes. See Revenue Ruling 58-66 (treating common-law marriage as valid, lawful marriage for federal tax purposes) and Revenue Ruling 2013-17 (reiterating that common-law marriages are valid, lawful marriages for federal tax purposes). Thus, the general rules regarding marital status for federal tax purposes provided in the proposed and final regulations address marital status regardless of whether the marriage is a civil marriage or a common-law marriage. Furthermore, even after the Obergefell decision, there are several states, including some states that recognize common-law marriage, that still have statutes prohibiting same-sex marriage. However, after Obergefell, we are unaware of any state enforcing such statutes or preventing a couple from entering into a common-law marriage because the couple is a same-sex couple. Accordingly, the commenter's suggestion has not been adopted. In addition, Revenue Ruling 2013-17 does not distinguish between civil marriages and common-law marriages of same-sex couples. Therefore, same-sex couples in common-law marriages may rely on Revenue Ruling 2013-17 for the purpose of filing original returns, amended returns, adjusted returns, or claims for credit or refund for any overpayment of tax resulting from the holdings of Revenue Ruling 2013- 17 and the definitions provided in these regulations, provided the applicable limitations period for filing such claim under section 6511 has not expired. IV. Comments on Proposed Sec. 301.7701-18(c) Regarding Persons Who are not Married for Federal Tax Purposes Section 301.7701-18(c) of the proposed regulations provides that the terms ``spouse,'' ``husband,'' and ``wife'' do not include individuals who have entered into a registered domestic partnership, civil union, or other similar relationship not denominated as marriage under the law of a state, possession, or territory of the United States. That section further provides that the term ``husband and wife'' does not include couples who have entered into such a relationship and that the term ``marriage'' does not include such relationship. The preamble to the proposed regulations provides several reasons for the rule in proposed regulation Sec. 301.7701-18(c). First, except when prohibited by statute, the IRS has traditionally looked to states to define marriage. Second, regardless of rights accorded to relationships such as civil unions, registered domestic partnerships, and similar relationships under state law, states have intentionally chosen not to denominate those relationships as marriage. Third, some couples deliberately choose to enter into or remain in a civil union, registered domestic partnership, or similar relationship even when they could have married or converted these relationships to marriage, and these couples have an expectation that their relationship will not be treated as marriage for purposes of federal tax law. Finally, no Code provision indicates that Congress intended to recognize civil unions, registered domestic partnerships, or similar relationships as marriages. Several commenters submitted comments addressing this section of the proposed regulations. Many agreed with proposed Sec. 301.7701-18(c), but three did not. These comments are discussed below. A. Comments That Specifically Agree With Proposed Regulation Sec. 301.7701-18(c) In addition to the four commenters that expressed strong support for the proposed regulations generally, two commenters provided specific comments agreeing with the position taken in proposed Sec. 301.7701-18(c). One of these commenters stated that because no Code section requires, or even permits, Treasury and the IRS to allow individuals in registered domestic partnerships, civil unions, and other similar relationships, to elect a married filing status under section 6013, any extension of section 6013 is a policy choice that Congress should make. This commenter also noted that to evaluate the rights and obligations created by various state legal relationships to determine if they are the same as relationships denominated as a marriage would be a significant drain on IRS resources. Finally, the commenter provided historical examples demonstrating how states have attempted to change state family law to reduce their residents' federal income tax obligations. Based on this historical analysis, the commenter concluded that if Treasury and the IRS were to reverse their position on the status of registered domestic partnerships, civil unions, and other similar relationships, there would be nothing to prevent states from permitting a private contract to create an equivalent state-law marriage to enable their residents to choose a filing status that reduces their federal income tax obligations. The second commenter that agreed with proposed Sec. 301.7701-18(c) observed that the proposed regulations respect the choices made by couples who entered into a civil union or registered domestic partnership with the expectation that their relationship will not be treated as a marriage for federal law purposes. The commenter also observed that the proposed regulations recognize that couples deliberately remain in these relationships, rather than marry, for lawful reasons. B. Comments That Disagree With Proposed Regulation Sec. 301.7701-18(c) Three commenters disagreed with the proposed regulations, stating that registered domestic partnerships, civil unions, and similar formal relationships should be treated as marriage for federal tax purposes. Their comments are summarized below. 1. Comments Regarding Relationships With the Same Rights and Responsibilities as Marriage Two of the commenters recommended that the substance of the legal rights and obligations of individuals in registered domestic partnerships, civil unions, and similar relationships should control whether these relationships are [[Page 60613]] recognized as marriage for federal tax purposes, rather than the label applied to the relationship. These commenters stated that regardless of whether a relationship is denominated as marriage, any relationship that has the same rights and responsibilities as marriage under state law should be treated as marriage for federal tax purposes. One commenter cited registered domestic partners in California as an example of a relationship not denominated as marriage but with the same rights and responsibilities as marriage under state law. Another commenter cited civil unions in New Jersey and Connecticut as an example of a relationship not denominated as marriage where the couple has the same rights and obligations as spouses. While some states extend the rights and responsibilities of marriage to couples in registered domestic partnerships, civil unions, or other similar relationships, as the commenters point out, these states also retain marriage as a separately denominated legal relationship. We also recognize that some states have permitted couples in those relationships to convert them to marriage under state law. Many of those states have continued to designate marriage separately from alternative legal relationships that are not a marriage, such as registered domestic partnerships, civil unions, or other similar relationships. The IRS has traditionally recognized a couple's relationship as a marriage if the state where the relationship was entered into denominates the relationship as a marriage. See Revenue Ruling 58-66 (if a state recognizes a common-law marriage as a valid marriage, the IRS will also recognize the couple as married for purposes of federal income tax filing status and personal exemptions). Similarly, the IRS has not traditionally evaluated the rights and obligations provided by a state to determine if an alternative legal relationship should be treated as marriage for federal tax purposes. Adopting the commenters' recommendation to treat registered domestic partnerships, civil unions, and similar relationships as married for federal tax purposes if the couple has the same rights and responsibilities as individuals who are married under state law would be inconsistent with Treasury and the IRS's longstanding position to recognize the marital status of individuals as determined under state law in the administration of the federal income tax. This position is, moreover, consistent with the reasoning of the only federal court that has addressed whether registered domestic partners should be treated as spouses under the Code. See Dragovich v. U.S. Dept. of Treasury, 2014 WL 6844926 (N.D. Cal. Dec. 4, 2014) (on remand following dismissal of appeal by the Ninth Circuit, 12-16628 (9th Cir. Oct. 28, 2013)) (granting government's motion to dismiss claim that section 7702B(f) discriminates because it does not interpret the term spouse to include registered domestic partners). In addition, it would be unduly burdensome for the IRS to evaluate state laws to determine if a relationship not denominated as marriage should be treated as a marriage. It would be also be burdensome for taxpayers in these alternative legal relationships, to evaluate state law to determine marital status for federal tax purposes. Besides being burdensome, the determination of whether the relationship should be treated as a marriage could result in controversy between the IRS and the affected taxpayers. This can be avoided by treating a relationship as a marriage only if a state denominates the relationship as a marriage, as the IRS has traditionally done. 2. Comments Regarding Deference to State Law Two of the commenters stated that by not recognizing registered domestic partnerships, civil unions, and other similar relationships as marriage for federal tax purposes, the IRS is disregarding the states' intent in creating these alternative legal relationships rather than deferring to state law. To illustrate, one of the commenters noted that Illinois affords parties to a civil union the same rights and obligations as married spouses, and that when Illinois extended marriage to same-sex couples, it enacted a statutory provision permitting parties to a civil union to convert their union to a marriage during the one-year period following the law's enactment. 750 Ill. Comp. Stat. Sec. 75/65 (2014). The Illinois law also provides that, for a couple converting their civil union to a marriage, the date of marriage relates back to the date the couple entered into the civil union. The commenter stated that the fact that couples could convert their civil union to a marriage, and that the date of their marriage would relate back to the date of their union, indicates that Illinois defines civil unions as marriages. The commenter further observed that when Delaware extended the right to marry to same-sex couples, it stopped allowing its residents to enter into civil unions. Following a one-year period during which couples could voluntarily convert their civil union into marriage, Delaware automatically converted into marriage all remaining civil unions (except those subject to a pending proceeding for dissolution, annulment or legal separation), with the date of each marriage relating back to the date that each civil union was established. The commenter concluded that the laws in Delaware and Illinois make it clear that by not recognizing civil unions and domestic partnerships as marriage, the IRS is not deferring to the state's judgment in defining marital status. Rather than support the commenter's position, these examples actually support proposed Sec. 301.7701-18(c). As discussed in the preamble to the proposed regulations, states have carefully considered which legal relationships will be recognized as a marriage and which will be recognized as a legal alternative to marriage, and have enacted statutes accordingly. For instance, Illinois did not automatically convert all civil unions into marriages or include civil unions in the definition of marriage. Instead, it allowed couples affected by the new law to either remain in a civil union or convert their civil union into a marriage. Furthermore, under Illinois law, couples who waited longer than one year to convert their civil union into marriage must perform a new ceremony and pay a fee to have their civil union converted into and be recognized as a marriage. Moreover, Illinois continues to allow both same-sex couples and opposite-sex couples to enter into civil unions, rather than marriages. The law in Delaware also demonstrates the care that states have taken to determine which legal relationships will be denominated as marriage. In 2014, Delaware law eliminated the separate designation of civil union in favor of recognizing only marriages for couples who want the legal status afforded to couples under state law. On July 1, 2014, Delaware automatically converted all civil unions to marriage by operation of law. Del. Code Ann. tit. 13, Sec. 218(c). Civil unions that were subject to a pending proceeding for dissolution, annulment, or legal separation as of the date the law went into effect, however, were not automatically converted. As a result, these couples are not treated as married under Delaware law, and the dissolution, annulment, or legal separation of their civil union is governed by Delaware law relating to civil unions rather than by Delaware law relating to marriage. Del. Code Ann. tit. 13, Sec. 218(d). [[Page 60614]] As these examples demonstrate, states have carefully determined which relationships will be denominated as marriage. In addition, states may retain alternatives to marriage even after allowing couples to convert those relationships to marriage. IRS's reliance on a state's denomination of a relationship as marriage to determine marital status for federal tax purposes avoids inconsistencies with a state's intent regarding the status of a couple's relationship under state law. 3. Comments Regarding Taxpayer Expectations As explained in the notice of proposed rulemaking, some couples have chosen to enter into a civil union or registered domestic partnership even when they could have married. In addition, some couples who are in civil unions or registered domestic partnerships have chosen not to convert those relationships into marriage when they had the opportunity to do so. In many cases, the choice not to enter into a relationship denominated as marriage was deliberate, and may have been made to avoid treating the relationship as marriage for purposes of federal law, including federal tax law. Two commenters stated that taxpayer expectations do not support Sec. 301.7701-18(c). According to the commenters, many same-sex couples entered into a domestic partnership or civil union because at the time they were prohibited under state law from marrying. According to the commenters, now that they have the option to marry, some of these couples have remained in domestic partnerships or civil unions not by choice, but because one member of the couple has died, has become incapacitated, or otherwise lacks the capacity to enter into a marriage. One of the commenters stated that these couples are trapped in this alternative legal relationship and have no ability to marry, even if they have an expectation that their relationship be treated as a marriage for federal tax purposes. The other commenter pointed out that some taxpayers may have resisted entering into or converting their relationship into marriage because of a principled opposition to the marriage institution, but may still have an expectation of being treated as married for federal tax purposes. Thus, the commenters conclude, many taxpayers do not voluntarily enter into or remain in alternative legal relationships because of any particular expectation that they will not be treated as married for federal purposes. The commenters stated that even if the type of relationship entered into represents a decision not to be treated as married for federal purposes, taxpayer expectations should not be taken into account for purposes of determining whether alternative legal relationships are recognized as marriage for federal tax purposes. One commenter stated that taking taxpayer expectations into account encourages tax-avoidance behavior. The other commenter stated that it is inappropriate for the IRS to determine tax policy based on taxpayers' expectations of reaping nontax benefits, such as Social Security. However, another commenter, who also disagreed with proposed Sec. 301.7701-18(c), stated the opposite, explaining that non-tax reasons support treating alternative legal relationships as marriage for federal tax purposes. According to this commenter, because nationwide protections for employment and housing are lacking, many same-sex couples remain at risk for termination at work or eviction from an apartment if their sexual orientation is discovered. Similarly, the commenter contends that individuals in the Foreign Service who work overseas may also feel unsafe entering into a same-sex marriage. Therefore, the commenter explained, in light of these realities, registered domestic partnerships, civil unions, and similar relationships provide a level of stability and recognition for many couples through federal programs like Social Security, and, therefore, should be treated as marriages for federal tax purposes. Finally, the commentator stated that recognizing these relationships as marriages for federal tax purposes would not impede the IRS's ability to effectively administer the internal revenue laws. Treasury and the IRS disagree with the commenters and continue to believe that the regulation should not treat registered domestic partnerships, civil unions, and other similar relationships--entered into in states that continue to distinguish these relationships from marriages--as marriage for federal tax purposes. While not all same-sex couples in registered domestic partnerships, civil unions, or similar relationships had an opportunity to marry when they entered into their relationship, after Obergefell, same-sex couples now have the option to marry under state law. In addition, the fact that some couples may not voluntarily enter into marriage because of a principled opposition to marriage supports not treating alternative legal relationships as marriages for federal tax purposes because this ensures that these couples do not risk having their relationship characterized as marriage. Further, as discussed in the preamble to the proposed regulations, treating alternative legal relationships as marriages for federal tax purposes may have legal consequences that are inconsistent with these couples' expectations. For instance, the filing status of a couple treated as married for federal tax purposes is strictly limited to filing jointly or filing as married filing separately, which often results in a higher tax liability than filing as single or head of household. After Obergefell, a rule that treats a couple as married for federal tax purposes only if their relationship is denominated as marriage for state law purposes allows couples in a registered domestic partnership, civil union, or similar relationship to make a choice: they may either stay in that relationship and avoid being married for federal tax purposes or they may marry under state law and be treated as married for federal tax purposes. The rule recommended by the commenters would eliminate this choice. 4. Comments Regarding Difficulties Faced by Couples if Alternative Legal Relationships Are Not Treated as Marriage Two commenters stated that not recognizing registered domestic partnerships, civil unions, and other similar relationships as marriages for federal tax purposes makes it difficult for couples in these relationships to calculate their federal tax liability. One commenter explained that when these couples dissolve their relationships, they are required to go through the same processes that spouses go through in a divorce; alimony obligations are calculated in the same way, and property divisions occur in the same way as for spouses. Yet, because they are not treated as married for federal tax purposes, these couples cannot rely on the certainty of tax treatment associated with provisions under the Code such as sections 71 (relating to exclusion from income for alimony and separate maintenance), 215 (relating to the deduction for alimony or separate maintenance payments), 414(p) (defining qualified domestic relations orders), 1041 (relating to transfers of property between spouses incident to divorce), 2056 (relating to the estate tax marital deduction), and 2523 (relating to gifts to spouses). The purpose of these regulations is to define marital status for federal tax law purposes. The fact that the Code includes rules that address transfers of property between individuals who are or were married should not control how marriage is defined for federal tax [[Page 60615]] purposes. Rather, as discussed in this preamble, the regulations are consistent with the IRS's longstanding position that marital status for federal tax purposes is determined based on state law. See Revenue Ruling 2013-17; Revenue Ruling 58-66. Accordingly, the proposed regulations have not been changed based on this comment. In addition, although not addressed specifically in the Code, guidance relating to registered domestic partnerships, civil unions, and other similar relationships, including answers to frequently asked questions, is available at www.irs.gov. 5. Comments Regarding the Fact That the Code Does Not Address the Status of Alternative Legal Relationships After describing the reasons for not treating civil unions, registered domestic partnerships, and similar relationships as marriage for federal tax purposes, the preamble to the proposed regulations states ``Further, no provision of the Code indicates that Congress intended to recognize as marriages civil unions, registered domestic partnerships, or similar relationships.'' That language makes clear that the Code is silent with respect to alternative legal relationships, and therefore, does not preclude the IRS from not recognizing these relationships as marriage for federal tax purposes. Two commenters took issue with this language and stated that the government should not interpret the lack of a Code provision specifically addressing the marital status of legal alternatives to marriage as an indication of Congressional intent that such relationships should not be recognized as marriage for federal tax purposes. In addition, the commenters explained that the reason Congress did not enact such a provision after DOMA is because it would have been inconsistent with DOMA's restriction on treating same-sex couples as married for federal law purposes. These comments are unpersuasive. Since DOMA was enacted on September 21, 1996, many states have allowed both same-sex and opposite-sex couples to enter into registered domestic partnerships, civil unions, and similar relationships. Although it would have been inconsistent for Congress to recognize alternative legal relationships between same-sex couples as marriage under DOMA, nothing prevented Congress from recognizing these relationships as marriages for federal tax purposes in the case of opposite-sex couples. Yet, since DOMA was enacted nearly 20 years ago, Congress has passed no law indicating that opposite-sex couples in registered domestic partnerships, civil unions, or similar relationships are recognized as married for federal tax purposes. Because no Code provision specifically addresses the marital status of alternative legal relationships for federal tax purposes, there is no indication that Congress intended to recognize registered domestic partnerships, civil unions, or similar relationships as marriage for purposes of federal tax law. C. Final Regulations Under Sec. 301.7701-18(c) In sum, Treasury and the IRS received twelve comments with respect to the proposed regulations. Only three of those comments disagreed with the approach taken in proposed Sec. 301.7701-18(c), which provides that registered domestic partnerships, civil unions, and similar relationships not denominated as marriage by state law are not treated as marriage for federal tax purposes. Of the nine comments that supported the proposed regulations, two provided specific reasons why they agreed with the approach taken in proposed Sec. 301.7701-18(c). Accordingly, the majority of comments supported the approach taken in proposed Sec. 301.7701-18(c). For the reasons discussed above, the points raised by the three comments that disagreed with the approach taken in proposed Sec. 301.7701-18(c) are not persuasive. Treasury and the IRS believe that federal tax law should continue to defer to states for the determination of marital status, and the rule in proposed Sec. 301.7701-18(c) does that. Any other approach would unduly burden the IRS and taxpayers by requiring an interpretation of multiple state laws and potential controversy when disagreements arise regarding this interpretation. In addition, Treasury and the IRS continue to believe that treating couples in registered domestic partnerships, civil unions, and similar relationships not denominated as marriage under state law, as married for federal tax purposes could undermine taxpayer expectations regarding the federal tax consequences of these relationships. To provide a rule that concludes otherwise would leave those couples who choose alternative legal relationships over marriage without a remedy to avoid the federal tax consequences of being married. In contrast, couples who wish to be treated as married may do so after Windsor and Obergefell. While Sec. 301.7701-18(c) of the regulations will continue to provide that registered domestic partnerships, civil unions, and other similar relationships not denominated as marriage under state law are not recognized as married for federal tax purposes, Sec. 301.7701- 18(c) is revised in the final regulations similar to revisions to Sec. 301.7701-18(b) to account for the place of celebration. As discussed in section III. Comments on Proposed Sec. 301.7701-18(b) Regarding Persons Who are Married for Federal Tax Purposes of this preamble, this change is necessary to ensure that there is a point of reference for which state law is applicable when determining whether the alternative legal relationship is recognized as marriage under state law. Accordingly, Sec. 301.7701-18(c) is revised in the final regulations to provide that the terms ``spouse,'' ``husband,'' and ``wife'' and ``husband and wife'' do not include individuals who have entered into a registered domestic partnership, civil union, or other similar relationship not denominated as a marriage under the law of the state, possession, or territory of the United States where such relationship was entered into, regardless of domicile. V. Comment That the Final Regulations Should Address Community-Property Issues One commenter recommended amending the proposed regulations to make a clear connection between marital status and community property tax treatment under state law. These regulations provide definitions for purposes of determining marital status for federal tax law purposes. These regulations do not provide substantive rules for the treatment of married or non-married couples under federal tax law. Accordingly, because the federal tax treatment of issues that arise under community- property law involves resolution of issues under substantive tax law, which is outside the scope of these regulations, the commenter's recommendation is not adopted by these final regulations. Effect on Other Documents These final regulations will obsolete Revenue Ruling 2013-17 as of September 2, 2016. Taxpayers may continue to rely on guidance related to the application of Revenue Ruling 2013-17 to employee benefit plans and the benefits provided under such plans, including Notice 2013-61, Notice 2014-37, Notice 2014-19, Notice 2014-1, and Notice 2015-86 to the extent they are not modified, superseded, obsoleted, or clarified by subsequent guidance. Effective Date These regulations are effective on September 2, 2016. [[Page 60616]] Statement of Availability for IRS Documents IRS Revenue Procedures, Revenue Rulings notices, notices and other guidance cited in this preamble are published in the Internal Revenue Bulletin (or Cumulative Bulletin) and are available from the Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402, or by visiting the IRS Web site at http://www.irs.gov. Special Analyses Certain IRS regulations, including this one, are exempt from the requirements of Executive Order 12866, as supplemented and reaffirmed by Executive Order 13563. Therefore, a regulatory impact assessment is not required. It has also been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not apply to these regulations. In addition, because the regulations do not impose a collection of information on small entities, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not apply. Accordingly, a regulatory flexibility analysis is not required under the Regulatory Flexibility Act (5 U.S.C. chapter 6). Drafting Information The principal author of these regulations is Mark Shurtliff of the Office of the Associate Chief Counsel, Procedure and Administration. List of Subjects 26 CFR Part 1 Income taxes, Reporting and recordkeeping requirements. 26 CFR Part 20 Estate taxes, Reporting and recordkeeping requirements. 26 CFR Part 25 Gift taxes, Reporting and recordkeeping requirements. 26 CFR Part 26 Estate, Reporting and recordkeeping requirements. 26 CFR Part 31 Employment taxes, Income taxes, Penalties, Pensions, Railroad retirement, Reporting and recordkeeping requirements, Social Security, Unemployment compensation. 26 CFR Part 301 Employment taxes, Estate taxes, Excise taxes, Gift taxes, Income taxes, Penalties, Reporting and recordkeeping requirements. Adoption of Amendments to the Regulations Accordingly, 26 CFR parts 1, 20, 25, 26, 31, and 301 are amended as follows: PART 1--INCOME TAXES 0 Paragraph 1. The authority citation for part 1 continues to read in part as follows: Authority: 26 U.S.C. 7805 * * * 0 Par 2. Section 1.7701-1 is added to read as follows: Sec. 1.7701-1 Definitions; spouse, husband and wife, husband, wife, marriage. (a) In general. For the definition of the terms spouse, husband and wife, husband, wife, and marriage, see Sec. 301.7701-18 of this chapter. (b) Applicability date. The rules of this section apply to taxable years ending on or after September 2, 2016. PART 20--ESTATE TAX; ESTATES OF DECEDENTS DYING AFTER AUGUST 16, 1954 0 Par. 3. The authority citation for part 20 continues to read in part as follows: Authority: 26 U.S.C. 7805 * * * 0 Par. 4. Section 20.7701-2 is added to read as follows: Sec. 20.7701-2 Definitions; spouse, husband and wife, husband, wife, marriage. (a) In general. For the definition of the terms spouse, husband and wife, husband, wife, and marriage, see Sec. 301.7701-18 of this chapter. (b) Applicability date. The rules of this section apply to taxable years ending on or after September 2, 2016. PART 25--GIFT TAX; GIFTS MADE AFTER DECEMBER 31, 1954 0 Par. 5. The authority citation for part 25 continues to read in part as follows: Authority: 26 U.S.C. 7805 * * * 0 Par. 6. Section 25.7701-2 is added to read as follows: Sec. 25.7701-2 Definitions; spouse, husband and wife, husband, wife, marriage. (a) In general. For the definition of the terms spouse, husband and wife, husband, wife, and marriage, see Sec. 301.7701-18 of this chapter. (b) Applicability date. The rules of this section apply to taxable years ending on or after September 2, 2016. PART 26--GENERATION-SKIPPING TRANSFER TAX REGULATIONS UNDER THE TAX REFORM ACT OF 1986 0 Par. 7. The authority citation for part 26 continues to read in part as follows: Authority: 26 U.S.C. 7805 * * * 0 Par. 8. Section 26.7701-2 is added to read as follows: Sec. 26.7701-2 Definitions; spouse, husband and wife, husband, wife, marriage. (a) In general. For the definition of the terms spouse, husband and wife, husband, wife, and marriage, see Sec. 301.7701-18 of this chapter. (b) Applicability date. The rules of this section apply to taxable years ending on or after September 2, 2016. PART 31--EMPLOYMENT TAXES AND COLLECTION OF INCOME TAX AT THE SOURCE 0 Par. 9. The authority citation for part 31 continues to read in part as follows: Authority: 26 U.S.C. 7805 * * * 0 Par. 10. Section 31.7701-2 is added to read as follows: Sec. 31.7701-2 Definitions; spouse, husband and wife, husband, wife, marriage. (a) In general. For the definition of the terms spouse, husband and wife, husband, wife, and marriage, see Sec. 301.7701-18 of this chapter. (b) Applicability date. The rules of this section apply to taxable years ending on or after September 2, 2016. PART 301--PROCEDURE AND ADMINISTRATION 0 Par. 11. The authority citation for part 301 continues to read in part as follows: Authority: 26 U.S.C. 7805 * * * 0 Par. 12. Section 301.7701-18 is added to read as follows: Sec. 301.7701-18 Definitions; spouse, husband and wife, husband, wife, marriage. (a) In general. For federal tax purposes, the terms spouse, husband, and wife mean an individual lawfully married to another individual. The term husband and wife means two individuals lawfully married to each other. (b) Persons who are lawfully married for federal tax purposes--(1) In general. Except as provided in paragraph (b)(2) of this section regarding marriages entered into under the laws of a foreign jurisdiction, a marriage of two individuals is recognized for federal tax purposes if the marriage is recognized by the state, possession, or territory of the United States in which the marriage is entered into, regardless of domicile. (2) Foreign marriages. Two individuals who enter into a relationship denominated as marriage under the laws of a foreign jurisdiction are recognized as married for federal tax purposes if the relationship would be [[Page 60617]] recognized as marriage under the laws of at least one state, possession, or territory of the United States, regardless of domicile. (c) Persons who are not lawfully married for federal tax purposes. The terms spouse, husband, and wife do not include individuals who have entered into a registered domestic partnership, civil union, or other similar formal relationship not denominated as a marriage under the law of the state, possession, or territory of the United States where such relationship was entered into, regardless of domicile. The term husband and wife does not include couples who have entered into such a formal relationship, and the term marriage does not include such formal relationships. (d) Applicability date. The rules of this section apply to taxable years ending on or after September 2, 2016. John Dalrymple, Deputy Commissioner for Services and Enforcement. Approved: August 12, 2016. Mark J. Mazur, Assistant Secretary of the Treasury (Tax Policy). [FR Doc. 2016-21096 Filed 8-31-16; 4:15 pm] BILLING CODE 4830-01-P
![Federal Register / Vol. 81, No. 171 / Friday, September 2, 2016 / Rules and Regulations 60609
Executive Orders 12866 and 13563 Authority: 8 U.S.C. 1504; 18 U.S.C. 1621; Obergefell v. Hodges, 576 U.S. ___, 135
22 U.S.C. 211a, 212, 212b, 213, 213n (Pub. L. S. Ct. 2584 (2015), Windsor v. United
The Department of State does not 106–113 Div. B, Sec. 1000(a)(7) [Div. A, Title
consider this rule to be an economically States, 570 U.S. ___, 133 S. Ct. 2675
II, Sec. 236], 113 Stat. 1536, 1501A–430);
significant regulatory action under 214, 214a, 217a, 218, 2651a, 2671(d)(3), 2705,
(2013), and Revenue Ruling 2013–17
Executive Order 12866, Regulatory 2714, 2714a, 2721, & 3926; 26 U.S.C. 6039E; (2013–38 IRB 201), and that define
Planning and Review. The Department 31 U.S.C. 9701; 42 U.S.C. 652(k) [Div. B, Title terms in the Internal Revenue Code
has nevertheless reviewed the V of Pub. L. 103–317, 108 Stat. 1760]; E.O. describing the marital status of
regulation to ensure its consistency with 11295, Aug. 6, 1966, FR 10603, 3 CFR, 1966– taxpayers for federal tax purposes.
1970 Comp., p. 570; Pub. L. 114–119, 130 DATES: Effective date: These regulations
the regulatory philosophy and Stat. 15; Sec. 1 of Pub. L. 109–210, 120 Stat.
principles set forth in both Executive 319; Sec. 2 of Pub. L. 109–167, 119 Stat.
are effective on September 2, 2016.
Order 12866 and Executive Order 3578; Sec. 5 of Pub. L. 109–472, 120 Stat. FOR FURTHER INFORMATION CONTACT:
13563, and certifies that the benefits of 3554; Pub. L. 108–447, Div. B, Title IV, Dec. Mark Shurtliff at (202) 317–3400 (not
this regulation outweigh any cost to the 8, 2004, 118 Stat. 2809; Pub. L. 108–458, 118 toll-free number).
public. Stat. 3638, 3823 (Dec. 17, 2004). SUPPLEMENTARY INFORMATION:
■ 2. Amend § 51.60 by adding
Executive Order 13132 paragraphs (a)(3) and (4), (f), and (g) to Background
This regulation will not have read as follows: This document contains amendments
substantial direct effects on the states, to the Income Tax Regulations (26 CFR
on the relationship between the national § 51.60 Denial and restriction of passports.
part 1), the Estate Tax Regulations (26
government and the states, or on the (a) * * * CFR part 20), the Gift Tax Regulations
distribution of power and (3) The applicant is certified by the (26 CFR part 25), the Generation-
responsibilities among the various Secretary of the Treasury as having a Skipping Transfer Tax Regulations (26
levels of government. Therefore, in seriously delinquent tax debt as CFR part 26), the Employment Tax and
accordance with section 6 of Executive described in 26 U.S.C. 7345. Collection of Income Tax at Source
Order 13132, it is determined that this (4) The applicant is a covered sex
Regulations (26 CFR part 31), and the
rule does not have sufficient federalism offender as defined in 42 U.S.C. 16935a,
Regulations on Procedure and
implications to require consultations or unless the passport, no matter the type,
Administration (26 CFR part 301).
warrant the preparation of a federalism contains the conspicuous identifier
On October 23, 2015, the Department
summary impact statement. placed by the Department as required by
of the Treasury (Treasury) and the IRS
22 U.S.C. 212b.
Executive Order 13175 published in the Federal Register (80
* * * * * FR 64378) a notice of proposed
The Department has determined that (f) The Department may refuse to rulemaking (REG–148998–13), which
this rulemaking will not have tribal issue a passport to an applicant who proposed to amend the regulations
implications, will not impose fails to provide his or her Social under section 7701 of the Internal
substantial direct compliance costs on Security account number on his or her Revenue Code (Code) to provide that,
tribal governments, and will not pre- passport application or who willfully, for federal tax purposes, the terms
empt tribal law. Accordingly, the intentionally, negligently, or recklessly ‘‘spouse,’’ ‘‘husband,’’ and ‘‘wife’’ mean
requirements of Executive Order 13175 includes an incorrect or invalid Social an individual lawfully married to
do not apply to this rulemaking. Security account number. another individual, and the term
(g) The Department shall not issue a ‘‘husband and wife’’ means two
Paperwork Reduction Act passport card to an applicant who is a individuals lawfully married to each
This rule does not impose any new covered sex offender as defined in 42 other. In addition, the proposed
reporting or record-keeping U.S.C. 16935a. regulations provided that a marriage of
requirements subject to the Paperwork Dated: August 23, 2016. two individuals will be recognized for
Reduction Act, 44 U.S.C. Chapter 35.
David T. Donahue, federal tax purposes if that marriage
Prior to the passage of the FAST Act,
Acting Assistant Secretary, Bureau of would be recognized by any state,
passport applicants were already asked
Consular Affairs, Department of State. possession, or territory of the United
to provide their Social Security numbers
[FR Doc. 2016–21087 Filed 9–1–16; 8:45 am] States. Finally, the proposed regulations
to obtain or renew passports. With
BILLING CODE 4710–13–P clarified that the term ‘‘marriage’’ does
respect to the IML requirements, the
not include registered domestic
applicant does not report his or her
partnerships, civil unions, or other
status as a covered sex offender to the
DEPARTMENT OF THE TREASURY similar relationships recognized under
Department during the application
state law that are not denominated as a
process; rather, the Department obtains
Internal Revenue Service marriage under that state’s law, and the
that information from other government
terms ‘‘spouse,’’ ‘‘husband and wife,’’
sources. Therefore, this rulemaking
26 CFR Parts 1, 20, 25, 26, 31, and 301 ‘‘husband,’’ and ‘‘wife’’ do not include
imposes no additional burden on the
individuals who have entered into such
applicant. [TD 9785]
a relationship.
List of Subjects in 22 CFR Part 51 RIN 1545–BM10 Written comments responding to the
Passports. proposed regulations were received, and
Definition of Terms Relating to Marital one person requested a public hearing.
Accordingly, for the reasons set forth Status A public hearing was held on January
in the preamble, the Department has
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AGENCY: Internal Revenue Service (IRS), 28, 2016; however, the individual who
amended 22 CFR part 51 as follows:
Treasury. requested the hearing was not able to
PART 51—PASSPORTS ACTION: Final regulations. attend, but did submit supplemental
comments. When given the opportunity,
■ 1. The authority citation for part 51 is SUMMARY: This document contains final no one who attended the hearing asked
revised to read as follows: regulations that reflect the holdings of to speak. After consideration of the
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![60610 Federal Register / Vol. 81, No. 171 / Friday, September 2, 2016 / Rules and Regulations
comments, Treasury and the IRS adopt the proposed regulations. Because this unnecessary in light of Obergefell.
the proposed regulations as revised by comment addresses issues outside the According to the commenter, after
this Treasury Decision. scope of these regulations, the final Obergefell, same-sex marriage should be
regulations do not address this recognized in every state. Therefore, the
Summary of Comments and
comment. commenter states that there is no need
Explanation of Revisions
for a definition of marriage for federal
The IRS received twelve comments in II. Comments on Proposed § 301.7701–
tax purposes and proposed § 301.7701–
response to the notice of proposed 18(a) Regarding the Definition of Terms
18 (b) should not be finalized.
rulemaking. All comments were Relating to Marital Status Treasury and the IRS disagree that
considered and are available for public Section 301.7701–18(a) of the proposed § 301.7701–18(b) is
inspection at http:// proposed regulations provides that for unnecessary in light of Obergefell. The
www.regulations.gov. The comments are federal tax purposes, the terms purpose of publishing these regulations
summarized and discussed in this ‘‘spouse,’’ ‘‘husband,’’ and ‘‘wife’’ mean is to ensure that, regardless of the term
preamble. an individual lawfully married to used in the Code, a marriage between
I. Comments on the Proposed another individual. The term ‘‘husband two individuals entered into in, and
Regulations Generally and wife’’ means two individuals recognized by, any state, possession, or
lawfully married to each other. The territory of the United States will be
The majority of commenters strongly preamble to the proposed regulations treated as a marriage for federal tax
supported the proposed regulations. explains that after Windsor and purposes. The majority of comments
Many commended Treasury and the IRS Obergefell, marriages of couples of the supporting the proposed regulations
for publishing proposed regulations that same sex should be treated the same as agree with this view and specifically
reflect the holdings of Obergefell v. marriages of couples of the opposite sex applaud Treasury and the IRS for
Hodges, 576 U.S. ___, 135 S. Ct. 2584 for federal tax purposes, and therefore, publishing regulations to make this
(2015), and Windsor v. United States, the proposed regulations interpret these clear rather than relying on sub-
570 U.S. ___, 133 S. Ct. 2675 (2013), terms in a neutral way to include same- regulatory guidance. Accordingly, the
instead of relying on sub-regulatory sex as well as opposite-sex couples. comment is not adopted and a
guidance. In general, commenters The overwhelming majority of definition of marriage for federal tax
applauded Treasury and the IRS for commenters expressed support for purposes is included in the final
determining that, in light of the Windsor proposed § 301.7701–18(a). However, regulations under § 301.7701–18(b).
and Obergefell holdings, marriages of one of the commenters recommended However, the definition in proposed
same-sex couples should be treated the that the IRS update all relevant forms to § 301.7701–18(b) is amended by these
same as marriages of opposite-sex use the gender-neutral term ‘‘spouse’’ final regulations, as described below.
couples for federal tax purposes. instead of ‘‘husband and wife.’’ The
One commenter suggested that the B. Comment That the Language in the
commenter stated that updating the Proposed Rule Should be Clarified To
regulations specifically reference ‘‘same- forms to use gender-neutral terms would
sex marriage’’ so that the definitions Eliminate Unintended Consequences
be cost-neutral and would more
apply regardless of gender and to avoid accurately reflect the varied Another commenter recommended
any potential issues of interpretation. composition of today’s families. The amending § 301.7701–18(b) of the
Treasury and the IRS believe that the commenter further stated that updating proposed regulations to simply state
definitions in the proposed regulations the forms to be inclusive of same-sex that the determination of an individual’s
apply equally to same-sex couples and couples would increase government marital status will be made under the
opposite-sex couples, and that no efficiency by alleviating confusion, laws of the relevant state, possession, or
clarification is needed. Proposed delays, and denials caused by current territory of the United States or, where
§ 301.7701–18(a) states, without forms using outdated terms. appropriate, under the laws of the
qualification, that, ‘‘[f]or federal tax The commenter’s recommendation relevant foreign country (for example,
purposes, the terms spouse, husband, relates to forms and is therefore outside the country where the marriage was
and wife mean an individual lawfully the scope of these final regulations. celebrated or, if conflict of laws
married to another individual,’’ and that Nevertheless, Treasury and the IRS will questions arise, another country). The
the ‘‘term husband and wife means two consider the commenter’s commenter pointed out that this
individuals lawfully married to each recommendation when updating IRS revision is needed to ensure that a
other.’’ The language is specifically forms and publications. couple’s intended marital status is
gender neutral, which reflects the recognized by the IRS. Specifically, the
holdings in Windsor and Obergefell and III. Comments on Proposed § 301.7701– commenter explains that the language in
is consistent with Revenue Ruling 18(b) Regarding Persons Who Are proposed § 301.7701–18(b) makes it
2013–17. Similarly, the language in Married for Federal Tax Purposes possible for unmarried couples living in
proposed § 301.7701–18(b) refers to a Section 301.7701–18(b) of the a state that does not recognize common-
marriage of two individuals, without proposed regulations provides that a law marriage to be treated as married for
specifying gender. Amending the marriage of two individuals is federal tax purposes if the couple would
regulations to specifically address a recognized for federal tax purposes if be treated as having entered into a
marriage of two individuals of the same the marriage would be recognized by common-law marriage under the law of
sex would undermine the goal of these any state, possession, or territory of the any state, possession, or territory of the
regulations to eliminate distinctions in United States. The comments received United States.
federal tax law based on gender. For on paragraph (b) are summarized below. Next, the commenter explains that the
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these reasons, the final regulations do language of the proposed regulations
not adopt this comment. A. Comment That Proposed § 301.7701– could result in questions about the
One comment reflected an overall 18(b) is Redundant in Light of validity of a divorce. Under Revenue
negative view of same-sex marriage. Obergefell and Should be Removed Ruling 67–442, a divorce is recognized
However, the comment did not One commenter stated that proposed for federal tax purposes unless the
recommend any specific amendment to § 301.7701–18(b) is redundant and divorce is invalidated by a court of
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![Federal Register / Vol. 81, No. 171 / Friday, September 2, 2016 / Rules and Regulations 60611
competent jurisdiction. The language of the United States in which the marriage included in the regulations’ text making
the proposed regulations would is entered into, regardless of the married this recognition explicit.
undermine this longstanding revenue couple’s place of domicile. This revision Proposed § 301.7701–18(b) was
ruling if any state would recognize the addresses the concerns raised by the drafted to apply to both domestic and
couple as still married despite the commenter and ensures that only foreign marriages. In light of the
divorce. couples entering into a relationship comments, the proposed rule has been
Finally, the commenter states that the denominated as marriage, and who have amended to be more explicit. To clarify
language of proposed § 301.7701–18(b) not divorced, are treated as married for how foreign marriages will be
could create a conflict with proposed federal tax purposes. By relying on the recognized for federal tax law,
§ 301.7701–18(c) if at least one state, place of celebration to determine which § 301.7701–18(b) has been amended to
possession, or territory of the United state, possession, or territory of the provide a specific rule for foreign
States recognizes a couple’s registered United States is the point of reference marriages. Accordingly, a new
domestic partnership, civil union, or for determining whether a couple is paragraph (b)(2) has been added to
other similar relationship as marriage. married for federal tax purposes, this § 301.7701–18 to provide that two
The commenter points out that in such rule is consistent with the longstanding individuals entering into a relationship
a situation, regardless of the couple’s position of Treasury and the IRS denominated as marriage under the laws
intention and where they entered into regarding the determination of marital of a foreign jurisdiction are married for
their alternative legal relationship, they status for federal tax purposes. See federal tax purposes if the relationship
could be treated as married for federal Revenue Ruling 2013–17; Revenue would be recognized as marriage under
tax purposes under the language of Ruling 58–66 (1958–1 CB 60). the laws of at least one state, possession,
proposed § 301.7701–18(b) if any state, or territory of the United States. This
possession, or territory recognizes their C. Comments on Marriages Entered Into rule enables couples who are married
alternative legal relationship as a in Foreign Jurisdictions outside the United States to determine
marriage. marital status for federal tax purposes,
According to the commenter, these Section 301.7701–18(b) of the
regardless of where they are domiciled
examples demonstrate that the language proposed regulations generally provides
and regardless of whether they ever
in proposed § 301.7701–18(b) could be that a marriage of two individuals is
reside in the United States. Although
interpreted to treat couples who divorce recognized for federal tax purposes if
this rule requires couples to review the
or who never intended to enter into a the marriage would be recognized by laws of the various states, possessions,
marriage under the laws of the state any state, possession, or territory of the and territories to determine if they
where they live or where they entered United States. The preamble to the would be treated as married, it is
into an alternative legal relationship as proposed regulations explains that sufficient if they would be treated as
married for federal tax purposes. under this rule, as a matter of comity, married in a single jurisdiction and
Without a change to proposed a marriage conducted in a foreign there is no need to consider the laws of
§ 301.7701–18(b), these couples would jurisdiction will be recognized for all of the states, territories, and
be required to analyze the laws of all the federal tax purposes if that marriage possessions of the United States. In
states, possessions, and territories of the would be recognized in at least one addition, unlike the language in
United States to determine whether any state, possession, or territory of the § 301.7701–18(b) of the proposed
of these laws would fail to recognize United States. The rule in § 301.7701– regulations, this rule incorporates the
their divorce or would denominate their 18(b) of the proposed regulations was place of celebration as the reference
alternative legal relationship as a intended to address both domestic and point for determining whether the legal
marriage foreign marriages, regardless of where relationship is a marriage or a legal
This was not the intent of the the couple is domiciled and regardless alternative to marriage, avoiding the
proposed regulations. Rather, the of whether the couple ever resides in potential conflict with § 301.7701–18(c)
proposed regulations were intended to the United States (or a possession or identified by the commenter, above.
recognize a marriage only when a territory of the United States). One Finally, this rule avoids the concern that
couple entered into a relationship commenter suggested amending the a couple intending to enter into a legal
denominated as marriage under the law proposed regulation to recognize alternative to marriage will be treated as
of any state, territory, or possession of marriages performed in any foreign married because this rule recognizes
the United States or under the law of a jurisdiction, for federal tax purposes, if only legal relationships denominated as
foreign jurisdiction if such a marriage the marriage is recognized in at least marriage under foreign law as eligible to
would be recognized by any state, one state, possession, or territory of the be treated as marriage for federal tax
possession, or territory of the United United States. Similarly, another purposes. This separate rule for foreign
States. To address these concerns, commenter recommended amending the marriages in § 301.7701–18(b)(2) is
§ 301.7701–18(b) is revised in the final proposed regulation to reflect the consistent with the proposed
regulations to provide a general rule for discussion in the preamble to the regulations’ intent, as described in the
recognizing a domestic marriage for proposed regulation regarding the preamble to the notice of proposed
federal tax purposes and a separate rule recognition of marriages conducted in rulemaking, and provides the clarity
for recognizing foreign marriages for foreign jurisdictions. This commenter commenters request.
federal tax purposes (discussed in noted that the preamble to the proposed
section III.C. Comments on Marriages regulation states, ‘‘[W]hether a marriage D. Comment on Common-Law Marriages
Entered Into in Foreign Jurisdictions of conducted in a foreign jurisdiction will One commenter stated that some
this preamble). be recognized for federal tax purposes states that recognize common-law
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Accordingly, under the general rule in depends on whether that marriage marriage only do so in the case of
§ 301.7701–18(b)(1) of the final would be recognized in at least one opposite-sex couples. Accordingly, the
regulations, a marriage of two state, possession, or territory of the commenter recommended amending the
individuals is recognized for federal tax United States.’’ The commenter regulations to clarify that common-law
purposes if the marriage is recognized recommended that, rather than relying marriages of same-sex couples will be
by the state, possession, or territory of on the preamble, language should be recognized for federal tax purposes. The
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![Federal Register / Vol. 81, No. 171 / Friday, September 2, 2016 / Rules and Regulations 60617
recognized as marriage under the laws Division, U.S. Department of Justice, directs the Special Master to issue full
of at least one state, possession, or 290 Broadway, Suite 1300, New York, compensation to eligible claimants, and
territory of the United States, regardless NY 10007, telephone 855–885–1555 instructs the Special Master to
of domicile. (TTY 855–885–1558). implement certain changes to the
(c) Persons who are not lawfully SUPPLEMENTARY INFORMATION: On policies and procedures used to
married for federal tax purposes. The December 18, 2015, President Obama evaluate and process claims.
terms spouse, husband, and wife do not signed into law the James Zadroga 9/11 The Interim Final Rule addressed
include individuals who have entered Victim Compensation Fund those changes mandated by the statute.
into a registered domestic partnership, Reauthorization Act (the ‘‘Reauthorized The Interim Final Rule was published in
civil union, or other similar formal Zadroga Act’’), Public Law 114–113, the Federal Register (81 FR 38936) and
relationship not denominated as a Div. O, Title IV. The Act extends the became effective on June 15, 2016, and
marriage under the law of the state, September 11th Victim Compensation was followed by a 30-day public
possession, or territory of the United Fund of 2001 (the ‘‘Fund’’) which comment period. The Department
States where such relationship was provides compensation to any received 31 comments since the
entered into, regardless of domicile. The individual (or a personal representative publication of the Interim Final Rule.
term husband and wife does not include of a deceased individual) who suffered The Special Master’s office has
couples who have entered into such a physical harm or was killed as a result reviewed and evaluated each of these
formal relationship, and the term of the terrorist-related aircraft crashes of comments in preparing this Final Rule.
marriage does not include such formal September 11, 2001, or the rescue and Significant comments received in
relationships. recovery efforts during the immediate response to the Interim Final Rule are
(d) Applicability date. The rules of aftermath of such crashes or the debris discussed below. After careful review
this section apply to taxable years removal efforts that took place in the and consideration, and for the reasons
ending on or after September 2, 2016. immediate aftermath of those crashes. described below, the Special Master has
On June 15, 2016, Special Master concluded that no substantive changes
John Dalrymple, Sheila L. Birnbaum published an to the Interim Final Rule are warranted.
Deputy Commissioner for Services and Interim Final Rule to revise the existing Accordingly, this Final Rule adopts
Enforcement. regulations to implement changes the provisions of the Interim Final Rule
Approved: August 12, 2016. required by the Reauthorized Zadroga without change, except for two
Mark J. Mazur, Act. (81 FR 38936). Since the issuance technical corrections, as follows. These
Assistant Secretary of the Treasury (Tax of the Interim Final Rule, Sheila are not substantive changes and merely
Policy). Birnbaum has stepped down as Special correct minor drafting errors in the
[FR Doc. 2016–21096 Filed 8–31–16; 4:15 pm] Master and the Attorney General has wording of the Interim Final Rule as
BILLING CODE 4830–01–P appointed Rupa Bhattacharyya in her published.
place, effective July 21, 2016. (1) In section 104.21, Presumptively
The Interim Final Rule took effect on covered conditions, this Final Rule
DEPARTMENT OF JUSTICE the date of publication (June 15, 2016), corrects an unintended wording error in
but provided a 30-day period for the second sentence of paragraph (a), by
28 CFR Part 104 interested persons to submit public restoring the missing word ‘‘or,’’ in this
comments. Special Master sentence.
[Docket No. CIV 151] (2) In section 104.62, Time limit for
Bhattacharyya is issuing this Final Rule,
RIN 1105–AB49 which addresses the issues that have filing claims, in paragraph (b), this Final
been raised. For the reasons described Rule restores the missing cross-reference
James Zadroga 9/11 Victim below, after consideration of all of the to paragraph ‘‘(a)’’ of the section.
Compensation Fund Reauthorization public comments, the Special Master Summary of Comments on the Interim
Act has concluded that no substantive Final Rule and the Special Master’s
AGENCY: Department of Justice. changes to the Interim Final Rule are Response Categories of Claims
needed. Accordingly, this Final Rule
ACTION: Final rule. adopts the provisions of the Interim Many comments focused on the
Final Rule without change, except for statutory definition of Group A claims
SUMMARY: This rule finalizes the Interim and the decision by Congress to define
Final Rule published on June 15, 2016, two minor technical corrections.
the two categories of claims by reference
which implemented recently-enacted Background to the date the Special Master
statutory changes governing the The June 15, 2016, Interim Final Rule ‘‘postmarks and transmits’’ a final award
September 11th Victim Compensation (81 FR 38936) provided a brief history determination to the claimant. Several
Fund of 2001 (the ‘‘Fund’’). After of the September 11th Victim commenters argued that the ‘‘cut-off’’
consideration of all of the public Compensation Fund of 2001, the James date for inclusion in Group A should
comments filed in response to the Zadroga 9/11 Health and Compensation have been the date the claim was
Interim Final Rule, the Special Master Act of 2010 (Zadroga Act), and the submitted or filed by the claimant,
has concluded that no substantive regulations issued by the Special rather than the date the final award
changes to the Interim Final Rule are Masters pursuant to those statutes. amount was determined by the Special
needed. Accordingly, this Final Rule On December 18, 2015, President Master. The commenters asserted that
adopts as final the provisions of the Obama signed into law Public Law 114– claims that had been submitted to the
Interim Final Rule, with only two minor 113, providing for the reauthorization of Fund on or before December 17, 2015,
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technical corrections. the Zadroga Act. The Reauthorized but did not have a loss determined by
DATES: This final rule takes effect on Zadroga Act extends the time period that time, should be considered Group
September 2, 2016. during which eligible claimants may A claims and subject to the standards in
FOR FURTHER INFORMATION CONTACT: submit claims, increases the Fund’s effect at the time of their submission.
Jordana H. Feldman, September 11th total funding available to pay claims, The Reauthorized Zadroga Act makes
Victim Compensation Fund, Civil creates different categories of claims, clear that the critical date is the date
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Document Created: 2018-02-09 11:55:33
Document Modified: 2018-02-09 11:55:33
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration | |
| Section | Rules and Regulations | |
| Action | Final regulations. | |
| Dates | Effective date: These regulations are effective on September 2, 2016. | |
| Contact | Mark Shurtliff at (202) 317-3400 (not toll-free number). | |
| FR Citation | 81 FR 60609 | |
| RIN Number | 1545-BM10 | |
| CFR Citation | 26
CFR
1 26 CFR 20 26 CFR 25 26 CFR 26 26 CFR 301 26 CFR 31 | |
| CFR Associated | Income Taxes; Reporting and Recordkeeping Requirements; Employment Taxes; Penalties; Pensions; Railroad Retirement; Social Security; Unemployment Compensation; Excise Taxes; Estate Taxes; Gift Taxes and Estate |
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