The DOMA Decision An Update As of 11414

The DOMA Decision: An Update As of 1/14/14 Charlotte Cathro, CPA Meyers Brothers Kalicka, P. C.

Your Presenter • Charlotte Cathro, CPA, Manager, Meyers Brothers Kalicka, P. C. • Member of the Massachusetts Society of Certified Public Accountants and the American Institute of Certified Public Accountants. • B. A. in Mathematics from Brandeis University and an MSA from Suffolk University. • Board treasurer of Dakin Humane Society. 2

Overview DOMA Windsor Case Effects of Decision - Questions Answered Open Questions Estate Planning Considerations 3

DOMA On the books since 1996 Three Sections • Section 1 – Title of Defense of Marriage Act • Section 2 – Powers of the states • Section 3 – Definition of Marriage – Legal Union Between a Man and a Woman 4

Discussed Effects of DOMA • Income Taxes • Health Care & Benefits • Immigration • Social Security, Medicare & Medicaid • Gift & Estate 5

Windsor v. United States Related to estate taxes and the unlimited marital deduction - $363, 053 of estate taxes assessed Claimed unconstitutionality of DOMA Section 3 Unconstitutional under equal protection clause 6

The Decision Repealed Section 3 as unconstitutional, NOT Section 2 Retroactive, as if law never existed How does it apply to people in: • Recognition states • Non-recognition states • Other relationship statuses Difference in Federal Agencies • State of Residence • State of Celebration 7

Effect of Decision - Income Taxes • August 29, 2013 – IRS issues guidance (Rev. Rul. 2013 -17), same sex couples recognized, based of state of celebration • In prior practice, the IRS has used state of residence as determining factor • Amendments available for open years, but not required • Income tax analysis performed on couples to determine tax impact 8

Effect of Decision - Health Care/Benefits No longer imputing Federal taxable value of spousal health benefits September 18, 2013 – DOL issues guidance under ERISA – recognizes and based on state of celebration • Too difficult for multi-state employers to implement based on state of residence • Spousal retirement benefits – RMDs, QDROs • Beneficiary designations made need updating August, 2013 – FMLA Fact Sheet #28 F – Recognizes but differs from DOL/IRS and is state of residence 9

Effect of Decision Immigration One week after the decision, the Secretary of Homeland Security Janet Napolitano directs immigration services to review applications similarly to opposite sex married couples Based on state of celebration, although fact based Couples may have previously been advised not to marry 10

Effect of Decision – Social Security, Medicare & Medicaid • Based on state of residence • August 9, 2013 SSA Commissioner announces some but not all spousal claims for social security will be processed • SSA Program Operations Manual System updated for process of approving claims • Social Security claims where living in nonrecognition state are currently being held, not denied • Medicaid is a federal-state cooperative program – Per guidance SHO# 13 -006, they are leaving it up to the state but encouraging recognition 11

Effect of Decision – Gift & Estate Taxes Unlimited marital deduction Portability Marital exemption from gift taxes Gift splitting Amending returns for refund requests 12

Open Questions Anything based on state of residence is up for clarification Non-recognition states need to clarify their tax law where they typically conform to the IRS Since retroactive, clarification needed on correction of previous events (taxable prior gifts to spouse, QDROs and other retirement distributions) Possibility of going back further than open tax years 13

Estate Planning Considerations • Still not the same as opposite sex couples • Ownership of property in a nonrecognition state • Contain conditional language • What if the client moves to a nonrecognition state? • What if some of the open considerations change – use “if applicable” 14

Resources • Lambda Legal Fact Sheet http: //www. lambdalegal. org/publications/after-doma • IRS Revenue Ruling 2013 -17 http: //www. irs. gov/pub/irs-drop/rr-13 -17. pdf • SSA Updates to Program Operations Manual System https: //secure. ssa. gov/apps 10/public/reference. nsf/links/12132013093759 AM https: //secure. ssa. gov/apps 10/public/reference. nsf/links/12132013094242 AM! opendocument&v. Name=instructiontypecode&catval=POMT https: //secure. ssa. gov/apps 10/public/reference. nsf/links/12132013094652 AM! opendocument&v. Name=instructiontypecode&catval=POMT • Medicaid SHO # 13 -006 http: //www. medicaid. gov/Federal-Policy-Guidance/Downloads/SHO-13006. pdf • DOL Technical Release No. 2013 -04 http: //www. dol. gov/ebsa/newsroom/tr 13 -04. html • DOL Wage and Hour Division Fact Sheet #28 F http: //www. dol. gov/whd/regs/compliance/whdfs 28 f. htm 15

Contact Information Charlotte Cathro, CPA Meyers Brothers Kalicka, P. C. 330 Whitney Avenue, Suite 800 Holyoke, MA 01040 Direct: 413 -322 -3481 Fax: 413 -322 -3347 ccathro@mbkcpa. com 16