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U.S. Supreme Court Rules in Landmark Same-Sex Cases

By Peter A. Rivellini | Categories: Business & Tax Law | Share July 2013

The United States Supreme Court, on June 26, 2013, issued two highly anticipated decisions that help define the landscape for same-sex couples in the US. Windsor v. United States addressed the validity of the federal “Defense of Marriage Act,” or “DOMA, and Hollingsworth v. Perry addressed the comparable state law statutes and constitutional provisions.

Windsor

Edie Windsor and her long-term partner, Thea Spyer, lived together in New York City.  They registered as domestic partners in 1993 when that option became available to New Yorkers.  In 2007, the couple was married in Canada, where same-sex marriages are legal.  Two years later, Spyer died and left her estate to Windsor.  Windsor filed a Federal Estate Tax return claiming the marital deduction for the portion of Spyer’s estate passing to Windsor.  The IRS rejected this deduction, and Windsor filed suit in 2010 for a refund of estate taxes paid.

The Southern District Court of New York held in favor of Windsor and found DOMA to be unconstitutional on the grounds of equal protection.  The Second Circuit Court of Appeals agreed with the lower court and also found DOMA to be unconstitutional.  In a 5-4 decision, the Supreme Court affirmed the 2nd DCA’s decision and struck down DOMA.  The Court determined that DOMA violated the Fifth Amendment as it deprived equal liberty.  In its holding, the Court acknowledged that the regulation of domestic relations is the province of the states and not of the federal government.  The effect of DOMA, the Court determined, was to impose a disadvantage to those same-sex couples lawfully married under applicable state laws.

The federal government is prohibited from imposing any separate status upon those married pursuant to the laws of the states.  As a result of this decision, for federal purposes, same-sex, married couples are to be treated no differently than opposite-sex, married couples.  For the first time, federal benefits will be available for anyone legally married under state law.  From a practical standpoint, these benefits include the ability to file joint income tax returns, qualifying for the marital deduction for gift and estate tax purposes, gift splitting, portability of a deceased spouse’s unused applicable exclusion amount, Medicare and Medicaid benefits, the ability to roll-over qualified retirement accounts.

Perry

Proposition 8 was an initiative in California to prohibit same-sex marriages by amending the state constitution to state that “only marriage between a man and a woman is valid or recognized in California.”  Soon after its passage, the constitutionality of Proposition 8 restrictions was challenged in the Northern District Court of California.  Following an extensive trial, the district court held that Proposition 8 violated the 14th Amendment of the U.S. Constitution as there was no compelling state interest justifying same-sex couples the fundamental right to marry.  The district court’s ruling was appealed to the Ninth Circuit Court of Appeals and the district court’s ruling was stayed pending the outcome of the appeal.  Interestingly, the appeal was made by a group of concerned individuals who were involved with the Proposition 8 efforts.  No official representatives of California were involved with the appeal.  The Ninth Circuit held in favor of the original plaintiffs by finding Proposition 8 unconstitutional.  However, the court limited its opinion to only California.

In another 5-4 decision, the United States Supreme Court found that the appellants did not have standing to appeal the district court’s order.  Therefore, a substantive discussion of the issues was avoided.  The Court remanded the case back to the Ninth Circuit to be dismissed for lack of standing, which allowed the district court’s decision to stand, thereby striking down the Proposition 8 ban on same-sex marriages.

What does this mean for Florida?

Although the result of the Perry decision was the reversal of California’s prohibition of same-sex marriages, the case does not affect similar prohibitions in other states.  Instead, states are free to determine for themselves whether to allow same-sex marriages or even recognize same-sex marriages of different states.

In 2008, Florida voters passed Amendment 2 to the state constitution, banning same-sex marriages and civil unions.  Florida also mandates that no same-sex marriage, although legal where the marriage occurred, will be recognized in Florida.  The U.S. Constitution requires that each state give “full faith and credit” to the laws of other states.  Some very limited exceptions have been allowed on public policy grounds.  Will same-sex marriage be one of those allowed public policy exceptions?  For example, a couple married in California but living in Florida is currently unable to file for divorce in Florida courts.  Among the many unanswered questions, will the couple be entitled to ownership by tenancy by the entireties in Florida?

Given the Windsor and Perry rulings, it is unclear if the states ultimately will have the ability to disallow same-sex marriages due to the “equal liberty” insured by the U.S. Constitution.  Although avoided by the Court this time, the Court likely will address the question whether the U.S. Constitution guarantees a right to same-sex marriage at some point in the future.

The landscape regarding same-sex marriages has changed permanently with the Windsor and Perry decisions.  Clients and advisors will need to learn how these rulings will affect the rights of so many people and clients.  In Florida, future litigation on these issues is likely, and legal advice for individual circumstances is highly recommended.

 


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