Definition of Terms Relating to Marital Status, 60609-60617 [2016-21096]

Agencies

• Internal Revenue Service
• DEPARTMENT OF THE TREASURY

[Federal Register Volume 81, Number 171 (Friday, September 2, 2016)]
[Rules and Regulations]
[Pages 60609-60617]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[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 https://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 https://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