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We all make mistakes, and sometimes those mistakes extend to preparing our tax returns. The tax laws allow a period in which these mistakes may be fixed, called the statute of limitations (SOL) period.
The SOL for a tax return is normally three years from the date the return is filed. If a return is filed early, the SOL applies assuming the return was actually filed on the due date.
The due date for a 2009 tax return was April 15, 2010, but the taxpayer could have extended that date to Oct. 15, 2010. This means that the SOL for the 2009 tax year will expire in about three months or nine months, depending on whether the due date was extended.
The looming deadline to amend a 2009 return may be critically important for gay and lesbian couples who qualify as married, or for some equivalent status, under an applicable state law.
There are currently 20 states and the District of Columbia that allow same-sex marriages, recognize same-sex marriages entered into in another state, recognize the equivalent of a marriage relationship, or provide specified protections for same-sex couples.
The Defense of Marriage Act, enacted in 1996, limits the meaning of marriage for purposes of federal law to a marriage between one man and one woman. This definition affects more than 1,000 provisions of federal law, including many provisions of the tax laws.
The Supreme Court has agreed to hear an appeal of the 2nd Circuit’s decision in Windsor, in which the 2nd Circuit held that DOMA violated the equal protection guaranteed by the due-process clause of the Fifth Amendment to the Constitution.
While there are more than 1,000 benefits extended to married couples by federal law, Windsor dealt specifically with a tax issue. Ms. Windsor was married in Canada in 2007 and she and her partner resided in New York when the partner died. New York did not permit same sex-marriage until 2011.
Ms. Windsor’s partner left all of her property to Ms. Windsor. The estate was large enough that an estate tax of $363,053 was due. This tax would have been avoided if the transfer to Ms. Windsor had qualified for the “marital deduction” allowed for transfers to a surviving spouse.
Because of DOMA, the IRS is forced to deny a marital deduction to the survivor of a same-sex marriage. Ms. Watson sued the government for a refund in a New York District Court, which ruled in her favor, and the decision was affirmed by the 2nd Circuit Court.
The Justice Department refused to defend the government three months after the District Court case was filed, so the House of Representative’s Bipartisan Legal Advisor Group, or BLAG, stepped in to defend the government.
The Supreme Court now wants legal briefs filed to determine whether DOJ’s refusal to defend the suit will allow the court to hear the case, and whether BLAG has standing to defend the government.
My opinion on Windsor is irrelevant to this tax column. What is relevant is that the outcome of this case may affect the tax treatment of same-sex couples, perhaps as broadly as all 21 jurisdictions that permit full or partial recognition of marital rights, perhaps more narrowly to only those that permit same-sex marriage.
But the clock is ticking for same-sex couples to file amended tax returns for 2009 if the Supreme Court’s decision grants federal equal protection in a manner that permits the couple to claim the tax benefits of marriage.
Any decision likely will not be available by the expiration of the SOL for the 2009 year. However, it is possible to file a “protective” refund claim that stops the running of the SOL subject to a taxpayer-favorable outcome of the DOMA challenge.
Protective refund claims may be appropriate under the income or the transfer (gift and estate) tax. Because protective claims are more complicated than “regular” refund claims, I would suggest visiting a tax professional for help with this issue.
Tax professionals, like everyone, have their own opinion of the DOMA, but they should all be willing to file protective claims based solely on meeting the professional needs of a client.
James R. Hamill is the director of Tax Practice at Reynolds, Hix & Co. in Albuquerque. He can be reached at jimhamill@rhcocpa.com.<br>
