NY State Estate Tax Refunds Due Gay Couples

Cuomo and U.S. Supreme Court Rule So

On July 23, 2013, Governor Andrew Cuomo stated that same-sex spouses who were forced to pay high New York estates when their partner died can now get refunds from the state if they filed amended estate tax returns.

The refunds are possible because of the June Supreme Court ruling that struck down Section 3 of the Defense of Marriage Act (DOMA). Because the Court declared that section unconstitutional, it granted the same rights to gay couples as heterosexual couples in terms of assets and lower tax costs under estate tax laws.

U.S. v. Windsor

The court decision came after Edie Windsor sued the Internal Revenue Service because, in her determined mind, it denied certain rights to same-sex couples that it granted to other wedded couples. Because of DOMA, the federal government did not recognize Edie Windsor’s same-sex legal marriage to Thea Spyer, her partner of forty years, in New York. When Spyer died in 2009, Edie was hit with a bill for $363,000 in federal estate taxes and more than $200,000 in state taxes. She paid the tax and then sued to get it back (U.S. v. Windsor).

The state of New York did recognize Windsor’s marriage. Same-sex marriages, under The Marriage Equality Act, were legal when Spyer died.  Signed into law in June 2011, gay marriage become legalized and a month later the IRS department extended equal rights under the estate tax law to legally married gay couples, even those married in other states before New York legalized gay marriage. However, the state could not extend the rights retroactively because of DOMA.  The Supreme Court’s DOMA ruling changed that issue.  

Happy Ending for Windsor and Countless Others

Windsor now has the same tax breaks as a married taxpayer, and is now due a tax refund from the IRS plus interest because she was forced to pay as a “single” taxpayer. She is hoping to receive a sizable refund from the state as well.

Filing for Refunds

Total amount of taxes that will be refunded?  New York has no estimate.

A claim for refund of an estate tax, in general, must be filed by a taxpayer within three years from the date the original return was filed or two years from the date the tax was paid.

The I.R.S. has said “we are reviewing the important June 26 Supreme Court decision on the Defense of Marriage Act.  We will be working with The Department of Treasury and Department of Justice, and we will move swiftly to provide revised guidance in the near future.”

Historic Gay Marriage Cases Set for Late March

U.S. Supreme Court will Hear Two Oral Arguments

On January 7, 2013, the U.S. Supreme Court will hear the challenge to California’s Proposition 8 Hollingsworth v.Perry, the constitutional amendment that forbids same-sex marriage on  March 26, and on March 27, it will listen to oral arguments in U.S. v. Windsor, the ACLU’s case challenging the constitutionality of DOMA which denies federal recognition to same-sex couples’ marriages. The court has scheduled only one hour’s worth of arguments each day. However, justices can extend the time allotted to arguments in each case.

The nine Supreme Court Justices involved in these cases are:  John Roberts, Antonin Scalia, Anthony Kennedy, Clarence Thomas, Ruth Bader Ginsburg, Stephen Broyer, Samuel Alito, Sonia Sotomayer, and Elena Kagan.

supreme-court

The Proposition 8 Case

The Justices will be considering if Proposition 8 violates the Fourteenth Amendment to the U.S. Constitution.  In November 2008, the ballot initiative banning gay marriage in California was passed by popular vote.

AFER,the American Foundation for Equal Rights, filed the lawsuit against Proposition 8 on behalf of two couples: Paul Katami and Jeff Zarrillo and Sandy Belzer Stier and Kris Perry. In February 2012, the United States Court of Appeals for the Ninth Circuit declared the law unconstitutional and this ruling was then appealed to the Supreme Court.

The couples will be represented ironically by” hotshot” lawyers Ted Olson and David Boies. These lawyers were adversaries in the 2000 Bush vs. Gore case, resulting in GeorgeW. Bush becoming the U.S. President. Boies and Olson have argued over 170 cases in the Supreme Court and have winnings in the Federal District Court and 9th Circuit Court of Appeals. Eleven California couples are hoping for the Supreme Court to overturn Proposition 8.

The Doma (Defense of Marriage Act) Challenge

Federal appeals courts in New York and Boston had ruled that the law is unconstitutional. The Republican leadership of the House of Representatives appealed to the Supreme Court.

The Supreme Court Justices agreed to hear the case of Edith Windsor, a Manhattan native. Windsor, legally married in Canada, is suing the federal government because they do not recognize her same-sex marriage to her late wife Thea Spyer.

Because DOMA does not allow the U.S. government from recognizing same-sex marriages (even in states where gay marriages are legal), couples cannot file joint federal tax returns or receive survivor benefits if one spouse dies.  In 1996, DOMA was passed by both houses of Congress and signed into law by President William Clinton.  Windsor has sued because she was required to pay a $350,000 federal estate tax bill on Spyer’s estate.

All nine justices could participate in this case.  It only takes four votes to hear a case.

Justice Kennedy believed to be the Fulcrum

Justice Kennedy authored the Lawrence v. Texas ruling that struck down state anti-sodomy laws in 2003 so he is expected to proceed on a course that is favorable to gays and lesbians. However, as much as homosexuals may want him to bring marriage equality to the entire country either by resorting to the fundamental right to marry or deeming sexual orientation a suspect classification, the March outcomes may have more limited victories.