Bills
| 3.23.22

Should Same-Sex Couples Be Able to Receive Retroactive Federal Tax Refunds Dating Back to Their Marriage Date? (S. 1940)

Do you support or oppose this bill?

What is S. 1940?

(Updated April 18, 2020)

This bill — the Refund Equality Act of 2019 — would create an exemption to the three-year limitations period in the Tax Code to allow married same-sex couples to file for retroactive federal income tax adjustments dating back to the tax year in which they were married. Under this legislation, an amended return for a past year could be filed up to the due date for the return for the year in which the provision is enacted. The Code already includes several exemptions to the three-year limitations period, ranging from adjustments to capital loss carryback to adjustments for retired servicemembers who receive an award of disability compensation. 

Argument in favor

Same-sex couples in certain states that legalized same-sex marriage early, such as Massachusetts, were forced to file separate tax returns for nearly a decade and should have access to retroactive refunds.

Argument opposed

Same-sex couples shouldn’t be able to retroactively claim tax refunds from years before the Supreme Court’s decision when they filed individual tax returns.

Impact

Married same-sex couples; married same-sex couples who previously filed separate tax returns prior to the Windsor decision; tax treatment of same-sex couples; the IRS; and the Internal Revenue Code.

Cost of S. 1940

The Joint Committee on Taxation estimates this bill would have a negative revenue effect of approximately $57 million over the period 2019-2024.

Additional Info

In-Depth: Sen. Elizabeth Warren (D-MA) reintroduced this bill from the 115th Congress to ensure that legally-married same-sex couples — who were barred from filing federal taxes jointly until the U.S. Supreme Court's 2013 U.S. v. Windsor decision — are permitted to file amended tax returns back to the date of their marriage:

"The federal government forced legally married same-sex couples in Massachusetts to file as individuals and pay more in taxes for almost a decade. We need to call out that discrimination and to make it right — Congress should pass the Refund Equality Act immediately."

Rep. Judy Chu (D-CA) is the sponsor of this bill’s House companion, the Promoting Respect for Individuals’ Dignity and Equality (PRIDE) Act of 2019. Rep. Chu’s legislation would remove gendered language like “husband” and “wife” from the tax code to accommodate same-sex couples and correct the tax code to allow same-sex couples who married before the Defense of Marriage Act (DOMA) was struck down to claim federal tax refunds to which they’re entitled: 

“Pride month is a chance for us to celebrate equality, and the victory that all love is equal. However, that is not the case in our tax code where discriminatory language and restrictions are still intact. That is why I am proud to be introducing the PRIDE Act to make some common sense fixes to the tax code. First, it will erase gendered language that left out same sex couples by only referring to a husband and a wife. We know that families come in all forms and it’s time our federal paperwork reflect that. Second, this bill will correct an older injustice against same-sex couples and put money directly back into the pockets of families who have earned it. For too long, discriminatory laws penalized same-sex married couples by denying them the ability to file jointly and claim tax refunds they were entitled. That injustice was finally corrected in the 2013 U.S. v. Windsor decision, but restrictions in the code still prevent many of those families from claiming refunds for prior years. For instance, since certain states, including California Connecticut, California, Iowa, New Hampshire, Vermont, and Washington, D.C., adopted marriage equality before the ruling, some legally married same-sex couples were forced to file separate federal income taxes for years. Because of IRS restrictions, these couples cannot amend their returns to claim reimbursement credits for many prior tax years. The PRIDE Act solves this problem.”

Writing in the , John Hirschauer criticized this legislation as a “tax giveaway” that conflicts with Sen. Warren’s overall opposition to “giant tax giveaways to rich people”: 

“Redressing old grievances has become something of a pastime for Congress as it searches for problems to solve (or create, as the need presents itself). Last Thursday, Elizabeth Warren re-introduced the Refund Equality Act, a bill that would retroactively grant tax refunds to same-sex couples who were married in their states before the Obergefell decision in 2015. The federal government had denied those couples the deductions that it granted to married couples because, according to the federal government, they weren’t married. If marriage has no eternal or even etymological foundation aside from the imprimatur of the government, then it’s not clear what standard Elizabeth Warren can use to claim that some actionable injustice has occurred… Warren was moved by the plight of the overtaxed masses, aghast that ‘the federal government forced legally married same-sex couples in Massachusetts to file as individuals and pay more in taxes for almost a decade’... Senator Warren’s campaign website decries ‘handing out giant tax giveaways to rich people.’ Her fierce opposition to the practice seems to end when such giveaways are granted to taxpayers with LGBTQ sexual preferences. There was a time in the not-too-distant past — in the lifetime of Taylor Swift, if you can believe it — when America’s federal government defined marriage as a union between one man and one woman. It has been remarkable to see how fast the prevailing cultural attitudes about marriage have changed. The view that most Americans held as recently as 2010 is now a position reserved for the nation’s verboten fringe. Adhering to what was once Barack Obama’s view on marriage – “marriage is between a man and a woman” —  is now a judiciable act of discrimination… We’re talking about reparations now! What was once a linguistic and religious discussion — an argument over what ‘marriage’ meant and didn’t mean, and whether it was a civil right to be extended or a necessarily exclusive institution with an unchanging definition — has now been repackaged as a proxy war in which the side of the angels (and goodness, and truth, and light, and Elizabeth Warren) does battle against ‘hate’... If Elizabeth Warren has her way, religious people around the country will be counted among the latter in perpetuity.”

This legislation has 42 Senate cosponsors, including 41 Democrats and one Independent, and has yet to receive a committee vote. Its House companion, sponsored by Rep. Judy Chu (D-CA), unanimously passed the House Ways and Means Committee by voice vote with the support of four Democratic cosponsors. 

Sen. Warren first proposed this idea in 2017, when she introduced the Refund Equality Act of 2017 (S. 1564) with 36 Senate cosponsors’ support (35 Democrats and one Independent). At that time, Rep. Richard Neal (D-MA) introduced companion House legislation (H.R.3234, also the Refund Equality Act of 2017) with 40 Democratic House cosponsors. Neither bill received a vote last Congress.


Of Note: Until the Supreme Court’s 2013 decision in U.S. v. Windsor, legally-married same-sex couples were barred from filing federal taxes jointly. Before this point, same-sex couples in 10 states received the right to legally marry. In its ruling in Windsor, the Court held that it was unconstitutional for a same-sex spouse to be assessed an estate tax for receiving an inheritance from their spouse (whereas an opposite-sex spouse would have been exempt). 

Through this ruling, the Court overturned the DOMA prohibition that prevented the federal government from recognizing same-sex marriage and allowed same-tax couples in valid marriages recognized by their states to file federal taxes using the preferential filing status of married filing joint.

While the IRS published guidance after the Windsor decision clarifying its recognition of same-sex marriages and stating that married same-sex couples could amend previously-filed tax returns to claim refunds or credits due as a result of correct marital status, married couples who previously filed taxes separately are currently only permitted to file amended joint returns going back three years (and the IRS doesn’t have the authority to override this limitation). 

Thus, same-sex couples who were married in jurisdictions recognizing same-sex marriage prior to Windsor aren’t able to claim refunds for all years they were legally married. Such couples are entitled to an estimated $57 million in refunds, according to the Joint Committee on Taxation.


Media:

Summary by Lorelei Yang

(Photo Credit: iStockphoto.com / DavidsAdventures)