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WASHINGTON – A little-noticed provision in President Joe Biden’s plan to expand the nation’s social safety net could mean a tax break for some same-sex couples.
Same-sex couples who were legally married under state law prior to 2010 – before the federal government recognized gay unions – could amend their tax returns and file claims for federal tax benefits under the latest version of Biden’s Build Back Better plan.
Tax benefits for those years have been denied to those couples under existing federal law.
Advocates argue the change would correct an injustice by giving gays and lesbians the same tax benefits that are afforded to married heterosexual couples.
“It’s a matter of fundamental fairness,” said David Stacy, government affairs director for the Human Rights Campaign, the nation’s largest LGBTQ advocacy group.
Biden’s roughly $2 trillion bill already has passed the House and is awaiting a vote in the Senate, so there’s no guarantee the tax provision for same-sex couples will remain in the final version. But Stacy said he is not aware of any opposition to the proposal.
“I’m pretty optimistic about it being in the final package,” he said.
Unequal under the law
The inequity in existing tax law is tied to a U.S. Supreme Court decision in 2013 that invalidated part of the Defense of Marriage Act, which legally defined marriage as a union between a man and a woman.
In a landmark ruling in the United States vs. Windsor, the high court struck down a section of the law that had denied married gay and lesbian couples the same federal benefits given to married heterosexuals.
The ruling, in effect, granted federal recognition of same-sex marriage for the first time and made same-sex couples eligible for federal benefits that had been off-limits to them. It also paved the way for another landmark decision two years later in which the Supreme Court overturned state bans on same-sex marriage, essentially legalizing same-sex marriage across the country.
Following the Windsor ruling, the Internal Revenue Service allowed same-sex couples who had filed taxes individually to amend those returns and file jointly, which in some cases meant they were due a refund. However, the IRS rule applied only to returns dating back to 2010.
Same-sex marriage was already legal in five states (Massachusetts, Vermont, New Hampshire, Iowa and Connecticut) and the District of Columbia between 2004 and 2010. But because the IRS ruling applied only to tax returns dating back to 2010, gay couples who were legally married before then were denied the opportunity to file for federal tax benefits.
A section of Biden’s Build Back Better plan would allow those couples to file an amended return as far back as 2004 and claim any tax credits and refunds they are owed.
Fixing the tax loophole “will ensure same-sex couples have the same benefits heterosexual couples have while also injecting thousands of dollars into families’ pockets at a time when this stimulus is sorely needed,” said Rep. Judy Chu, D-Calif., who authored separate legislation to correct the inequity.
Chu and Rep. Richard Neal, a Massachusetts Democrat who chairs the House Ways and Means Committee, inserted the tax language into the latest version of Biden’s Build Back Better package, which includes other tax provisions as well.
“While the federal government has affirmed its commitment to all love being equal, Congress has yet to recognize the tax code’s prior discrimination against LGBTQ couples,” Neal said.
With Build Back Better, “we can finally right this wrong and give all married couples the opportunity to claim the tax benefits they had wrongfully been denied,” he said.
If approved, the new tax rule would apply not only to same-sex couples in the five states and the District of Columbia that legalized same-sex marriage between 2004 and 2010. Gay couples who wed in one of those jurisdictions even though they lived in a state where same-sex marriage was not legal at the time also would be eligible to file an amended return.
U.S. couples who wed before 2010 in another country where same-sex marriage was legal also could possibly file for the unclaimed benefits, depending on how their states recognize international marriage, Chu said.
No estimates were available on how many taxpayers would be eligible for benefits under the new rule, but “it is a relatively small number of couples,” Stacy said.
The cost of providing the benefits is projected to be $55 million over 10 years, according to the congressional Joint Committee on Taxation.
Who would benefit?
Not every couple may want to file an amended return.
To claim the benefits, couples would need to file during the upcoming tax season. But because they will be submitting an amended return, they will likely have until Oct. 15, 2022, to file, Chu’s office said.
Some couples who file an amended return could end up getting a refund, said Kimberly Shockley, a Houston-based accountant who specializes in LGBTQ tax issues.
Others may find they are better off filing individually because of the so-called “marriage penalty” in which a higher tax burden is placed on some married couples, Shockley said.
“It all depends on how much each partner or spouse makes,” she said.
Couples who could potentially benefit by filing an amended return include those in which one spouse has a high income while the other has little or none, she said. In some cases, couples with children also could possibly claim additional child tax credits, she said.
Fixing the tax law “is a fair and just thing to allow,” Shockley said. But, “I don't think it's necessarily right for everyone.”
Michael Collins covers the White House. Follow him on Twitter @mcollinsNEWS.
This article originally appeared on USA TODAY: Build Back Better: Same-sex couples to get tax break under Biden plan