This post was originally published on Forbes Aug 19, 2015
It is kind of ironic for the Ninth Circuit, which played such a big role in advancing marriage equality, to be issuing a decision that discourages registered domestic partners from marrying. That is an effect of the decision in the case Bruce Voss and Charles Sophy vs IRS, although I imagine it is an unintended consequence. It almost seems as if the Ninth Circuit has instituted that conservative trope - special rights for homosexuals - with this decision. Closer analysis would show it would be more like special rights for homosexuals and geezers.
We thus agree that the debt limit provisions of § 163(h)(3) result in a marriage penalty; but we are not particularly troubled. Congress may very well have good reasons for allowing that result, and, in any event, Congress clearly singled out married couples for specific treatment when it explicitly provided lower debt limits for married couples yet, for whatever reason, did not similarly provide lower debt limits for unmarried co-owners.
The IRS argues that applying § 163(h)(3)'s debt limit provisions on a per-taxpayer basis creates a marriage penalty. We agree that it does, but we do not believe the marriage penalty is as significant a concern as the IRS urges.
Of course, a married couple filing separate returns does not receive the benefits of filing a joint return. Is it unfair, then, that they are treated as a single taxpayer while the unmarried couple is not? Perhaps not, for the married couple, unlike the unmarried couple, can usually elect to file a joint return. And perhaps Congress did not want separately filing married couples to have a significant advantage over jointly filing married couples.
Thanks to the Ninth Circuit's recent decision, there is now a new marriage penalty for couples with large mortgages. The amount of the penalty depends on how much the mortgage exceeds $1.1 million, its interest rate and the marginal tax rate of the taxpayers. My back of the envelope computation would put the maximum penalty at not a lot more than $20,000 (The Voss/Sophy Tax Court decision had total deficiencies of about $36,000 in 2006 and $22,000 in 2007, but it seems like there was a little more going on there than the definitional issue).
Registered domestic partners shall have the same rights, protections, and benefits, and shall be subject to the same responsibilities, obligations, and duties under law, whether they derive from statutes, administrative regulations, court rules, government policies, common law, or any other provisions or sources of law, as are granted to and imposed upon spouses.
The eligibility criteria for registration of a domestic partnership is set by statute. The age eligibility of opposite sex couples requires that at least one partner be at least 62 and the age eligibility for same sex couples requires that both partners be over 18, or have obtained a court order granting permission to establish a domestic partnership.
We’ve known for a while that same-sex couples could choose a self-help solution to the marriage penalty that still allowed them most legal rights of marriage. But in at least some states opposite-sex couples can do the same. I don’t know if enough people will take advantage of this opportunity to create a revenue problem, but it bears watching.