1. News Flash: June 26, 2013 – U.S. Supreme Court Rules DOMA
Unconstitutional
Today, the United States Supreme Court ruled that the 1996 federal Defense of Marriage Act
(DOMA), specifically §3, is unconstitutional under the Equal Protection Clause of the Fifth
Amendment. Willis’ National Legal & Research Group is reviewing the Court’s decision and will
provide detailed analysis in a future publication.
Background
In 1996, President Clinton (D) signed into law DOMA. Section 3 of DOMA defined marriage as a
union between one man and one woman for all federal purposes. Under the law, the federal
government did not recognize same-sex marriages for any legal purpose. This meant that
individuals who are in same-sex marriages were barred from enjoying those federal marital
benefits afforded to individuals in opposite-sex marriages. These benefits include, for example,
receiving employer-sponsored benefits on a tax-free basis and the right to continue benefits under
COBRA. DOMA, specifically §2, also grants states the authority to refuse to recognize same-sex
marriages, including those that have been performed in, and recognized by, other states. This
section of DOMA was not challenged.
Supreme Court’s Decision
Windsor v. United States involved a same-sex couple married in Canada and residing in New
York, a state that recognized same-sex marriage. When one of them died, she left her entire estate
to her spouse who was barred from claiming the federal estate tax exemption for surviving spouses
due to §3 of DOMA. The spouse paid the tax bill and sought a refund, which the Internal Revenue
Service (IRS) denied. She then brought suit challenging the constitutionality of §3 of DOMA.
Both the United States District Court and the Second Circuit Court of Appeals held that this
section of DOMA is unconstitutional and ordered the United States to pay a refund.
Given that §3 of DOMA affects more than 1,000 federal laws, including those related to estate and
gift taxes, Social Security benefits and tax return filings, the Court’s ruling will have a significant
effect on employer-sponsored plans. For example, same-sex spouses will now meet the COBRA
definition of a qualified beneficiary and have an independent right to elect and maintain COBRA
(a right opposite-sex spouses already enjoy). The Court’s ruling also affects the taxation of
employer-sponsored benefits provided to same-sex spouses. It allows employers to provide
benefits to same-sex spouses without having to worry about imputed income issues, employees
could pay for same-sex benefits on a pre-tax basis through the employer’s cafeteria plan, and a
same-sex spouse’s qualified medical expenses could be reimbursed through a health flexible
spending account (FSA) on a tax-preferred basis.

2. Conclusion
The full implications of this decision and its effect on employers and employer-sponsored plans
are unclear at this time. Additional guidance from the IRS is needed to address the many issues the
Court’s ruling raises. Employers should consult with their tax advisors before making changes to
their benefit plans in response to the ruling.
The information in this publication is not intended as legal or tax advice and has been prepared
solely for informational purposes. You may wish to consult your attorney or tax adviser
regarding issues raised in this publication.