Federalism

Via TaxProf, we learn of two related private letter rulings, PLR 200524016 and PLR 200524017. The rulings apply the Defense of Marriage Act to deny domestic partners spousal benefits under qualified deferred compensation plans run by state governments.

The state in question in both rulings has a domestic partner statute that "provides that registered domestic partners have the same rights, protections and benefits and are subject to the obligations and duties 'under law' as granted to and imposed on spouses." Among the rulings given in the PLRs was the following:

A registered domestic partner, a former registered domestic partner, or a surviving registered domestic partner as defined in [the state's] Act is not a spouse, a former spouse or a surviving spouse for purposes of [the relevant IRS Code Provision] section 457. Accordingly, in the event that the Spouse Provisions are not interpreted and applied in a manner consistent with the Defense of Marriage Act, the operation of Plan A will not be in compliance with section 457(b).

In other words, if the state interpretes its plan to include a domestic partner within the term "spouse," not only will the benefits of the plan not inure to the participants who are attempting to invoke the state's domestic partner statute, but the plan itself will be disqualified. Thus, every other participant in the plan (presumably all government employees within the affected jurisdiction) would lose the tax-deferral benefits that the plan would otherwise have conferred.

Assuming that the rulings correctly apply the Defense of Marriage Act (and I believe that they do), they mean that, even in states that allow same-sex marriages, those marriages will not be effective to confer federal tax benefits that otherwise extend to married couples. Furthermore, because all employees would lose benefits if the plans were extended to same-sex marriages, the Act essentially prohibits states from even attempting to extend benefits to same-sex couples.

It is obvious that Republican calls to allow states and localities to make independent policy determinations without federal government interference are hollow. That principle apparently applies only when the state and local policies adhere to the doctrines of the Republican right.