On March 27, 2013, the United States Supreme Court heard oral arguments in United States v. Windsor. A decision from the court is expected in June. The case is an appeal from a Second Circuit decision upholding the federal district court ruling that the Defense of Marriage Act, or DOMA, a federal Law passed in 1996, is unconstitutional. The case came to court because Edith Windsor, the 83-year-old widow of Thea Spyer, had to pay the Internal Revenue Service $363,000 in estate taxes after the death of her wife. Edith or “Edie” and Thea, New York residents, were married in 2007 in Toronto, Canada, and had been life partners for 40 years. When Thea died in 2009, New York recognized the Canadian marriage as a legal marriage. However, DOMA prevented the federal government, and the Internal Revenue Service, from recognizing the marriage for tax purposes.
Under federal estate tax law, a heterosexual spouse would not have had to pay the tax thanks to an unlimited marital deduction that can be applied to reduce or eliminate the estate tax. If Thea had been “Theo,” Edie would have had no federal estate tax liability. The New York decision was considered a significant victory for tax equality and same-sex couples, but the case is now in the hands of the Supreme Court. If the court finds in favor of Edie, and strikes down DOMA as unconstitutional, many believe the decision will influence state legislatures and state courts in a positive way. Whether this will have any impact in Pennsylvania is yet to be seen.
Despite the increase in the number of states that now recognize either same-sex marriages or civil unions, Pennsylvania does not. Same-sex couples cannot marry in Pennsylvania and Pennsylvania will not recognize a legal marriage or civil union performed in another state for purposes of its own estate and tax law. The implications of the Pennsylvania Marriage Law on same-sex couples when one member of the couple dies are harsh. For instance, if a Pennsylvania resident dies without a valid will, the estate of the decedent passes by intestate succession. For purposes of the intestate succession law, a surviving member of a same-sex couple is considered an unrelated person and has no rights to receive any part of the decedent’s estate. This situation can be remedied by preparing a valid will and leaving all or a portion of the estate to the partner, but there is no recourse if there is no will.
Finally, when a Pennsylvania resident dies, state law imposes an inheritance tax on the value of the decedent’s probate estate and certain non-probate assets. The rate of tax varies depending on the relationship between the decedent and the person or persons inheriting the decedent’s estate. In the case of a heterosexual married person, assets left to a spouse incur no inheritance tax because the tax rate for spouses is 0.00%. Assets left to children and other lineal descendants are taxed at the rate of 4.5% and assets left to siblings incur a tax of 12%. Assets left to anyone else are taxed at the rate of 15%. Same-sex partners, whether legally married elsewhere or not, are considered “anyone else.”
A futile attempt at tax equality occurred in September 2011, when Representative Michelle Brownlee and other members of the Pennsylvania legislature introduced HB 1828. The bill, which would have added domestic partners to the list of relatives currently exempt from paying Pennsylvania inheritance tax, was referred to the finance committee and never came up for a vote. If HB 1828 had passed, the Pennsylvania inheritance tax law would have been revised so that “inheritance tax upon the transfer of property passing to or for the use of an individual in a domestic partnership shall be at the rate of zero per cent for estates of decedents dying on or after January 1, 2012.”
Unfortunately, a positive decision in Windsor, and even a repeal of DOMA will not automatically change the law in Pennsylvania. Individual states still have the right to make and enforce laws governing their citizens when not preempted by federal law. A repeal of DOMA will have a positive effect on Pennsylvania same-sex couples when it comes to federal taxes and other federal benefits, but as demonstrated by the failure of HB 1828, it will be difficult to change the minds of most Pennsylvania legislators and courts and bring Pennsylvania in line with the growing support for equal rights. Perhaps a favorable decision by the United States Supreme Court this June will encourage Pennsylvania legislators to recognize and address the inequality of certain individual laws, such as the inheritance tax law, or inspire a Pennsylvania resident to again challenge the law in court.