Welcome to the Fall 2013 edition of the Golan & Christie Newsletter. In this issue, we are tackling issues that are important to your business--and to you as an individual.

SAME-SEX MARRIAGES WILL BE RECOGNIZED FOR FEDERAL TAX PURPOSES

In our last newsletter we discussed the Supreme Court landmark decision in United States v. Windsor, in which the Court held the terms “marriage” and “spouse” cannot exclude same-sex partners. In this issue, we discuss the new IRS ruling about the treatment of samesex couples for purposes of federal income taxes. 

IMPACT OF NEW CONCEALED CARRY GUN LAW

Beginning on January 5, 2014, individuals in Illinois can apply for permits allowing them to carry concealed weapons under the recently passed Firearm Concealed Carry Act.

TIME TO SAY GOODBYE

As many of you know, Dave Schmitt, our friend and colleague of many years, suffered a major medical trauma in September 2009. He has been on extended medical leave since then. As part of Dave’s rehabilitation program, he has been in the office from time-to-time reviewing various non-legal matters. Dave’s continued journey, however, lies outside the G&C family, and at end of this year, his affiliation with G&C will formally come to an end.

During his time as a practicing lawyer at G&C, Dave has been a great lawyer to his clients and a wonderful mentor to our litigation team. While our professional relationship has come to an end, we look forward to continuing our long relationship as friends, and we know that many of our clients join us in wishing him all the best.

-Stephen L. Golan
 Managing Partner

In our last newsletter we discussed the Supreme Court landmark decision in United States V. Windsor, in which the Court held the terms “marriage” and “spouse” cannot exclude same-sex partners. As a result of the Court’s decision, each state may determine whether or not to permit or prohibit same-sex marriages.

The questions raised by the decision were plentiful, and we noted that, although current Illinois law permits same-sex civil unions, it has yet to permit same-sex marriage, so it was unclear whether partners in an Illinois civil union would be considered married for federal tax purposes. We also noted it was unclear whether legally married same-sex couples would receive equal tax and Social Security benefits in all states, or only in those states that permit same-sex marriages.

After weeks of speculation as to how the Internal Revenue Service would treat same-sex marriages, the U. S. Department of the Treasury and the IRS released a joint ruling which held same-sex couples, legally married in jurisdictions that recognize same-sex marriages, will be treated as married for federal tax purposes. Revenue Ruling 2013-17 (issued August 29, 2013) includes FAQs providing guidance on the topic. The ruling applies whether the couple lives in a jurisdiction that recognizes same-sex marriage or a jurisdiction – such as Illinois – that does not recognize same-sex marriage. The determining factor is where the marriage took place and if the marriage was legal in that jurisdiction.

In reaching its decision, the joint ruling discussed the IRS’s historical treatment of common-law marriages. Since 1956, the IRS has treated a couple who entered into a common-law marriage in a state that recognizes such marriages as married for federal income tax purposes, notwithstanding that the couple later moved to and resided in a state that does not recognize common-law marriage. This is consistent with longstanding Revenue Ruling 58-66. The IRS acknowledged that, although states have different rules of marriage recognition, a rule under which a couple’s marital status for tax filing purposes could change simply by moving from one state to another, would be close to impossible for taxpayers to follow and the IRS to enforce. Thus, state law could not be permitted to govern whether a couple was “married” for federal tax purposes.

The ruling applies to any same-sex marriage legally entered into in any one of the 50 states, District of Columbia, a U.S. territory, or a foreign country. However, the ruling explicitly does not apply to registered domestic partnerships, civil unions, or similar formal relationships entered into under state law.

The IRS ruling has made it clear legally married same-sex couples will receive equal federal tax treatment in all states, and not only in those states that permit same-sex marriages. For example, if a same-sex couple who is legally married in New York moves to Illinois, where same-sex marriages are not recognized, they will still be deemed legally married for federal tax purposes. Moreover, if the same couple moves to Missouri, where same-sex marriages are prohibited under both state statute and the state Constitution, they remain validly married for purposes of federal tax filings.

2013 Returns

The ruling will apply to all federal tax provisions where marriage is a factor, and for all federal taxes including income, estate and gift taxes. Legally married, same-sex couples must file their 2013 federal returns as a married couple, and have the same filing choices as an opposite sex married couple, including filing status (married filing jointly or married filing separately), personal and dependency exemptions, the standard deduction, employee benefits, contributions to IRAs, the earned income credit, and the child tax credit, to name a few. Of course, this requirement is only for federal returns, and the state law of the domicile of the same-sex couple will determine whether or not they are eligible to – or required to – file as a married couple.

There are in excess of 200 provisions in the Internal Revenue Code and Regulations that contain the terms “spouse, husband, wife,” etc. Under the Revenue Ruling, such terms will be treated as gender neutral.

2012 Returns

The Revenue Ruling will be applied prospectively, effective September 16, 2013. This means if you are a spouse in a legally binding same-sex marriage and you first file your 2012 federal tax return on or after September 16, 2013, you must file as married. If you are eligible and have already filed your 2012 returns separately, you may leave them as filed or amend the returns to file jointly. Taxpayers who wish to rely on the ruling for earlier periods may do so, subject to the information below. It should be noted that the requirement to file jointly applies not only to income tax returns, but also to gift and estate tax returns.

Refund Claims for Prior Year Returns

Legally married same-sex couples are permitted – but not required – to file refund claims for previously filed returns. Since the statute of limitations for filing a refund claim is generally three years, refund claims for tax years 2010 and 2011 (in addition to 2012) may still be filed. Moreover, a legally married same-sex couple may also take advantage of certain gift and estate tax exclusions available only to married couples, and may be entitled to file for a refund of overpaid federal estate or gift tax for the same tax years.

Social Security

Effective August 9, 2013, the Social Security Administration will approve same-sex marriage spousal claims, provided at the time of the application or while the claim is pending, the couple lived in a state where same-sex marriage is recognized.

Open Issues

The ruling is limited to the impact of the Windsor case on federal tax matters, and did not include any guidance as to the impact on federal benefits, such as pensions and Social Security. Although the IRS indicated that guidance as to employee benefits, such as federal pensions, would be forthcoming, no mention was made of forthcoming guidance concerning the impact on Social Security benefits.

The IRS also intends to announce streamlined procedures for employees who wish to file refund claims for payroll taxes paid on previously taxed health insurance and fringe benefits provided to same-sex spouses.

If you are an employer and wish additional assistance, please contact Donna F. Hartl (312) 696-2035 dfhartl@golanchristie.com or Nancy Franks-Straus (312)696-1368 nfstraus@golanchristie.com

Beginning on January 5, 2014, individuals in Illinois can apply for permits allowing them to carry concealed weapons under the recently passed Firearm Concealed Carry Act. Business owners can prohibit the carrying of concealed weapons on company property if they post a sign indicating that the carrying of firearms is prohibited at the location.

The Illinois State Police has proposed rules for the standardized signs that must be present at any place of business that wishes to prohibit concealed weapons. The rules are as follows: sign requires a white background; no text (except the reference to the Illinois Code 4307 ILCS 66/1) or marking within the one-inch area surrounding the graphic; a depiction of a handgun in black ink with a circle around and diagonal slash across the firearm in red ink; and the image must be 4 inches in diameter. The sign in its entirety must measure 4 in x 6 in. A larger sign is permissible if the property owner believes the entrance of the building requires it. More information regarding the Illinois State Police’s proposed rules and an image of the suggested graphic can be found at www.isp.state.il.us/media/pressdetails.cfm?ID=762.

As you’ve likely already heard, the Affordable Care Act’s mandate for employers to provide health insurance to all employees has been delayed one year. But did you remember to provide notice to your employees of the healthcare exchanges by October 1st? If not, the good news is that there’s currently no penalty for failing to issue the notice. However, that is likely to change, so you should issue the notice now to all existing employees and make sure to include it in the first day paperwork given to new employees in the future. A copy of the model notice is available on the U.S. Department of Labor’s website here: www.dol.gov/ebsa/healthreform/.

To discuss how these issues apply to your company contact: Laura A. Balson, (312)696-1351, labalson@golanchristie.com or Margaret A. Gisch, (312)696-2039, magisch@golanchristie.com.

Golan & Christie is pleased to welcome a new partner to the firm:

Rita W. Garry joins Golan & Christie LLP most recently from SmithAmundsen’s Corporate and Transactional Group and The Garry Law Firm, P.C., a business boutique firm that Ms. Garry founded in 1995.

Ms. Garry received her J.D. from Boston University and a B.A. in Politics with Phi Beta Kappa and Thesis Honors from Lake Forest College. She is also a licensed Certified Financial Planner. Ms. Garry’s 30 year legal career has been focused on being a strategic advisor to entrepreneurs, small business and middle market privately-held companies and their stakeholders in entity structuring and design, business owner agreements, corporate taxation, contract review and negotiations, intellectual property, debt and equity financing transactions, securities matters acting as issuer counsel in SEC Regulation D private securities offerings, business ventures, mergers, acquisitions, and private equity finance transactions. She has represented clients in many industries, including: ecommerce, manufacturing, technology, distributions, professional services, aviation, real estate, health care, employment staffing companies, business consulting services, retail, and food and beverage.

Congratulations to partner Beverly A. Berneman on the 10 year anniversary of her position as an adjunct professor at the John Marshall School of Law. Ms. Berneman, who received her LL.M. in Intellectual Property Law from John Marshall School of Law in 2003, personally developed the two courses she teaches, Financing the Development of Intellectual Property and Bankruptcy. These courses were borne out of Ms. Berneman’s experience in the relevant areas of the law. The courses are unique and are part of the reason that John Marshall School of Law School is ranked as one of the top U.S. Intellectual Property Law programs by U.S. News and World Report.

We’re pleased to announce that Golan & Christie attorney Laura Balson and her husband, Matt, have welcomed a new child into their life. Ten-week old Aden Thurgood Balson, born July 25, 2013 became part of their family on October 4, 2013. Aden joins big sister Grace. We wish the entire Balson family much health and happiness.

In the Spring, 2013 issue of the Golan & Christie Newsletter, the article authored by Barry Siegal, “Estate Planning Across State Lines” noted that “…Illinois law requires two witnesses to a will and does not require that a living trust be witnessed, Florida law requires three witnesses to a will, as well as a living trust.”

We would like to clarify that although the applicable Florida statute only technically requires two witnesses, our practice is to recommend three witnesses, out of an abundance of caution.