October 2, 2013

Brett Turner, Senior Attorney, National Legal Research Group

     The IRS has now issued guidance on how it will construe the Windsor opinion.  The guidance is found in Revenue Ruling 2013-17. 

     The ruling begins by recognizing that Windsor applies broadly to all issues of federal tax law. "In light of the Windsor decision . . . the Service also concludes that the terms 'husband and wife,' 'husband,' and 'wife' should be interpreted to include same-sex spouses" for purposes of federal income tax law." Rev. Rul. 2013-17 at 4. 

     The ruling then relies heavily upon Rev. Rul. 58-66, cited previously in this article, which held that the IRS will recognize common-law marriages which were valid in the state in which
they were formed. The IRS will apply the same rule to same-sex marriages:

     The Service has applied this rule with respect to common-law marriages for over 50 years, despite the refusal of some states to give full faith and credit to common-law marriages established in other states. Although states have different rules of marriage recognition, uniform nationwide rules are essential for efficient and fair tax administration. A rule under which a couple's marital status could change simply by moving from one state to another state would be prohibitively difficult and costly for the Service to administer, and for many taxpayers to apply.

Id. at 3.

     Consistent with the longstanding position expressed in Revenue Ruling 58-66, the Service has determined to interpret the Code as incorporating a general rule, for Federal tax purposes, that recognizes the validity of a same-sex marriage that was valid in the state where it was entered into, regardless of the married couple's place of domicile. The Service may provide additional guidance on this subject and on the application of Windsor with respect to Federal tax administration.

Id. at 9.

     Under this rule, individuals of the same sex will be considered to be lawfully married under the Code as long as they were married in a state whose laws authorize the marriage of two individuals of the same sex, even if they are domiciled in a state that does not recognize the validity of same-sex marriages.

Id. at 10 (emphasis added).

     Thus, even if the taxpayers are domiciled in a state which adamantly refuses to recognize same-sex marriages, they can spend a weekend in a state which does recognize such marriages, obtain a marriage license, and have a marriage which the IRS will recognize as valid
for federal tax purposes.

Brett R. Turner, Senior Attorney, National Legal Research Group

On June 26, 2013, the U.S. Supreme Court held in United States v. Windsor, No. 12-307, 2013 WL 3196928 (U.S. June 26, 2013), that section 3 of the Defense of Marriage Act, 1 U.S.C. § 7, is unconstitutional.  Section 3 provides that for purposes of federal law, same-sex marriages are not recognized.  Windsor held that in determining the marital status of same-sex couples, as in determining the marital status of opposite-sex couples, the federal government must defer to state law.

While state law is now controlling, many situations will arise in which state law is conflicting.  This short note will take a preliminary look at choice-of-law issues in a post-Windsor world.  The note is based upon a morning's worth of research, but not upon an exhaustive review of the entire field.  As additional relevant points appear, the note will be kept updated. 

At a very minimum, Windsor must mean that when a same-sex couple gets married and continues to live in a state that recognizes same-sex marriage, they have a valid marriage under federal law.  Thus, they are entitled to federal benefits available to married persons, such as the right to file a joint tax return. 

What if a same-sex couple gets married in a state that allows same-sex marriage but moves to a state that does not?  Under federal tax law, "[f]or the purpose of establishing eligibility to file a joint Federal income tax return, the marital status of the two individuals is to be determined under the laws of the State of their residence."  Von Tersch v. Comm'r, 47 T.C. 415, 419 (1967) (citing Rev. Rul. 58-66, 1958‑1 C.B. 60); Lipton v. Comm'r, T.C. Summ. Op. 2007‑36, 2007 WL 686349, at *4 (2007) 

The practical setting of Revenue Ruling 58-66 was common-law marriage.  Most American states have abolished common-law marriage, but a small number of states retain it.  See generally Nadine E. Roddy, Interstate Recognition of Common Law Marriages, 9 Divorce Litig. 200 (1997).  Revenue Ruling 58-66 stated: 

The marital status of individuals as determined under state law is recognized in the administration of the Federal income tax laws. Therefore, if applicable state law recognizes common‑law marriages, the status of individuals living in such relationship that the state would treat them as husband and wife is, for Federal income tax purposes, that of husband and wife.

The Lawletter Vol 38 No 5

Sandra Thomas, Senior Attorney, National Legal Research Group

Yet another ground for conflict in U.S. state court custody disputes arises from the fact that a number of foreign countries have not signed the Hague Convention on the Civil Aspects of International Child Abduction.  That treaty provides a civil remedy if a parent, in violation of the
custody rights of the other parent, absconds with a child to a foreign country.  Under the Hague Convention, courts are required to return the child to the United States if he or she has been wrongfully removed from the United States or wrongfully retained in the foreign country.  The courts of countries that have not signed the treaty are not bound by it and are not obligated to
return a child who was wrongfully removed or retained and not allowed to return to the United States.  (Information about the status of particular countries is available at http://travel.state.gov/abduction/country/country_3781.html.) 

This state of affairs has led some parents in U.S. custody disputes to ask for an order prohibiting the other parent from traveling outside the United States with the children or to ask that the children's passports be held by the domestic parent or by a third party. 

The Lawletter Vol 38 No 4

Brett Turner, Senior Attorney, National Legal Research Group

      Data collected by the government have traditionally been presented to the public through official government publications.  As the world moves deeper into the Age of the Internet, however, governments have increasingly stopped printing data reports.  Instead, data reports are often published on an official government website.  This fundamental change poses an evidentiary challenge for parties seeking to rely upon government-collected data.

      A good example from the field of family law is the consumer price index ("CPI"), an index of price data produced monthly by the federal Bureau of Labor Statistics ("BLS").  It is not uncommon for a support provision in a divorce settlement to include a provision increasing the payments periodically, based upon changes in the CPI.  Some states do not allow the court to insert such an escalator clause into its own order, but settlement agreements containing self-modifying support provisions are generally enforceable.  See In re Marriage of Strieby, 255 P.3d 34 (Kan. Ct. App. 2011); West v. West, 891 So. 2d 203 (Miss. 2004); Payne v. Payne, 635 S.W.2d 18 (Mo. 1982).

      When an escalator clause is based upon the CPI, how can the CPI be proven?  This question was presented to the North Carolina Court of Appeals in the unpublished decision of Blackburn v. Bugg, 723 S.E.2d 585, 2012 WL 1332728 (N.C. Ct. App. 2012) (unpublished table disposition).  The plaintiff in that case went to the website of the BLS, http://stats.bls.gov, and simply printed a list of the CPI for different years and months.  The defendant objected that the printout had not been properly authenticated and was in any event inadmissible hearsay.

      The trial court disagreed, and the appellate court affirmed:

[W]e discern no abuse of discretion in the trial court's admission of Plaintiff's CPI evidence.  Plaintiff offered testimony, including the exhibits at issue, to prove the amount of CPI payments owed by Defendant at the time of trial. Defendant offered no evidence of his own CPI calculations, nor evidence to dispute Plaintiff's calculations.  Plaintiff's exhibits consisted of computer printouts—which Plaintiff testified she obtained from a website operated by the United States Department of Labor—and her own handwritten calculations, which she computed using the CPI figures obtained from the government website.  Plaintiff's testimony, in addition to the "UNITED STATES DEPARTMENT OF LABOR BUREAU OF LABOR STATISTICS" heading displayed on the printouts, was sufficient to prove that the computer printouts were what Plaintiff purported them to be.  See N.C. Gen.Stat. § 8C-1, Rule 901 (2011).  Moreover, we note that the CPI information set forth in the computer printouts is public information readily available and subject to judicial notice.  See N.C. Gen.Stat. § 8C-1, Rule 201 (2011).

2012 WL 1332728, at *4.

      To summarize, the computer printout was properly authenticated by the plaintiff's testimony that she had printed the document from an official government website.  The official heading at the top of the document was also evidence that the document was what it claimed to be.

March 13, 2013

Brett Turner, Senior Attorney, National Legal Research Group

A growing number of states require, by statute or case law, that the court set the date for valuing marital property in advance of the actual hearing.  In Virginia, for example, all marital property must be valued on the date of the evidentiary hearing.  But "[u]pon motion of either party made no less than 21 days before the evidentiary hearing the court may, for good cause shown, in order to attain the ends of justice, order that a different valuation date be used."  Va. Code Ann. § 20-107.3.  In New York, "[a]s soon as practicable after a matrimonial action has been commenced, the court shall set the date or dates the parties shall use for the valuation of each asset."  N.Y. Dom. Rel. Law § 236(B)(4)(b).  Setting the date of valuation in advance allows all of the experts to value property as of the same date and therefore removes one important source of variance in parties' valuations.

But what happens if there is a material change in circumstances after the court has entered an interlocutory order setting the date of valuation?  In Caveney v. Caveney, 81 Mass. App. Ct. 102, 960 N.E.2d 331 (2012), a discovery master initially set the date of valuation as June 30, 2008.  In late 2008, of course, the national economy entered a sharp and very severe recession.  The recession caused a significant decrease in the value of many marital assets.  The wife therefore filed a motion, supported by an affidavit from her financial expert, asking the court to value the assets as of December 31, 2008.

The trial court granted the motion, and the Massachusetts Appeals Court affirmed. "Based on the changes in the economic climate, the judge indicated that it was reasonable and proper for the wife to utilize a valuation date of December 31, 2008."  Id. at 107, 960 N.E.2d at 336. 

The discovery master's order setting the date of valuation in Caveney did expressly allow either party to modify the order by filing a motion.  But the result would probably not have been materially different if that express modification provision had not been present.  Interlocutory orders granted by a trial court are generally not final and are therefore subject to modification in the discretion of the court until a final order has been entered in the case.  For example, in Virginia, the trial court has full discretion to modify any order it makes until 21 days after entry of a final order resolving all contested issues in the case.  Va. Sup. Ct. R. 1:1.  In states with Rules of Civil Procedure based upon the federal model, "any order or other decision, however designated, that adjudicates fewer than all the claims or the rights and liabilities of fewer than all the parties . . . may be revised at any time before the entry of a judgment adjudicating all the claims and all the parties' rights and liabilities."  Fed. R. Civ. P. 54(b).  Since a pretrial order setting the date of valuation will never resolve all contested issues in the case, the trial court has discretion to modify such an order after it has been made.

An order setting the date of valuation should not, of course, be changed lightly.  The purpose of such an order is to manage the case in an orderly fashion by ensuring that all expert valuations use the same date.  If the order can easily be modified, many of its advantages are lost. 

The Lawletter Vol 37 No 8

Brett Turner, Senior Attorney, National Legal Research Group

In a divorce case, can the court divide property that is titled in the name of a third person, not in the name of the husband or the wife?  In some situations, the answer is clearly yes.

At a minimum, when marital property is conveyed into the name of a third party for purposes of avoiding division, the court can charge that property against the conveying spouse's share of the marital estate.  It may also be possible to set the transfer aside as a fraudulent conveyance.  See, e.g., Howard v. Howard, 2010 ME 83, 2 A.3d 318; Myers v. Myers, 741 So. 2d 274 (Miss. Ct. App. 1998).  See generally 2 Brett R. Turner, Equitable Distribution of Property '' 6:103–:108 (3d ed. 2005 & Supp. 2012).

In addition, situations exist in which a third party holds title in constructive or resulting trust for the benefit of one or both spouses.  Many of these cases involve homes that are titled in the names of parents or other third parties for purposes of financing, where all mortgage and maintenance expenses are paid by the spouses.  See, e.g., Gore v. Gore, 638 A.2d 672 (D.C. 1994); Ravenscroft v. Ravenscroft, 585 S.W.2d 270 (Mo. Ct. App. 1979), overruled on other grounds by Hoffmann v. Hoffmann, 676 S.W.2d 817 (Mo. 1984).  See generally 1 Turner, supra, § 5:18.

October 9, 2012

Brett Turner, Senior Attorney, National Legal Research Group

In 2007, the Hague Conference on Private International Law finished work on a new multilateral convention on the enforcement of child and spousal support.  See  Hague Convention on the International Recovery of Child Support and Other Forms of Family Maintenance, Nov. 23, 2007 [hereinafter the "Convention"].  The United States signed the Convention, and on November 29, 2010, the Senate ratified it.

The Convention is implemented in a revised article 7 of the Uniform Interstate Family Support Act ("UIFSA"), which some States have already begun to adopt.  Adoption of UIFSA is, of course, a condition upon receipt of federal child support enforcement funding, see 42 U.S.C. § 666(f) (Westlaw current through P.L. 112‑142 (excluding P.L. 112‑140 and 112‑141) approved 7‑9‑12), and while the federal statute presently requires adoption of UIFSA only as it existed in 1996, it is likely that the federal statute will ultimately require adoption of the 2008 version as well.

The Convention adopts into international law the principle of continuing exclusive jurisdiction ("CEJ"), which lies at the heart of UIFSA.  Article 18 of the Convention provides:

(1)        Where a decision is made in a Contracting State where the creditor is habitually resident, proceedings to modify the decision or to make a new decision cannot be brought by the debtor in any other Contracting State as long as the creditor remains habitually resident in the State where the decision was made.

Convention art. 18(1).  Thus, when a child support order is entered in the support provider's habitual residence, support proceedings cannot be brought elsewhere unless the support provider's habitual residence changes.  Jurisdiction over support matters, once acquired, is exclusive.  See also UIFSA § 711 (specifically applying the CEJ concept to orders from nations that have signed the Convention).  There is a series of exceptions, Convention art. 18(2), that apply when the parties agree in writing to give another country jurisdiction, when the support provider voluntarily submits to another country's jurisdiction, when the country with CEJ refuses to rule, or when the original support order cannot be recognized in another country.

Article 20 of the Convention is a broad jurisdictional provision, allowing jurisdiction in the habitual residence of the support provider, the habitual residence of the support recipient, or the habitual residence of the child.  The latter two bases are fundamentally inconsistent with American law, which provides that the court cannot make a support order unless it has personal jurisdiction over the support provider, even if the support recipient and the child are domiciled within the court's jurisdiction.  Kulko v. Super. Court, 436 U.S. 84 (1978).  The Senate resolution ratifying the Convention provides as follows:

The advice and consent of the Senate under section 1 is subject to the following reservations, which shall be included in the instrument of ratification:

(1)        In accordance with Articles 20 and 62 of the Convention, the United States of America makes a reservation that it will not recognize or enforce maintenance obligation decisions rendered on the jurisdictional bases set forth in subparagraphs 1(c), 1(e), and 1(f) of Article 20 of the Convention.

The Lawletter Vol 37 No 6

Sandra Thomas, Senior Attorney, National Legal Research Group

The Supreme Court of Iowa has permitted a man (Dier) who was falsely charged with fathering a child, and who then voluntarily provided support to the child and the mother (Peters), to seek recovery of those support payments in an action alleging common-law fraud.  Dier v. Peters, 815 N.W.2d 1 (Iowa 2012).

The child was born to Peters in February 2009.  Peters knew that Dier was not the biological father, but she told him that he was.  Based on Peters's representations, Dier provided financial support for both Peters and the child.

Dier filed an application seeking custody of the child; when Peters realized she might not get custody, she requested a paternity test.  The test excluded Dier as the biological father.

Dier then filed a petition seeking reimbursement from Peters of money given to her, money given to support the minor child, and money spent litigating custody.  Peters moved to dismiss the petition, stating that Iowa did not recognize an action for "paternity fraud" and that Dier had therefore failed to state a claim on which relief could be granted.  Dier opposed the motion, alleging that all the elements of fraud were present.  The trial court granted Peters's motion to dismiss, and Dier appealed.

The Iowa Supreme Court recognized that the "sole issue on appeal is whether Iowa law allows a putative father to bring a paternity fraud action against a biological mother to obtain reimbursement of payments that were voluntarily made."  Citing authority from other jurisdictions, the court stated that "paternity fraud" occurs when a mother "makes a representation to a man that the child is genetically his own even though she is aware that he is not, or may not be, the father of the child."  Id. at 4 (internal quotation marks omitted).  The court noted, however, that Dier "seeks only reimbursement of payments that he made without court compulsion."  Id. at 4-5.

The Iowa court recognized that the courts of other jurisdictions are divided on whether to recognize such claims.  The courts that do not allow such claims cite considerations of public policy and child welfare.  The courts that permit such suits reason that paternity fraud is not unlike other tort claims and should be allowed to go forward if the elements of the tort are met.