Dragovich v. U.S. Dep't of the Treasury

872 F.Supp.2d 944

109 A.F.T.R.2d 2012-2286

Michael DRAGOVICH; Michael Gaitley; Elizabeth Litteral; Patricia Fitzsimmons; Carolyn Light; Cheryl Light; David Beers; Charles Cole; Rafael V. Dominguez; and Jose G. Hermosillo, on behalf of themselves and all others similarly situated, Plaintiffs,

v.UNITED STATES DEPARTMENT OF the TREASURY; Timothy Geithner, in his official capacity as Secretary of Treasury, United States Department of the Treasury; Internal Revenue Service; Douglas Shulman, in his official capacity as Commissioner of the Internal Revenue Service; Board of Administration of California Public Employees' Retirement System; and Anne Stausboll, in her official capacity as Chief Executive Officer, CalPERS, Defendants.

No. C 10–01564 CW.

United States District Court, N.D. California.

May 24, 2012.

Unconstitutional as Applied

1 U.S.C.A. § 7; 26 U.S.C.A. § 7702B(f)

Claudia Center, Elizabeth Kristen, Lori Rifkin, Shelley A. Gregory, San Francisco, CA, for Plaintiffs.

ORDER GRANTING PLAINTIFFS' MOTION FOR SUMMARY JUDGMENT AND DENYING THE BLAG'S AND FEDERAL DEFENDANTS' CROSS–MOTIONS FOR SUMMARY JUDGMENT (Docket Nos. 111, 116 and 117)

CLAUDIA WILKEN, District Judge.

Plaintiffs challenge the constitutionality of § 3 of the Defense of Marriage Act (DOMA), 1 U.S.C. § 7, and § 7702B(f) of the Internal Revenue Code, 26 U.S.C. § 7702B(f), to the extent that these statutes limit Plaintiffs' participation in a long-term care insurance program maintained by the California Public Employees' Retirement System (CalPERS). Plaintiffs contend that these federal provisions violate the Constitution's guarantees of equal protection and substantive due process by barring the same-sex legal spouses and registered domestic partners of California public employees from enrollment in the CalPERS long-term care plan, even though opposite-sex legal spouses are permitted to enroll.

Plaintiffs move for summary judgment on their claims against all Defendants. Federal Defendants have submitted a brief partially supporting Plaintiffs' motion for summary judgment. Federal Defendants argue that gay men and lesbians should be found to be a suspect class and that § 3 of the DOMA infringes their equal protection rights. However, Federal Defendants oppose Plaintiffs' motion and cross-move for summary judgment as to Plaintiffs' equal protection claim challenging § 3 of the DOMA on behalf of same-sex couples who are registered domestic partners under California law, and as to Plaintiffs' substantive due process challenge to § 3 of the DOMA. Federal Defendants also cross-move for judgment that Title 26 U.S.C. § 7702B(f) is constitutionally valid.

Because Federal Defendants would not defend the validity of § 3 of the DOMA against the equal protection challenge by same-sex spouses, the Court granted the Bipartisan Legal Advisory Group of the United States House of Representatives (BLAG) leave to intervene to defend the law. Accordingly, the BLAG has opposed Plaintiffs' motion for summary judgment that § 3 of the DOMA is unconstitutional as it affects same-sex spouses here, and has cross-moved for summary adjudication that the provision is constitutional.

State Defendants have filed a response to Plaintiffs' motion, seeking guidance from the Court and a stay of any federal action disqualifying the CalPERS program, in the event that the Court grants Plaintiffs' motion for summary judgment.¹

Having considered all of the parties' submissions and oral argument, the Court grants Plaintiffs' motion for summary judgment and denies Federal Defendants' and the BLAG's cross-motions.

BACKGROUND

I. Long-term Care Insurance and the Challenged Provisions

Plaintiffs are California public employees and their same-sex spouses and registered domestic partners, who are in long-term committed relationships recognized and protected under California law. As explained in this Court's previous orders, CalPERS provides retirement and health benefits, including long-term care insurance, to many of the state's public employees and retirees and their families. Long-term care insurance provides coverage when a person needs assistance with basic activities of living due to injury, old age, or severe impairments related to chronic illnesses, such as Alzheimer's disease.

In 1996, Congress passed the DOMA, which, among other things, defined the terms “spouse” and “marriage” for federal law purposes in a manner limiting them to heterosexual couples. As amended by § 3 of the DOMA, the United States Code provides,

In determining the meaning of any Act of Congress, or of any ruling, regulation, or interpretation of the various administrative bureaus and agencies of the United States, the word “marriage” means only a legal union between one man and one woman as husband and wife, and the word “spouse” refers only to a person of the opposite sex who is a husband or a wife.

1 U.S.C. § 7.

Title 26 U.S.C. § 7702B(f) was also enacted in 1996, as part of the Health Insurance Portability and Accountability Act (HIPAA), providing favorable federal tax treatment to participants in qualified state-maintained long-term care insurance plans for state employees. 26 U.S.C. § 7702B(f). Currently, the CalPERS long-term care insurance program is a qualified state-maintained plan pursuant to § 7702B(f).

Section 7702B(f)(2) disqualifies a state-maintained plan from favorable tax treatment if it provides coverage to individuals other than those specified under its subparagraph (C). The list of eligible individuals in § 7702B(f)(2)(C) includes state employees and former employees, their spouses, and individuals bearing a relationship to the employees or spouses which is described in subparagraphs (A) through (G) of 26 U.S.C. § 152(d)(2). Id.

Section 152(d)(2), the part of the tax code from which subparagraph (C) draws its list of eligible relatives, defines the relatives for whom a taxpayer may claim a dependent exemption. See26 U.S.C. §§ 151–52. Section 152(d)(2), subparagraphs (A) through (H), identifies the following individuals as “qualifying relatives” for the dependent exemption:

(A) A child or a descendant of a child.

(B) A brother, sister, stepbrother, or stepsister.

(C) The father or mother, or an ancestor of either.

(D) A stepfather or stepmother.

(E) A son or daughter of a brother or sister of the taxpayer.

(F) A brother or sister of the father or mother of the taxpayer.

(G) A son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law.

(H) An individual ... who, for the taxable year of the taxpayer, has the same principal place of abode as the taxpayer and is a member of the taxpayer's household.

26 U.S.C. § 152(d)(2).

When it chose to incorporate subparagraphs (A) through (G), Congress specifically chose not to carry over subparagraph (H) to subparagraph (C) of § 7702B(f)(2). Had Congress not chosen to exclude subparagraph (H) from subparagraph (C) of § 7702B(f)(2), registered domestic partners of California public employees would have qualified as individuals eligible to enroll in the CalPERS long-term care plan.

In addition to providing favorable tax treatment to state-maintained long-term care plans, Congress approved such treatment for long-term care coverage purchased through the private market. 26 U.S.C. § 7702B(a)-(b).

Congress enacted these provisions because of the critical role of long term care insurance in protecting families. “The legislation ... provides tax deductibility for long term care insurance, making it possible for more Americans to avoid financial difficulty as the result of chronic illness.” 142 Cong. Rec. S3578–01 at *3608 (Statement of Sen. McCain) (Apr. 18, 1996); see also Joint Committee on Taxation, “Description of Federal Tax Rules and Legislative Background Relating to Long–Term Care Scheduled for a Public Hearing Before the Senate Committee on Finance on March 27, 2001,” at 2001 WL 36044116 (provisions granting tax advantages for long-term care plans were adopted “to provide an incentive for individuals to take financial responsibility for their long-term care needs.”).

II. Congressional Denial of Federal Legal Recognition for Same–Sex Couples

For more than two decades, jurisdictions other than the federal government have extended to same-sex couples legal recognition in various forms, such as registered domestic partnerships, civil unions, reciprocal beneficiary relationships and, more recently, civil marriage.² Over time, the number of jurisdictions granting these forms of legal recognition has increased.

Congress discussed registered domestic partnership laws prior to and during 1996, when the statutes challenged here were passed. These discussions occurred after the District of Columbia passed, in April 1992, the Health Care Benefits Expansion Act, which established a domestic partnership registry in that jurisdiction. Congress reacted to the new law by barring any local or federal funding to implement, enforce or administer the registry. District of Columbia Appropriations Act, 1993, Pub.L. No. 102–382, 106 Stat. 1422 (1992). Representative Clyde Holloway argued, “If there ever was an attack on the family in this country, it is [the District of Columbia's] Domestic Partnership Act ... To me, this bill totally destroys the families of this country.” 138 Cong. Rec. H2950–04, 1992 WL 96521, at *H2950. In arguing against the appropriations ban before the Senate, Senator Brock Adams entered into the Congressional record information detailing domestic partnership recognition in numerous jurisdictions, apart from the District of Columbia. 138 Cong. Rec. S10876–01, 1992 WL 180795, at *S10904.

In 1993, as part of a successful drive to renew the funding ban, Representative Ernst Istook argued, “Now, obviously this was passed by the District of Columbia to enable people, more than anything else, who are in a homosexual relationship to register an equivalent of a gay marriage. That is one of the reasons that this particular...