Section 211(a) (5) (A) of the Social Security Act previously provided that community income subject to community
property laws and derived from a trade or business (other than a trade or business
carried on by a partnership) was to be treated as the income of the husband unless
the wife exercises substantially all the management and control of the trade or business.
Several Federal courts found this section of the Act to be unconstitutional as it
discriminated against women in violation of the equal protection provision of the
Due Process Clause of the Fifth Amendment to the Constitution. Cases so holding are:
Carrasco V. Secretary, HHS (1 Cir. 1980); Hester v. Harris (5th Cir. 1980); and Becker v. Harris (E.D., California; 1980). SSA acquiesced in the Becker decision (see SSR 81-17c) and in October 1980 the Attorney General notified Congress that he would not appeal
the decision that the statute was unconstitutional.
Therefore, effective with taxable years that include October 1980, the unconstitutionality
of section 211(a) (5) (A) applied and SSA no longer applied the statutory presumption
that self-employment income (SEI) would be considered earned by the husband under
the statutory presumption that the husband is the operator of the business. The following
States have community property laws: Arizona, California, Idaho, Louisiana, Nevada,
New Mexico, Wisconsin, Texas, and Washington. The court decisions affected Federal
Social Security coverage. The State laws themselves were not declared unconstitutional.
However, Section 425 of the Social Security Protection Act of 2004 amended section 211(a)(5)(A) of the Social Security Act and section 1402(a)(5)(A) of the Internal Revenue Code to provide that if community property laws apply to
income that an individual derives from a trade or business (other than a partnership),
the gross income and deductions derived from such trade or business shall be treated
as the gross income and deductions of the spouse carrying on the trade or business
and if jointly operated as the gross income and deductions of each spouse on the basis
of his or her respective distributive share of the gross income and deductions. Therefore,
SSA no longer follows the provisions of the Edwards Court Order or the instructions
previously contained in RS 01802.410 through RS 01802.470 which are now obsolete.