Provides for the exemption of contributions made by an employer to an accident or health plan for the benefit of an employee's domestic partner from federal gross income

Title of bill

An act to amend the tax law and the administrative code of the city of New York, in relation to exempting from federal adjusted gross income the value of employer-provided coverage under an accident or health plan for an employee's domestic partner

Summary of specific provisions

Section one of the bill amends subsection (c) of section 612 of the tax law, which lists subtractions from federal adjusted gross income, by adding a new paragraph 39 that includes contributions made by an employer to an accident or health plan for the benefit of the employee's domestic partner, to the extent includible in gross income for Federal tax purposes.

Section two of the bill makes a corresponding amendment to subdivision (c) of section 11-1712 of the administrative code of the city of New York by adding a new paragraph 35, specifying contributions made by an employer to an accident or health plan for the benefit of the employee's domestic partner, to the extent includible on gross income for Federal income tax purposes.

Justification

Under current federal law, when an employer pays additional amounts to cover an employee's domestic partner by a health insurance plan, the amount over that paid to cover the employee is treated as part of the employee's gross income for federal tax purposes. By contrast, when an employer pays such amounts to cover an employee's spouse or dependent, the contribution is excluded from federal gross income. See, 26 U.S.C. §106 and 26 C.F.R. §1.106-1. A domestic partner is not a dependent for this purpose. Because State and City tax laws determine gross income based on federal tax law in this regard, health benefits provided to an employee's domestic partner are also taxed as a "taxable fringe benefit" at the State and local level. Current law therefore creates the following inequitable situation: a married employee whose spouse is covered under an employer health plan does not have to treat this benefit as taxable income, but an employee with a covered domestic partner does, and is therefore subject to additional taxes.

This bill would make income attributed to the employee from the health coverage an employer provides for that employee's domestic partner a New York subtraction, thus excluding it from income for state and city income tax purposes. Such a tax benefit would further the goal of equality between married couples and domestic partners, and would also further the goal of making quality health care more accessible and affordable to more New Yorkers.

Prior legislative history

A.3614/S.1833 (2007-2008); A.7577/S.4795-A (2005-06).

Fiscal implications

To be determined.

Effective date

This act shall take effect on the first of January next succeeding the date on which it shall have become a law.