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Federal legislation introduced to provide fair tax treatment for same-sex couples
Domestic partner act introduced in House; Senate expected to follow

by Brad Luna

‘I want dignity, respect and the law to extend to health care benefits for gay, lesbian, transgender and bisexual Americans in the workplace …’
— Congressman Jim McDermott (D-WA)
WASHINGTON, D.C. — Congressman Jim McDermott (D-WA) introduced the Tax Equity for Health Plan Beneficiaries Act into the 110th Session of Congress on March 29. The legislation would end the tax inequities that currently apply to employer-provided health insurance for domestic partners.

Currently, the Internal Revenue Code (IRC) excludes from income the value of insurance premiums and benefits received by employees for coverage of an employee’s spouse and dependents, but does not extend this treatment to coverage of domestic partners. As a result, employees are taxed on the coverage provided to their partners, but have no additional income to cover this tax burden. In addition, the value of domestic partner benefits is included in the employee’s wages for the purpose of calculating payroll taxes, thus increasing both the employee’s and the employer’s payroll tax obligations.

“This legislation to provide equitable tax treatment to all employees, regardless of their sexual orientation, is as fair and common-sense as it gets,” said Human Rights Campaign President Joe Solmonese. “Over half of Fortune 500 companies now offer domestic partner health benefits to their employees and there is no logical reason why these benefits should be taxed any differently. This bill is a win, win proposal for both workers and businesses.”

Rep. McDermott is the lead author of the bill in the United States House of Representatives. Sen. Gordon Smith (R-OR) and Sen. Chuck Schumer (D-NY) are expected to introduce their bipartisan, companion bill — the Domestic Partner Health Benefits Equity Act — in the United States Senate soon.

“Human rights is unattainable without equal rights; I want dignity, respect, and the law to extend to health care benefits for gay, lesbian, transgender and bisexual Americans in the workplace, and this bill is my commitment put into action,” Rep. McDermott said.

In growing numbers, both public and private employers across the country have made the wise business decision to provide health benefits to domestic partners of their employees. As of Jan. 1 a majority (265) of the Fortune 500 corporations offered health benefits to employees’ domestic partners, more than twice as many as in 2000 and more than a ten-fold increase since 1995. Unfortunately, federal tax law has not kept up with corporate change in this area and both employers and employees who offer these benefits are being taxed inequitably. A total of 30 businesses have joined the Business Coalition for Benefits Tax Equity in support of these changes becoming law.

“At Chubb, we take pride in the progress we have made in creating a workplace that values employee diversity. As one of the first major corporations to extend benefits to domestic partners, we continue to seek ways to demonstrate how we value all of our employees’ diversity-enabling us to attract and retain the most talented and diverse group of employees,” said Kathy Marvel, senior vice president and chief diversity officer, Chubb & Son, a member of the Business Coalition for Benefits Tax Equity. “Unfortunately, the continued taxation of domestic partner benefits places an undue burden on our employees and our company. We support Rep. McDermott’s efforts to repeal the unfair taxation of these important benefits.”

“Domestic partner health benefits have been a key part of our effort to attract and retain a qualified and diverse workforce, and we are pleased to support Rep. McDermott’s legislation that would end the tax penalties we and our employees face when we make these benefits available,” said Julie Fasone Holder, corporate vice president for human resources, diversity and inclusion and public affairs, The Dow Chemical Company, also a member of the Business Coalition for Benefits Tax Equity.

— For numerical examples of how the current domestic partner tax inequity affects many same-sex couples, visit www.hrc.org.

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