Because the federal Defense of Marriage Act (DOMA) prohibits recognition of same-sex partnerships, the federal government treats health insurance benefits provided through a same-sex spouse’s or domestic partner’s employer as income and taxes them. The federal government does not tax these benefits as income for different sex couples. When a California employer provides reimbursement to its employees for this federal tax, often referred to as a “gross-up,” California taxes this reimbursement as additional income.
Assembly Bill 362, LGBT Health Insurance Parity, would cover people in a same-sex partner relationship who work for public entities, such as the City or County of San Francisco, or private sector companies that choose to reimburse their employees for federal taxes they pay on benefits received for their partner and dependents.
I am writing you to ask that you support Assemblymember Phil Ting's bill AB 362, LGBT Health Insurance Parity, which provides an exemption from state taxes for additional income an employer provides to an employee to make up for federal taxes the employee would otherwise pay to add a registered domestic partner or same-sex spouse (and/or their dependents) to insurance plans.
Under existing law, even when reimbursed for the federal taxes paid for their health insurance, same-sex couples end up paying an average of $180 more on their health insurance coverage every year compared to different-sex couples. If one partner’s dependents are also covered under the other partner’s health plan, that will multiply their costs. For example, a family of four in this situation would end up paying approximately $540 more on their health insurance compared to a similarly situated family headed by a different-sex couple.
This hurts both the wealth and the health of your constituents and Californians.
AB 362 would make gross-ups/reimbursements exempt from California state income tax and put an end to this unfair taxation. Please vote to support LGBT health insurance parity.