Search form

New California Law Excludes Certain Health Care Reimbursements from Employees' State Taxable Income

By Mark S. Askanas
  • October 15, 2013

California has adopted a new law excluding from gross income, for state personal income tax purposes, any amount received by an employee from an employer to compensate for additional federal income taxes incurred by the employee from employer-provided health benefits because of the federal government’s failure to recognize same-sex spouses or domestic partners as the employee’s spouse for federal income tax purposes. This exclusion also includes any “grossed-up” amounts the employer provided to offset any taxes incurred by the employee on such reimbursement. The new law covers same-sex couples who are married or registered domestic partners whose employers reimburse them for federal taxes the couples pay on health care benefits for their partner and dependents. The exclusion applies to tax years 2013 to 2018.

Following the U.S. Supreme Court’s June 26, 2013, opinion in United States v. Windsor, which invalidated the provision of the federal law that confined marriage to a legal union between one man and one woman as husband and wife, the Internal Revenue Service ruled that same-sex couples who are legally married in jurisdictions that recognize their marriages will be treated as married for all federal tax purposes, regardless of whether the couple currently lives in a jurisdiction that recognizes same-sex marriage or not. (For details on Windsor, please see U.S. Supreme Court Rulings on DOMA and California’s Proposition 8 Affect Employee Benefit Plans and Plan Sponsors. For details on the IRS ruling, please see IRS Rules All Legal Same-Sex Marriages Will Be Recognized for Federal Tax Purposes.) The IRS ruling does not apply to registered domestic partners.

For more information on this or other workplace developments, please contact the Jackson Lewis attorney with whom you regularly work. 

IRS Circular 230 disclosure: Any tax advice contained in this communication (including any attachments or enclosures) was not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed in this communication. (The foregoing disclaimer has been affixed pursuant to U.S. Treasury regulations governing tax practitioners.)

 

©2013 Jackson Lewis P.C. This Update is provided for informational purposes only. It is not intended as legal advice nor does it create an attorney/client relationship between Jackson Lewis and any readers or recipients. Readers should consult counsel of their own choosing to discuss how these matters relate to their individual circumstances. Reproduction in whole or in part is prohibited without the express written consent of Jackson Lewis.

This Update may be considered attorney advertising in some states. Furthermore, prior results do not guarantee a similar outcome.

Jackson Lewis P.C. represents management exclusively in workplace law and related litigation. Our attorneys are available to assist employers in their compliance efforts and to represent employers in matters before state and federal courts and administrative agencies. For more information, please contact the attorney(s) listed or the Jackson Lewis attorney with whom you regularly work.

See AllRelated Articles You May Like

July 27, 2017

Increase in 2017 Service Contract Act Health & Welfare Rate; Lower Rate for Contracts Covered by Federal Paid Sick Leave EO

July 27, 2017

The U.S. Department of Labor has released its annual memorandum with the rate increase for Service Contract Act (SCA) Health and Welfare (H&W) Fringe Benefits. The new rate of $4.41 per hour (up from the 2015-2016 rate of $4.27 per hour) is required in all government contract bids or other service contracts awarded on or after August... Read More

July 19, 2017

U.S. Supreme Court Round Up – 2016-2017

July 19, 2017

The U.S. Supreme Court term that ended June 2017 included a number of decisions important to workplace law, as well as the confirmation of Justice Neil Gorsuch. Although functioning with only eight justices for most of the 2016-2017 term, the Court managed to achieve a strong consensus in each of its employment-related rulings.... Read More

June 7, 2017

Supreme Court Rules Pension Plans of Religiously Affiliated Organizations Exempt from ERISA

June 7, 2017

ERISA’s “church plan” exemption applies to pension plans maintained by church-affiliated organizations such as healthcare facilities, even if the plans were not established by a church, the U.S. Supreme Court has ruled unanimously, 8-0. Advocate Health Care Network et al. v. Stapleton et al., Nos. 16-74; 16-86; 16-258 (June 5, 2017). (... Read More

Related Practices