WASHINGTON — U.S. Sens. Charles Schumer (D-N.Y.) and Susan Collins (R-Maine) on Monday introducing the Tax Parity for Health Plan Beneficiaries Act, a bill that would end the taxation of employer-provided health insurance for domestic partners, as well as the penalty imposed on employers who provide equal benefits to their LGBT employees.
Currently, employees are taxed on the fair market value of employer-provided health coverage for same-sex domestic partners or spouses. The same employer-provided health coverage for opposite-sex spouses is excluded from the employee’s gross income and no taxes are paid.
While a growing number of companies “gross up,” or pay LGBT employees with dependent partners more to offset the tax burden, most do not.
Employees who elect to cover domestic partner or same-sex spouse pay more income and payroll tax and employers who offer benefits to domestic partners face the administrative burden of calculating taxes separately, and also pay additional payroll taxes.
Among them, a coalition of major employers — including Dow, Corning, Chubb, IBM, Microsoft, and Nike — support ending the taxation of health benefits, and endorse the Tax Parity for Health Plan Beneficiaries Act.
“Domestic partner benefits play a large role in our ability to recruit and retain top talent. This legislation would end the discriminatory tax burden our employees and their families face when we offer these important benefits to them,“ said Howard Ungerleider, an Executive Vice President at Dow Chemical Company and executive sponsor of Dow’s Diversity Network.”