BILL NUMBER:  S2870

 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.