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opposite-sex domestic partners as _ ary reduction agreement between the employer now presumably transfer assets between well as same-sex domestic partners. and the employee in which the employee agrees themselves with no concern of lifetime gift to contribute a portion of his or her salary on tax consequences. This creates consider- COMMENT. The federal governments a pre-tax basis to pay for the qualified benefits. ably greater flexibility for estate planning. Office of Personnel Management defines Salary reduction contributions are not actually The IRS is expected to issue guidance. domestic partner for purposes of federal or constructively received by the participant. employee benefits as a committed relation- Therefore, those contributions are not consid- COMMENT. Giffs to cover medical and ship between two adults, of the same sex. ered wages for federal income tax purposes. In education expenses for an individual, if addition, those sums generally are not subject to paid directly to the medical or education Tax Treatment. Domestic partners who are FICA and FUTA taxes. However, pre-tax dol- provider, are gift tax free without limit not married under state law are not treated lars could not be used to pay for coverage of a and are not counted against the annual as spouses for federal income tax purposes. _ same-sex spouse because of DOMA. This now $14,000 exclusion for any individual. As a result, an employee must continue should change as a result of the Court's decision. to pay taxes on the fair market value of COMMENT. Where one spouse is not a the coverage for the employee’s domestic Health Flexible Spending Accounts. A U.S. citizen, the annual exclusion from partner (whether the domestic partner is a _ health flexible spending arrangement (FSA) CCH Tax Briefing HOUSE_OVERSIGHT_029311
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employees on income imputed to IMPACT. The Supreme Courts decision spending accounts, health savings accounts employees for same-sex married spouse presumably enables same-sex married and health reimbursement arrangements and refunds of payroll taxes paid by em- couples to take advantage of portability as available to opposite-sex married couples. players on that income. FICA tax refund part of their estate planning. The IRS is claims by employers and employees for expected to issue guidance. IMPACT. Employers in states that allow prior, open years may also be possible. same-sex marriage will presumably need Gifts. Because of DOMA, only opposite- to amend plans to cover same-sex married COMMENT. Some employers have at- sex married couples were allowed to “split” spouses. The IRS is expected to provide guid- tempted to equalize the treatment be- gifts to take advantage of a doubled annual ance on the timing of plan amendments, in- tween opposite-sex couples and same-sex gift tax exclusion ($14,000 for 2013, for cluding the issue of whether benefits need to couples by providing so-called gross-ups a total tax-free gift of $28,000). DOMA be made retroactive or only prospective from to cover the additional taxes that same- presented even more of a disadvantage the date of the Windsor decision. sex couples pay on health benefits. Many for same-sex married couples in that only employers require an employee to certify transfers between spouses, where both in- | Domestic Partners. Many employee ben- that a domestic partner qualifies as a de- dividuals are U.S. citizens, are allowed an _ efit plans in the private and public sectors pendent under Code Sec. 152. unlimited gift tax exclusion under Code _ refer to domestic partners rather than same- See. 2523: sex spouses. The definition of domestic Cafeteria Plans. Employer contributions to partner varies. In some cases, it may en- a cafeteria plan are usually made under a sal- IMPACT. Same-sex married couples can compass
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June 27, 2013 deduction unnecessary in the majority of gift taxes for gifts made to the noncitizen same-sex partner or an opposite-sex part- cases. However, as Windsor showed, it is spouse is $143,000 for 2013. ner). However, domestic partner benefits a valuable tax benefit for larger estates. are tax-free if the employee's partner quali- Many same-sex married couples may find fies as a dependent under Code Sec. 1525 it valuable to revisit their estate plans to EMPLOYEE BENEFITS that is, if benefits are paid for a person who make certain that interests passing to the meets the following requirements: other spouse qualify for the marital de- Perhaps in no area outside of income taxes is duction and other tax benefits. the impact of the Supreme Court's decision = Receives more than half of his or her more expansive than on employee benefits. support from the taxpayer for the year. Portability. The American Taxpayer Relief — Because of DOMA, employers that allowan m= Uses the taxpayer’s home as the principal Act of 2012 extended permanently the con- _ employee to add his or her same-sex spouse abode and is a member of the taxpayer's cept of portability, which generally allows to their health plan had to impute income household during the entire tax year. the estate of a surviving spouse to utilize the to the employee for federal income tax pur- sm _Is in a relationship with the taxpayer unused portion of the estate tax applicable _ poses equal to the fair market value of health that is not a violation of local law. > exclusion amount of his or her last prede- coverage provided to the same-sex spouse. ceased spouse. Because of DOMA, only _ If the same-sex spouse qualified as a depen- 5 opposite-sex married couples could take ad- dent, this rule did not apply. DOMA also IMPACT. The Supreme Courts decision vantage of portability. precluded same-sex married couples from may open the window to refunds of taxes i sharing the same benefits of health flexible paid by
February 10, 2026 at 3:21 AM