Pennsylvania ends same-gender marriage ban – are you taxing benefits correctly?

On May 20, 2014, a US District Court judge overturned Pennsylvania’s 1996 ban on same-gender marriage ruling it unconstitutional. (Deb Whitewood, et al, vs. Michael Wolf, 1:13-cv-1861) Governor Tom Corbett chose not appeal the ruling making it the 18th state plus the District of Columbia that now allows the issuance of marriage licenses to same-gender couples. Pennsylvania has never recognized civil unions or registered domestic partnerships, and until now, was the only state in the northeast region that prohibited same-gender marriage.

The May 20th ruling ends a wave of legal challenges that began in September 2013. Guidance has not yet been issued by the Pennsylvania Department of Revenue; however, it is assumed that fringe benefits provided to a same-gender spouse will receive the same state and local tax treatment that was extended to a lawful spouse under prior law.

State and local taxation of same-gender partner benefits isn’t as easy as it seems. That’s because a state’s civil laws governing marriage do not necessarily govern the income tax and unemployment insurance coverage rules. Take Missouri for instance. The state prohibits marriage between a couple of the same gender; however, a same-gender couple lawfully married in another state is treated as married for Missouri income and unemployment insurance tax purposes.

Speak to a trusted employment tax advisor about the payroll tax treatment of same-gender partner benefits.

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Same-sex partner benefits | Do you have a plan?

The Supreme Court’s ruling, in United States v. Windsor, that Section 3 of the Defense of Marriage of Act (DOMA) is unconstitutional has triggered guidance from Treasury, Internal Revenue Service,  US Department of Labor and state taxing authorities changing the manner in which employers retroactively and prospectively administer, tax and report same-sex spousal benefits.

Integrating the new rules into multiple business practices means analyzing, implementing and communicating with employees in a short time frame.

To start you off in the process, Ernst & Young LLP has  prepared a handy check list and sample work plan.

You can download the check list and sample work plan at  http://response.ey.com/CSG3/?doma