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Bill Ends Tax Inequities On Health Benefits For Same-Sex Couples

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Bipartisan legislation has been introduced in Congress to stop the federal tax inequities faced by same-sex couples when they receive employer-provided health care benefits.

Specifically, under current law employers are subject to payroll tax, and employees to income and payroll taxes, for the value of providing healthcare coverage to a domestic partner.

The legislation in the Senate is S. 1556, the “Tax Equity for Domestic Partner and Health Plan Beneficiaries Act of 2007.” Companion legislation, H.R. 1820, was introduced March 29 in the House by Rep. Jim McDermott, D-Wash.

Under the legislation introduced June 6 by Sen. Gordon Smith, R-Ore., and Sen. Maria Cantwell, D-Wash., the inequity in the tax deduction for healthcare benefits for same-sex couples would be ended. In addition, the new law would encourage employers to increase health plan coverage for same-sex couples by reducing administrative burdens, Smith said.

Sen. Joseph Lieberman, Ind.-Conn., is an original co-sponsor of the legislation.

Margery Brittain, vice president of global benefits for MetLife, voiced support for the legislation on behalf of MetLife and the Business Coalition for Benefits Tax Equity.

In a statement, the coalition noted that “employers across the U.S. in increasing numbers have made their business to provide health benefits to the domestic partners of their employees.”

Both Brittain and a coalition letter to the co-sponsors said that as of this month, 266 of the Fortune 500 companies are offering domestic partner coverage, which represents a 12-fold increase since 1995.

“These employers have recognized that the provision of domestic partner health coverage is an essential component of a comprehensive benefits package,” the letter said.

In his comments, Smith said the legislation could pass Congress as a stand-alone bill, but will more likely be part of omnibus health insurance legislation now being drafted by the Senate Finance Committee.

For example, the panel hopes to hold a markup very soon on bipartisan legislation that would extend the State Children’s Health Insurance Program and increase funding for it. A key decision that has tentatively been made is to pay for the increase in funding of $50 billion over 10 years by increasing the cigarette tax.

Besides Senate Finance Committee members, Sen. Ted Kennedy, D-Mass., and Sen. Orrin Hatch, R-Utah, are involved in the talks, say congressional staffers.