BILL ANALYSIS Ó
-----------------------------------------------------------------
|SENATE RULES COMMITTEE | AB 362|
|Office of Senate Floor Analyses | |
|1020 N Street, Suite 524 | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
-----------------------------------------------------------------
THIRD READING
Bill No: AB 362
Author: Ting (D), et al.
Amended: 5/21/13 in Assembly
Vote: 21
SENATE GOVERNANCE & FINANCE COMMITTEE : 6-1, 8/14/13
AYES: Wolk, Beall, DeSaulnier, Emmerson, Hernandez, Liu
NOES: Knight
SENATE APPROPRIATIONS COMMITTEE : 6-1, 8/30/13
AYES: De León, Gaines, Hill, Lara, Padilla, Steinberg
NOES: Walters
ASSEMBLY FLOOR : 56-19, 5/28/13 - See last page for vote
SUBJECT : Personal income taxes: exclusion: health insurance
SOURCE : Equality California
DIGEST : This bill, until January 1, 2019, excludes from gross
income any amounts received by an employee from an employer to
compensate for additional federal income taxes that are incurred
by the employee on employer-provided health-care benefits
because, for federal income tax purposes, the same-sex spouse or
domestic partner of the employee is not considered the spouse of
the employee. The exclusion from gross income also applies to
any amount of the employer-provided health-care compensation
paid to an employee that represents the "grossed-up" amount that
an employer includes to offset additional federal income taxes
incurred on such compensation.
CONTINUED
AB 362
Page
2
ANALYSIS : Federal and state tax laws exclude
employer-provided health insurance from gross income. Federal
law provides the inclusion for the employee, his/her dependents
and the employee's opposite sex spouse. State law provides the
benefit for a domestic partner which may include a same sex
spouse. This difference in the recognition and treatment of
same sex spouses lead to different tax consequences under state
and federal law:
Federal law provides that employer provided health insurance
premiums must be included in gross income and therefore taxed
at the federal level. Under state law, these premiums are
not included.
Federal and state law allow taxpayers to claim a personal
exemption for each of the taxpayer's dependents but federal
law does recognize the dependents of same sex marriages.
Generally, the more dependents a taxpayer may claim, the
lower that taxpayer's federal tax liability will be.
Both federal and state law includes any compensation to
discharge any tax liability in gross income. For example, if an
employer provides an "offset" to an employee to pay the taxes on
health insurance premiums of his/her same sex spouse, that
amount would be included in gross income and therefore taxed.
This bill, until January 1, 2019, excludes from gross income any
amounts received by an employee from an employer to compensate
for additional federal income taxes that are incurred by the
employee on employer-provided health-care benefits because, for
federal income tax purposes, the same-sex spouse or domestic
partner of the employee is not considered the spouse of the
employee. The exclusion from gross income also applies to any
amount of the employer-provided health-care compensation paid to
an employee that represents the "grossed-up" amount that an
employer includes to offset additional federal income taxes
incurred on such compensation.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee, the Franchise
Tax Board (FTB) indicates that the bill will result in a General
CONTINUED
AB 362
Page
3
Fund revenue loss of $80,000 in 2013-14, $60,000 in 2014-15 and
$70,000 in 2015-16. This bill will not significantly impact the
department's costs. However, FTB's revenue estimate was
prepared before the United States Supreme Court passed rulings
related to same-sex marriages in June 2013. Those rulings would
likely lower the revenue loss from this bill.
SUPPORT : (Verified 8/30/13)
Equality California (source)
AFSCME
Alice B. Toklas Democratic Club
Board of Equalization Member Betty T. Yee
California Association of Health Underwriters
California Nurses Association
Cities of Los Angeles, Sacramento, and West Hollywood
Facebook
Harvey Milk Democratic Club
Health Access
Los Angeles Gay & Lesbian Center
Microsoft
Orange County LGBTQ Center
San Francisco Chamber of Commerce
San Francisco Mayor Edwin M. Lee
ARGUMENTS IN SUPPORT : According to the author:
Many employers provide health insurance benefits to their
employees. Due to the Federal Defense of Marriage Act (DOMA),
however, unlike coverage for opposite-sex spouses, benefits
for same-sex partners are taxed by the Federal Government as
income to the employee. Employees with same-sex partners pay
an average of $1,070 per year more in taxes than opposite-sex
married employees with the same coverage. The number
multiplies if the partner has children.
Unjustly, even when a California employer compensates an
employee for the federal taxes, these households end up paying
state income taxes on this reimbursement.
ASSEMBLY FLOOR : 56-19, 5/28/13
AYES: Achadjian, Alejo, Ammiano, Atkins, Bloom, Blumenfield,
Bocanegra, Bonilla, Bonta, Bradford, Brown, Buchanan, Ian
Calderon, Campos, Chau, Chávez, Chesbro, Cooley, Daly,
CONTINUED
AB 362
Page
4
Dickinson, Eggman, Fong, Fox, Frazier, Garcia, Gatto, Gomez,
Gonzalez, Gordon, Gray, Hall, Roger Hernández, Jones-Sawyer,
Levine, Lowenthal, Maienschein, Medina, Mitchell, Mullin,
Muratsuchi, Nazarian, Nestande, Pan, Perea, V. Manuel Pérez,
Quirk, Quirk-Silva, Rendon, Skinner, Stone, Ting, Weber,
Wieckowski, Williams, Yamada, John A. Pérez
NOES: Bigelow, Conway, Dahle, Donnelly, Beth Gaines, Grove,
Hagman, Harkey, Jones, Linder, Logue, Mansoor, Melendez,
Morrell, Olsen, Patterson, Wagner, Waldron, Wilk
NO VOTE RECORDED: Allen, Gorell, Holden, Salas, Vacancy
AB:k 8/31/13 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
**** END ****
CONTINUED