A Little Bit of History
To understand where we are now, it’s helpful to know how we got here…
The roots of domestic partner benefits stretch way back to 1982, when the City of San Francisco enacted legislation to offer health insurance coverage to the same or opposite sex partners of its unmarried employees. “Domestic partner” soon became the official legal term used by insurers and private and public employers.
Also, in 1982, New York City newspaper The Village Voice became the first private employer to offer domestic partner health care benefits. Many other companies and municipalities followed suit. Fast forward to more than 30 years later when, in 2015, the United States Supreme Court ruled that domestic partner benefits apply to both same-sex and unmarried opposite-sex couples.
Federal Law: Domestic Partnership Vs. Marriage
The Supreme Court declared in 2013 that Section 3 of the Defense of Marriage Act, which denied the federal government’s recognition of same-sex marriages (even in states where it was legal), was unconstitutional. And with the Court’s landmark 2015 decision in Obergefell v. Hodges, same-sex marriage became legal nationwide.
The IRS stepped in and declared that two people are legally married under federal law when they are also legally married under their state’s law. Because of this declaration, the IRS treats same-sex and opposite-sex marriages the same under federal tax law. However, domestic partnerships, regardless of state, aren’t considered marriages.
Employers Unable to Provide Pre-Tax Benefits to Domestic Partners
Providing pre-tax benefits to employees is an important component of the attraction and retention programs of many companies. But under federal law, an employer can provide pre-tax health insurance benefits only to their employees’ spouses or dependents, not domestic partners.
According to the Human Rights Campaign, “Domestic partner benefits are an easy way to obtain a competitive advantage for talent and to drive recruitment and retention of dedicated employees… a plan that does not include domestic partner benefits ignores a significant portion of the workforce.”
The benefits landscape is changing, and employers should always be on the lookout for any edge that can better attract and retain top talent.
Domestic Partner Benefits Laws: By States and Municipalities
Here’s a quick snap shot of the U.S. and which states have laws around domestic partner benefits. For a deeper dive into a specific state, check out the chart below.
To help organizations stay informed—and compliant—we’ll keep these resources updated in line with any new legislation at federal, state or local level.
|State||Domestic Partner Benefits Law|
|Alabama||No rights for domestic partners|
|Alaska||No rights for domestic partners|
|Arizona||Phoenix and Tucson mandate benefits for domestic partners|
|Arkansas||No rights for domestic partners|
|California||Alameda County, Berkeley, Laguna Beach, Los Angeles, Los Angeles County, Marin County, Oakland, Petaluma, Sacramento, San Diego, San Francisco, San Francisco County, San Mateo County, Santa Cruz, Santa Cruz County, Ventura County, West Hollywood. The following cities and counties offer domestic partner registries: Arcata, Berkeley, Cathedral City, Davis, Laguna Beach, Long Beach, Los Angeles, Los Angeles County, Oakland, Palo Alto, Sacramento, San Francisco, Santa Barbara County, and West Hollywood mandate benefits for domestic partners|
|Colorado||Denver mandates benefits for domestic partners|
|Connecticut||The state mandates benefits for domestic partners|
|Delaware||No rights for domestic partners|
|Florida||Broward County and Palm Beach County mandate benefits for domestic partners|
|Georgia||Atlanta mandates benefits for domestic partners|
|Hawaii||The state mandate benefits for domestic partners|
|Idaho||No rights for domestic partners|
|Illinois||Chicago, Oak Park and Cook County mandate benefits for domestic partners|
|Indiana||Bloomington mandates benefits for domestic partners|
|Iowa||Iowa City mandate benefits for domestic partners|
|Kansas||No rights for domestic partners|
|Kentucky||No rights for domestic partners|
|Louisiana||New Orleans mandates benefits for domestic partners|
|Maine||Portland mandates benefits for domestic partners|
|Maryland||Baltimore and Takoma Park mandate benefits for domestic partners|
|Massachusetts||Boston, Brewster, Brookline, Nantucket, Provincetown and Springfield mandate benefits for domestic partners|
|Michigan||Ann Arbor, East Lansing, Kalamazoo, Washtenaw County and Wayne County mandate benefits for domestic partners|
|Minnesota||Minneapolis mandates benefits for domestic partners|
|Mississippi||No rights for domestic partners|
|Missouri||St. Louis mandate benefits for domestic partners|
|Montana||No rights for domestic partners|
|Nebraska||No rights for domestic partners|
|Nevada||No rights for domestic partners|
|New Hampshire||No rights for domestic partners|
|New Jersey||The state mandates benefits for domestic partners|
|New Mexico||Albuquerque mandate benefits for domestic partners|
|New York||Albany, Brighton, Eastchester, Ithaca, New York City, Rochester, and Westchester County mandate benefits for domestic partners|
|North Carolina||Chapel Hill mandates benefits for domestic partners|
|North Dakota||No rights for domestic partners|
|Ohio||No rights for domestic partners|
|Oklahoma||No rights for domestic partners|
|Oregon||The state mandates benefits for domestic partners|
|Pennsylvania||Philadelphia mandates benefits for domestic partners|
|Rhode Island||No rights for domestic partners|
|South Carolina||No rights for domestic partners|
|Tennessee||No rights for domestic partners|
|Texas||Travis County mandates benefits for domestic partners|
|Utah||No rights for domestic partners|
|Vermont||The state mandates benefits for domestic partners|
|Virginia||Alexandria mandates benefits for domestic partners|
|Washington||The state mandates benefits for domestic partners|
|West Virginia||No rights for domestic partners|
|Wisconsin||Madison, Sherwood Hills Village and Dane County mandate benefits for domestic partners|
|Wyoming||No rights for domestic partners|
Domestic Partnership Tax and Exceptions
If a company’s health insurance plan permits employees’ unmarried partners to be covered and an employee is not married but in a committed relationship, the employer has to provide health insurance benefits on a post-tax basis.
What this means for the employee carrying the coverage is that the fair market value of their partner’s insurance coverage is considered part of the employee’s income. If an employer pays for any part of a domestic partner’s health insurance, that employee benefit is taxable and must be reported on the employee’s W-2 as imputed income.
Domestic Partner Insurance Can Be Tax-Free
It’s possible for employer-paid insurance coverage to be tax-free in certain circumstances. On the federal level, an exception is made if the domestic partner meets these three qualifications. They must:
- Receive 50% or more of their financial support from the employee
- Live in the same home as the employee
- And be a citizen, national or legal resident of the United States, Canada or Mexico
The government recommends that an employee include their unmarried domestic partner in a family plan only if they have a child together or if they’ll claim the domestic partner as a tax dependent. If the domestic partner doesn’t meet the three criteria, it may be cheaper for both to enroll in Marketplace plans.
Some Employers are Actively Eliminating Domestic Partner Coverage
Since same-sex marriage became legal, a growing number of companies have eliminated their health insurance coverage for domestic partners. Their justification is that there’s no need to continue offering the coverage now that same-sex partners can legally get hitched and become same-sex spouses.
It’s important to note that companies are not required by federal law to provide domestic partner benefits even if they offer coverage to married couples, but some states and municipalities do mandate that businesses offer coverage to unmarried couples. In most cases, employees must prove domestic partnership to gain eligibility via registration with their local domestic partnership registry, an affidavit certifying the relationship, or other documentation.
Paycor is not a legal, tax, benefit, accounting or investment advisor. All communication from Paycor should be confirmed by your company’s legal, tax, benefit, accounting or investment advisor before making any decisions.
How Paycor Helps
We’re proud to keep more than 30,000 organizations informed and compliant with federal and state laws and regulations. Since 1990, Paycor has maintained a core expertise in payroll and compliance. We established our compliance expertise in the Cincinnati tri-state area, one of the most complex tax jurisdictions in the country, which is why we’re able to handle payroll and tax complexities in a way our competitors can’t.