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Benefit TAX Memo.HRC To: Human Relations Commission From :Carmen Atilano, Manager, Community Relations and Human Rights Date: November 7, 2011 Subject:Federal Tax on Same-Sex Couples Health Benefits SUMMARY The HRC has received a request from Out Boulder, alocal GLBT organization, to consider a recommendation to City Manager and City Council to address thetax issue on same-sex couple health benefits. Specifically, Out Boulder recommends that the city of Boulder provide same-sex couples with one partner employed by the City a compensation for the additional tax incurred by the couple. Its intent is to achieve equitable benefits for all employees. Under the existing federal tax code,health benefits for same-sex domestic partners (unlike those of heterosexualspouses of employees)are taxed as income to the employee. For these employees, the monetary value of the benefit is reported to the IRS as additional income. This additional income, referred to as imputed income, is subject to federal, state, and FICA taxation. Out Boulder’s request canbe addressed through local administrative and/or legislative approaches.At the administrative level, the City Manager’s role is to determine internal policy regarding employee compensation and benefits. At the legislative level, the HRC can recommend to City Council specific legislation to alleviate problems of human relations or to promote better human relations. BACKGROUND U.S. Congress is currently considering The Tax Parity for Health Plan Beneficiaries Act proposed by Rep. Jim McDermott (D-Seattle). This act is intended to achieve tax equity for same-sex couples and has gotten support from 77 of the nation’s largest companies, including Microsoft, Boeing and Alaska Airlines. Under the umbrella organization named the Business Coalition for Benefits Tax Equity, they have stated that the current tax inequity puts them at a competitive disadvantage. Support for this legislation is consistent with previous HRC recommendation to Council furthering the rights of all people regardless of their sexual orientation or gender variance status. On May 18, 2004, Boulder’s City Council adopted Resolution No. 947. This resolution affirms the city’s commitment to the protection of civil rights for all people as outlined in the city’s human rights ordinance. Furthermore, the resolution recognized the many contributions that the city’s gay, lesbian, bisexual and transgender residents have provided that have enhanced the lives of all in the community. Finally, the resolution declared support for repealing or legislatively challenging the Colorado state law prohibiting the issuance of same sex marriage licenses. NEXT STEP Does the HRC wish to recommend to Boulder City Council the following legislative action? SUPPORT FOR TAX PARITY FOR HEALTH PLAN BENEFICIARIES ACT The city of Boulder has been, and remains, committed to the protection of civil rights for all people. It believes that employees who are in committed same-sex relationships are fully equal to other employees. It supports the Tax Parity for Health Plan Beneficiaries Act proposed by Rep. Jim McDermott (D-Seattle). Under the existing federal tax code,health benefits for same-sex domestic partners (unlike hose of heterosexual spouses of employees)are taxed as income to the employee. This act is intended to achieve tax equity for same-sex couples and has gotten support from 77 of the nation’s largest companies, including Microsoft, Boeing and Alaska Airlines. Under the umbrella organization named the Business Coalition for Benefits Tax Equity, they have stated that the current tax inequity puts them at a competitive disadvantage. Attachments: Tax Parity for Health Plan Beneficiaries Act Resolution No. 947