CALIFORNIA LAW (AB25) AFFECTING STATE INCOME TAX TREATMENT OF DOMESTIC PARTNER COVERAGE
California law (AB25) enhanced certain rights of domestic partners who are registered with the State of California.
The law provides that California State registered domestic partners should be treated as spouses for purposes of taxing the premiums paid for group health insurance plans. Under this State law, for purposes of California income taxes, employees who purchase medical and dental coverage for a registered domestic partner and the domestic partner’s dependents may pay for the employee portion of the applicable premiums on a before-tax basis. Any County contribution toward the premium is also excludable from the employee’s income. In order to take advantage of this law, the following criteria must be met:
- The domestic partnership must meet the State of California definition, which is narrower than the County of Los Angeles definition. The California Family Code defines a domestic partnership as: 1) two adults of the same sex who have chosen to share one another’s lives in an intimate and committed relationship of mutual caring; or 2) two equally committed adults of the opposite sex if one or both partners are over age 62 and one or both partners meet specified eligibility criteria under the Social Security Act. Please note that not everyone who qualifies as a “domestic partner” for purposes of the County of Los Angeles Domestic Partner Enrollment Form and coverage under the County approved health plans will qualify for favorable tax treatment under California law.
- The domestic partnership must be registered with the California Secretary of State. A domestic partnership is not established under the California Family Code until both persons register a valid Declaration of Domestic Partnership with the California Secretary of State. The declaration must be notarized and requires that both individuals declare that they:
- Share a common residence;
- Are jointly responsible for each other’s basic living expenses incurred during their domestic partnership;
- Are not married or a member of another domestic partnership;
- Are not related by blood in a way that would prevent them from being married to each other in California;
- Are both at least 18 years of age;
- Are both members of the same sex or at least one is over the age of 62 and meets certain eligibility criteria;
- Are both capable of consenting to the domestic partnership;
- Have not previously filed a Declaration of Domestic Partnership with the Secretary of State that has not been terminated.
Declaration of Domestic Partnership and Notice of Termination of Domestic Partnership forms are available to the public at the office of the Secretary of State at: Secretary of State, Domestic Partnerships, P.O. Box 942877, Sacramento, CA 94277-0001, and at all offices of every county clerk. You may call (916) 653-3984 or access the Secretary of State’s website at www.ss.ca.gov/dpregistry for additional information.
County of Los Angeles employees who currently cover a domestic partner (as defined by the State of California) under their County-approved health insurance plan and would like to take advantage of AB 25 must submit a copy of the registered State Declaration of Domestic Partnership form to the following address: County of Los Angeles Benefits Plan Administrator, P.O. Box 67128, Los Angeles, CA 90067. If your form is received by the 25th of the month, the change will be effective the first of the following month. If the domestic partnership is terminated, a domestic partner is required to provide the County of Los Angeles with a copy of the State’s Notice of Termination of Domestic Partnership form within 60 days of termination of the domestic partnership. Effective January 1, 2005, under Section 299 of the California Family Code, in certain circumstances, a domestic partner will be required to obtain a court order to terminate a State registered domestic partnership. In such a case, a copy of the court order would need to be submitted in lieu of a Notice of Termination form.
AB 25 provides only State of California income tax relief to California State registered domestic partnerships. Under Federal income tax law, the employee’s portion of the premiums for health coverage of registered domestic partners and their dependents must still be paid on an after-tax basis and any County contribution toward the premium must still be treated as income to the employee.
County employees with a domestic partnership who are not registered with the California Secretary of State will, for purposes of both California and Federal income tax purposes, continue to pay the portion of the benefit premium attributable to domestic partner coverage on an after-tax basis and will be imputed income for any County contribution.