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Date: December 17, 2013

Bulletin Number: CU-478

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Subject

Changes in Taxation of Imputed Income

Purpose

To inform agencies of the change related to the taxation of imputed income for a non-employee same-sex spouse’s health coverage and of the potential tax impact for non-residents of New York State.

Affected Employees

Employees who covered their same-sex spouse in the New York State Health Insurance Plan (NYSHIP) or City of New York Health Insurance Plan.

Effective Date(s)

Immediately.

Background

Following New York's enactment of the Marriage Equality Act, the State no longer considers the value of a non-employee same-sex spouse's health coverage to be taxable as imputed income for NYS tax purposes, regardless of whether the taxpayer was married in New York or elsewhere, and regardless of whether the taxpayer now resides in a state that permits and/or recognizes such marriages. Similarly, following the finding of the United States Supreme Court that Section 3 of the Defense of Marriage Act is unconstitutional, the Internal Revenue Service (IRS) no longer considers the value of a non-employee same-sex spouse's health coverage by NYS to be taxable as imputed income for federal tax purposes, regardless of where the taxpayer now resides. Therefore, the value of such health coverage will not be reported on Form W-2s.

If the spouse resides (for tax purposes) outside of NYS, while the above treatment by the IRS for federal tax purposes and by NYS for state tax purposes would remain the same, a number of states for their own resident tax purposes may tax (as imputed income) the value of a non-employee same-sex spouse's health coverage by NYS.

Therefore, a New York State employee who:

(i) covers her/his same-sex spouse under NYSHIP,
or
(ii) covers her/his same-sex spouse under the City of New York Health Insurance plan, and
(iii) resides for tax purposes in a state that neither permits nor recognizes same-sex marriages, and
(iv) resides in a state that taxes income,
should
a) contact such state’s taxing authority to determine whether the value of her/his spouse’s health coverage is taxable as imputed income; and, if so,
b) contact the Department of Civil Service Employee Benefits Helpline at (800) 833-4344 or (518) 457-5754 to obtain a statement indicating the amount of the imputed income related to her/his spouse’s health care coverage.
or
c) the City University of New York’s Benefits Office at (646) 313-8231 to obtain a statement indicating the amount of the imputed income related to her/his spouse’s health care coverage.

NOTE: Additional guidance regarding retro time periods will be forthcoming.

OSC Actions

OSC will no longer report or tax, for federal, state or local purposes, the value of a non-employee’s same sex spouse’s health care coverage.

OSC will provide guidance, at a later date, regarding the retro adjustments and refunds.

Agency Actions

Inform impacted employees of the change.

Questions

Questions regarding this bulletin may be e-mailed to the Tax and Compliance mailbox. 

Questions regarding NYSHIP coverage should be directed to Department of Civil Service’s Employee Benefits Helpline at (800) 833-4344 or (518) 457-5754.

Questions regarding coverage under the City of New York Health Insurance Plan should be directed to Yvonne Rodriguez at (646) 313-8231.