Supes consider tax relief
for LGBT cityworkers
by Matthew S. Bajko
San Francisco supervisors are set to discuss covering the tax costs LGBT city employees incur for their same-sex spouses' or partners' health care coverage provided by the city's Health Service System. Only two other municipalities in the country have adopted similar policies, as have a number of private companies.
The board's Budget and Finance Committee will take up the measure, proposed by District 2 Supervisor Mark Farrell , at its February 6 meeting. The full board is expected to hear the proposal later in February and it needs a simple majority, or six votes, to be adopted.
Because federal law does not recognize the marriages of same-sex couples, city employees face a penalty for federal income tax purposes when they add their partner or spouse to their city-provided health care coverage. Under current federal law, the Internal Revenue Service treats any employer contributions for a same-sex partner's or spouses' health insurance premiums as taxable income.
"It is one more blow and hurdle people have to face and deal with because of their sexual orientation," said Paul Henderson , Mayor Ed Lee's adviser on public safety.
When he first met his partner of 16 years, Kevin Crawford , while working as a lawyer in the District Attorney's office, Henderson signed up Crawford for the city's health care plan. He recalled it costing the couple more than $75 a month; the payments ended after Crawford graduated college and began receiving health care from his employer.
"It was unfair," said Henderson, noting that his straight co-workers were not similarly penalized. "There is no justification for disparate treatment."
The city's Department of Human Resources counted 353 same-sex spouses and/or same-sex domestic partners enrolled in the city's health-care system as of July 28, 2011. Initially, it had been estimated that covering their tax bill stemming from their partners' health coverage would be roughly $1 million.
But the city controller's office now estimates it would cost slightly more than $500,000 to implement the policy, according to Farrell's office. Under the ordinance the city would pay 20 percent of the portion of the employee's health insurance premiums attributable to the same-sex spouse or partner as determined by the city's Health Service System.
The payments would not be part of the employee's base pay nor would they be included when determining overtime or premium pay. The policy, which would go into effect July 1, would cover any city employee, from supervisors and department heads to Muni bus drivers and public park gardeners.
Farrell, who chairs the board's budget committee, said most feedback he has received about the proposal has been people asking, "Why haven't we done this before?"
Gay Supervisors David Campos (D9) and Scott Wiener (D8) are co-sponsors, as is District 4 Supervisor Carmen Chu , a commissioner on the city's Health Service System Board. Farrell expects the legislation will be adopted.
"I don't anticipate a true debate about it at the board, but this is San Francisco so you never do know," he said.
Catherine Dodd, an out lesbian who is director of the SF Health Service System, noted that city employees with a same-sex spouse or domestic partner face several unfair federal rules governing their health care. They cannot set up a tax-free account to pay for their same-sex spouse or domestic partner's or child's health care services.
Another rule specifies that when an employee's same-sex spouse or domestic partner turns 65 and is enrolled in the city's group coverage they must sign up for Medicare and pay the Part B premium at age 65. Opposite-sex spouses can stay on the group coverage without signing up for Medicare Part B until the employee retires, noted Dodd in an emailed response to questions.
"We have a lot of work to do to ensure that laws are applied fairly. This is a first step that is occurring at the local level in anticipation of someday fixing this and other inequities at the federal level," wrote Dodd, vice chair of the National Committee to Protect Social Security and Medicare, which recently published a white paper on Social Security and Medicare inequities for same-sex couples.
Dodd stressed that she and the health service board have not taken a position on the proposed ordinance. But she said its adoption could have significant impact.
"It acknowledges that same-sex couples/families are unfairly taxed on benefits straight couples are not taxed on," wrote Dodd. "It's a first step in raising awareness."
As the Bay Area Reporter noted in November, Farrell's measure is modeled after similar policies adopted by the city of Cambridge, Massachusetts and technology company Google. Cambridge's policy was instituted in 2011 and estimated to cost the city $33,000.
Last November Hallandale Beach, Florida commissioners voted to offset the taxes its employees in domestic partnerships pay for their partner's health care. The city estimated the reimbursements would cost it $2,500.
While not as comprehensive as Cambridge's policy, it is "certainly a wonderful and important gesture," said Cathryn Oakley , the Human Rights Campaign's legislative counsel for state and municipal advocacy.
HRC offers bonus points to cities with such a "grossing up" policy in its Municipality Equality Index, "because it is cutting edge," said Oakley.
Several East Coast cities have expressed interest in the issue but have not filed bills as San Francisco has done.
"San Francisco has always been on the cutting edge of LGBT inclusion and equality. It is great to see them taking this step," said Oakley.
In recent years businesses have resorted to grossing up the pay of their LGBT workers in order to cover their federal health care tax bill. One of the latest to adopt such a policy is TD Bank, which on January 1 began offsetting the additional federal and state taxes that its LGBT employees pay for domestic partner benefits.
Robert Pompey, head of commercial management administration at TD Bank and co-chair of the bank's Lesbian, Gay, Bisexual, Transgendered and Allies Committee, announced the new policy in December. At the end of 2013 the bank will make a one-time payment equal to the extra taxes the same-sex domestic partners must pay for their benefits over the course of the year.
"Offsetting these extra taxes for our LGBT employees makes us more competitive in the hunt for great talent and it's the right thing to do," stated Pompey in a news release.
The issue may become moot for some LGBT households this June should the U.S. Supreme Court overturn the federal Defense of Marriage Act. In March the court will hear oral arguments in a case seeking to end DOMA's prohibition from having the federal government recognize same-sex marriages.
"It will be irrelevant for same-sex spouses once DOMA falls because spouses are recognized for federal tax purposes and health coverage for spouses is tax free," said Santa Clara Law Professor Patricia Cain, an expert on LGBT tax issues.
Questions could linger on if the ruling would apply to those same-sex couples in registered domestic partners, said Cain, as well as if it would only help those LGBT couples living in states that recognize same-sex marriages.
"There is a good argument to be made that registered domestic partners should be treated the same as same-sex spouses," said Cain.
Written into the SF ordinance is a section specifying that the policy will expire when same-sex couples are no longer subjected to the discriminatory federal income taxation policy.
The board committee hearing on the issue begins at 11 a.m. next Wednesday inside the board's legislative chamber, Room 250 at City Hall.
Web Extra: For more queer political news, be sure to check http://www.ebar.com Monday mornings at noon for Political Notes, the notebook's online companion. This week's column reported on SF planners seeking public input for a remodel of Castro Street.
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Got a tip on LGBT politics? Call Matthew S. Bajko at (415) 861-5019 or e-mail mailto:.