NEW YORK -- Workers who receive employer-provided health insurance for an adult companion to whom they are not married must pay income taxes on the benefit unless they provide more than half of the companion's support, the Internal Revenue Service said.
The IRS policy was detailed in a private-letter ruling issued Jan. 19 to an unnamed international law firm. Such rulings apply only to those the letter addresses, but are followed closely by tax experts as a guide to the agency's thinking.
The ruling does not break new ground.
"This is not going to help the movement toward adopting domestic-partner policies," said John J. Cannon III, the benefits partner at Shearman & Sterling, a New York law firm, "because there will be some administrative burden and that gives one more excuse for people who are not in favor of these policies."
A small but growing number of employers from the Walt Disney Co. and Levi Strauss, the jeans maker, to Columbia University and the City of New York, provide health insurance to live-in partners of employees. Some employers limit such benefits to same-sex relationships on the theory that heterosexual couples could obtain such benefits by marrying.
Employers typically assume that health insurance for unmarried partners is not tax deductible, according to Ilse De Veer, a benefits expert at William Mercer, a benefits consulting company.
In metropolitan New York, she said, it typically costs about $2,000 annually to add an adult to a group insurance policy. Most employers require the worker to pay a quarter of this cost, or $400. The employer would then pay $1,600 for its share of the insurance and report this money as income on the workers' W-2 form.
Combined federal, state and municipal income taxes on this sum would typically total 40 percent, or $640, of the $1,600 paid by the employer.
Thus the out-of-pocket cost to a worker for a partner's insurance would total $1,040, or half the cost of the insurance.
Disney, Apple Computer and some other corporations have been criticized by some religious organizations for offering such benefits, which these critics view as supporting immoral relationships.