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Tax Impact of New York Same-Sex Marriage Law on Employees and Employers

Publisher: Day Pitney Alert
August 10, 2011
Day Pitney Author(s) Kathy A. Lawler


The Marriage Equality Act (the "Act") was signed into New York state law on June 24, 2011, granting same-sex couples in New York the same legal right to marriage as opposite-sex couples. The New York state Department of Taxation and Finance (the "Department") has recently issued guidance explaining the Act's impact on the state's personal income, estate, withholding and sales taxes.

Same-sex couples who are married as of December 31, 2011, will be required to file their New York state return under "married" status, even if they file as individual or head of household on their federal return. However, their marital status remains unrecognized for federal tax purposes. Therefore employers that use a federal definition of spouse under the Defense of Marriage Act (one man and one woman) may now have to take a bifurcated approach when considering tax issues relating to same-sex couple employees who are participating in company benefit plans.

The Department's website indicates, for instance, that employers should not withhold tax for New York (state, New York City or Yonkers) income tax purposes on the value of certain benefits provided to same-sex married employees, such as domestic partner health benefits, even though the same benefit would be subject to federal withholding. This applies if the employee's federal taxable wages subject to withholding include the value of the benefits, and the value of these benefits wouldn't be included in taxable wages if provided to an opposite-sex married spouse.

The Department's guidance on withholding tax information regarding same-sex married employees, found at, also advises same-sex married employees to file a new Form IT-2104 (Withholding Allowances Certificate) and to provide proof of their marriage to their employers. Employers are instructed to continue using the rules described in NYS-50, Employer's Guide to Unemployment Insurance, Wage Reporting, and Withholding Tax for reporting state and local wages on federal Form W-2, and are given the following guidance with regard to reporting annual wage totals:

When reporting the annual wage totals on Form NYS-45, Quarterly Combined Withholding, Wage Reporting, and Unemployment Insurance Return, Part C, column d; report the federal wages minus any amount of benefits discussed above that you don't withhold on for New York purposes (plus any amount of any taxable 414(h) retirement contributions and any IRC 125 amounts from a New York City flexible benefits program for governmental employees).

Employers should review existing plans to determine whether any changes are necessary and/or what clarifications should be communicated to employees. If you have any questions about the tax impact of the Act on your benefit plans, please contact a member of the Employee Benefits/Executive Compensation group.