Update on Same-Sex Marriage Taxation

Posted March 25th, 2014 at 3:56 pm.

The following email was sent to faculty and staff by Director of Human Resources Marty Mastascusa on Friday, March 21.

On August 29, 2013, the U.S. Treasury Department announced that the federal government would recognize all same-sex marriages, regardless of whether the marriage was recognized in the state of residence.  Based on the Treasury Department ruling, the IRS then determined that employers should extend federal tax breaks for these newly recognized same-sex marriages to all pays that occurred on or after September 16, 2013.

Pennsylvania still does not permit same-sex marriages and still does not recognize same-sex marriages performed in other states.  This ruling initially created confusion as it meant that benefits costs would be tax-free at the federal level but still taxable at the state level.  However, I have since been advised that a representative from the Pennsylvania Department of Revenue has provided guidance that employer-provided health benefits under a Section 125 cafeteria plan are nontaxable, regardless to whom the benefits are provided.

The interpretation of this guidance is that Pennsylvania tax breaks provided to an opposite-sex spouse under the College Flexible Benefit Plan should also be extended to a same-sex spouse. That is effectively what has occurred since September, as the current version of PeopleSoft does not permit federal taxes to be suppressed and state taxes withheld. PeopleSoft was to have been updated to allow for this disparate tax treatment.  However, given this recent guidance, that no longer appears to be necessary.

Please call me if you have any questions.

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