States begin to issue guidance on marriage benefits

Michigan is the latest state to issue written guidance on the payroll issues related to the most recent U.S. Supreme Court (Obergefell vs. Hodges, — S.Ct. –, 576 U.S. — (June 25, 2015)) decision on same-sex marriages. Some states mention the payroll issues in their guidance and some states do not. All the states that issue guidance generally focus on income tax issues and sometimes other issues, such as pensions. Each state’s payroll related guidance will be reported in the Payroll Management Guide Report Letters as the states release the guidance. Most of the states will probably follow the same payroll treatment as Michigan and Ohio.

Alabama.-The Alabama Department of Revenue has issued guidance on the personal income filing status for same-sex couples. The Department will accept “married filing jointly” income tax returns filed by same-sex couples. For tax years within the statute of limitations, same-sex couples who filed as “single” will be allowed to amend their tax returns to file as “married filing jointly.” (Alabama Department of Revenue Same-Sex Marriage Guidance, July 2, 2015.)

Georgia.-The Georgia guidance focuses on income tax issues. (Georgia Department of Revenue Guidance For Same-Sex Couples Filing in Georgia, July 14, 2015.)

Kentucky.-In accordance with the Supreme Court’s decision, Kentucky will now license a marriage between two people of the same sex, and will recognize a marriage between two people of the same sex when their marriage was lawfully licensed and performed out-of-state. The guidance focussed mainly on income tax issues. (, July 9, 2015.)

Louisiana.-The Louisiana guidance focuses on income tax issues. (Louisiana Department of Revenue Information Bulletin 15-028 (revised), July 2, 2015.)

Michigan.-Michigan now recognizes the marriages of same-sex spouses including marriages that occurred in other states either before or after June 26, 2015.

Recognition of same-sex marriage will exempt certain employee benefits for a same-sex spouse from taxation under the Michigan Income Tax Act. The guidance does not apply to domestic partnerships or other relationships that do not constitute state-sanctioned marriage.

Prior to the recognition of same-sex marriage in Michigan, the value of the employer’s share of employer-provided health care coverage for a same-sex spouse was included in the employee’s Michigan taxable income. In addition, pre-tax dollars used to pay the employee’s share of health premiums for a same-sex spouse were also added to the employee’s Michigan taxable income. Similarly, pre-tax dollars used to fund a flexible spending account for the benefit of a same-sex spouse and dependents of that spouse were added to the employee’s Michigan taxable income.

If an employee is married to a same-sex spouse at any time during 2015, an employer should not withhold Michigan income tax from the employee’s wages to cover the value of employee benefits for the spouse. If during 2015 an employer has been withholding Michigan tax on the value of the benefits, the employer should reduce withholding on the employee’s wages for the rest of the year to correct any overwithholding. If a reduction in withholding does not correct the full amount of overwithholding, the employee may receive a refund of the overpaid withholding through the 2015 Michigan income tax return. (Michigan Department of the Treasury Notice Michigan Tax Treatment of Employee Benefits for Same-Sex Spouses 16, 2015.)

Nebraska.-The Nebraska guidance focuses on income tax issues. (Nebraska Department of Revenue News Release July 7, 2015.)

North Dakota.-The North Dakota guidance focuses on income tax issues. (North Dakota Office of State Tax Commissioner Notice, July 13, 2015.)

Ohio.-On June 26, 2015, the U.S. Supreme Court issued a ruling on the constitutionality of Article XV, 11 of the Ohio Constitution. As a result, the Ohio Department of Taxation has withdrawn information release EW 2013-01 – Guidelines for Employers Providing Benefits to Employees Married in a Jurisdiction That Recognizes Same-Gender Marriage – Issued Nov. 14, 2013, which is no longer effective. As of June 26, 2015, Ohio employers must determine employer-provided benefits for Ohio employer withholding purposes in a manner consistent with IRS Revenue Ruling 2013-17, IRS Notice 2013-61 and U.S. Department of Labor Technical Release No. 2013-04.

Therefore, Ohio employers may now recognize any lawful marriage when determining an employee’s Ohio taxable gross earning amounts reported on box 16 of federal Form W-2. This new guidance is effective for all of tax year 2015 and all subsequent tax years. To the extent that an employer, in following the guidance in EW 2013-01, will have over-withheld or under-withheld for tax year 2015, the employer shall reconcile the difference on the Ohio Employer’s Annual Reconciliation of Income Tax Withheld (form IT 941). Provided that form IT 941 reflects the proper amount of tax due for tax year 2015, and that amount is remitted timely along with the properly completed IT-941, no penalties will be billed or assessed as a result of the amounts not being previously paid. (Ohio Department of Taxation Employer- Withholding Information Release, EW 2015-01, July 2, 2015.)

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