In the wake of the news that Google has decided to offer a tax gross-up for its employees who are covering same-sex partners under Google's health plan, one wonders whether this will create a trend that will spread to other major corporations in the United States.
By way of background, a tax gross-up is essentially an agreement to pay taxes on behalf of an employee who is subject to federal and state income taxes and payroll taxes simply because his partner covered under the health benefit plan is of the same sex. This tax result is required due to the Federal Defense of Marriage Act, which was passed in 1996 and defines marriage as one man and one woman as husband and wife for all purposes of federal law.
Many of the nation's largest corporations have signed on to a coalition to support federal legislation that would eliminate this tax result (see list of corporations on the Coalition for Business Tax Act, www.hrc.org).
However, Google has taken its support of same-sex couples one step further by agreeing to equalize the domestic partner benefits tax inequity that federal law has created. Since this announcement on July 1, Google has received a great deal of media attention and support for its decision (and rightfully so, as providing a tax gross-up is still a cutting edge practice that only a select handful of companies, including Cisco and Kimpton Hotels, have entered into).
Maybe more important in the long run than the news of Google's decision is whether this practice will trickle into other major corporations. Nearly 60 percent of the Fortune 500 companies and over 80 percent of the Fortune 100 companies currently offer domestic partner benefits, but very few of these corporations offer a tax gross-up.
My educated guess for the reason why this is the case is because tax gross-up is a fairly expensive out-of-pocket gesture and can be reasonably complicated for payroll and benefits departments to administer. In addition, given how many times federal legislation has been proposed that would rectify this tax result, I would expect that many employers have been holding their collective breath waiting for the federal government to eliminate the tax inequity.
Given that the most recent legislative proposal dropped out of the healthcare reform act prior to passage, perhaps employers will realize that Congress may not soon eliminate this tax inequity and others will follow Google's lead and announce a tax gross-up. But only time will tell.