BILL ANALYSIS
AB 901
Page 1
Date of Hearing: May 10, 1999
ASSEMBLY COMMITTEE ON REVENUE AND TAXATION
Wally Knox, Chair
AB 901 (Knox) - As Amended: April 12, 1999
Majority vote. Tax levy. Fiscal committee.
SUBJECT : Personal Income Tax: Domestic Partner Tax Equity
SUMMARY : Allows domestic partners to take advantage of some of
the tax preferences for health care costs that are available to
spouses and dependents. Specifically, this bill :
1)Allows an employee to exclude from gross income the value of
medical insurance benefits received from his/her employer for
the care of his/her domestic partner. (Example: If Jim and
Phil are domestic partners and Jim's employer offers health
insurance coverage for domestic partners, the health insurance
payments provided by Jim's employer for Phil's coverage will
not be included in Jim's gross income).
2)Allows a taxpayer to include medical expenses incurred for
his/her domestic partner within those that may be claimed as
an itemized deduction if they exceed 7.5% if his/her adjusted
gross income (AGI). (Example: If Jim incurs sizeable,
unreimbursed medical expenses for both Phil and himself during
a tax year, Jim will be allowed to claim an itemized deduction
for any of those costs that exceed 7.5% of his AGI).
3)Allows a self-employed taxpayer to deduct a specified
percentage of his/her costs for health insurance that covers
his/her domestic partner. California's allowable deduction is
currently 40%. (Example: Jim is self-employed and purchases
health insurance to cover both Phil and himself. This bill
would allow Jim to deduct 40% of his costs to purchase the
insurance).
4)Defines "domestic partners" by reference to the Family Code as
"two adults who have chosen to share one another's lives in an
intimate and committed relationship of mutual caring." To
qualify as domestic partners, both persons must: share a
common residence, agree to be jointly responsible for each
other's basic living expenses during the partnership, not be
married or members of another domestic partnership, be at
AB 901
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least 18 years of age, and file a Declaration of Domestic
Partnership with the Secretary of State.
EXISTING FEDERAL AND STATE LAW :
1)Allow a taxpayer to exclude the value of medical insurance
benefits received from his/her employer from his/her gross
income. The exclusion is allowed for employer-provided health
insurance that covers the taxpayer, his or her spouse, and his
or her dependents.
2)Allow individuals to deduct any unreimbursed medical expenses
they incur that exceed 7.5% of their AGI. This itemized
deduction is allowed for the medical expenses of the taxpayer,
his or her spouse, and his or her dependents.
3)Allow self-employed individuals to deduct a specified
percentage of their costs for health insurance. This
deduction is allowed for costs incurred to purchase insurance
that covers the taxpayer, his or her spouse, and his or her
dependents. California's allowable deduction is currently
40%. The federal deduction is currently 60% and will increase
to 100% by 2003.
FISCAL EFFECT : The Franchise Tax Board estimates that this bill
will result in revenue losses of $1 million annually.
COMMENTS :
1)This bill is intended to provide tax equity to domestic
partners with respect to health care costs. Both the state
and the federal government have long-recognized that improving
access to health insurance and reducing the financial burden
imposed by medical expenses is good public policy. Insured
individuals are healthier, much more likely than uninsured
individuals to seek preventive health care, and more likely to
seek medical care when needed rather than waiting until the
problem worsens. Taxpayers, their spouses, and their
dependents are already provided favorable treatment under the
tax laws for health care expenses. This bill would allow
domestic partners to qualify for these existing benefits.
2)This bill does not contain a sunset date or reporting
requirements. Neither is recommended, because this bill is an
equity measure and is not intended to incentivize behavior.
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3)This bill defines "domestic partner" by reference to a section
of the Family Code that will be added by AB 26 (Migden) and SB
75 (Murray). If neither the Migden nor the Murray measure
becomes law, a textual definition of domestic partner will be
amended into AB 901 to prevent its enactment with a reference
to a nonexistent code section.
REGISTERED SUPPORT / OPPOSITION :
Support
California Alliance for Pride and Equity (CAPE)
Los Angeles Gay and Lesbian Center
West Hollywood Presbyterian Church
Santa Barbara Stonewall Democratic Club
Larry Sperber, PFLAG (Parents, Families, and Friends of Lesbians
and Gays)
California Child, Youth & Family Coalition (CCYFC)
Jeffrey Prang, Councilmember, City of West Hollywood
Howard Jacobs, Deputy Councilmember, City of West Hollywood
Marivic Bamba, San Francisco Human Rights Commission
Albert Aubin
Andrea Atkinson
Andy Ball, Los Angeles Gay and Lesbian Center, Carmichael, CA
Asian Pacific AIDS Intervention Team
Boyce Hinman, LAMBDA Letters Project
Charles Knudtson
David Almada, Anti-Violence Project
David MacCarthy, Lesbian and Gay Men's Community Center
David Ramer
Elizabeth Cecil
Erik Leidal, Los Angeles, CA
Hivas Magilligan, Ten Percent Newsmagazine
Jack Gibbons, Los Angeles, CA
Jack Richards
John Leiken, Davis, CA
Karen Marshall, The Center (San Diego County)
Kyril Plasken, Gay and Lesbian Times
Martin Backstrom, Oakland, CA
Michael Birth, Lesbian and Gay Men's Community Center
Michael Eselun, GLIDE
Patricia Plaster, Lesbian and Gay Men's Community Center
Rebecca Bucklee, The Center
Rob Knight, LAMBDA GLBT Community Services
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Robert Barile, West Hollywood, CA
Robert Green
Robin Fornicola, Christopher Street West, Los Angeles, CA
Sharon Lubert, The Center
Tania Mohammad, Ten Percent Newsmagazine
Thomas Sullivan
Tom Lidot
Tom Soto, PS Enterprises
Tracy Moore
Victor Torres, Center for Social Services
William Kennedy
Opposition
California Catholic Conference
Analysis Prepared by : Eileen A. Roush / REV. & TAX. / (916)
319-2098