Although health care reform legislation excluded the value of employer-provided health benefits provided to any employee’s child under the age of 27 at the end of the taxable year (not just tax dependents) effective March 30, 2010, several states did not incorporate that change into state law. As a result, there has been some confusion as to whether the value of employer-provided health benefits provided to non-tax dependent children would be subject to state taxes in those states. However, earlier this year, several states, including California and Minnesota, enacted legislation to conform state tax treatment of such coverage with federal tax treatment.
Wisconsin is the most recent state to have addressed this issue. Last week, the Wisconsin State Assembly approved a bill to adopt the federal tax treatment of employer-provided health coverage of adult children for Wisconsin state purposes, effective for taxable years beginning on January 1, 2011. This means that employers will not need to impute income on such coverage for Wisconsin state tax purposes.
While the bill has been passed by both houses of the Wisconsin Legislature, it has not yet been signed into law by the Governor. However, the Governor is expected to sign the bill soon.