One of the earlier versions of health care reform included a tax-equalization provision for domestic partners. The provision would have made health coverage for domestic partners and same-sex spouses free from tax, as it is for opposite-sex spouses (Sec. 571). The provision provided tax-equality for purposes of premiums, health care benefits, income tax withholding, health care deductions (for self-employed), VEBAs and health care flexible spending accounts. The tax-equality provision did not make it into the final bills that were signed by President Obama.
The Obama Administration made a statement on February 23, 2011 though, that indicates its continued support of tax-equality for domestic partners and same-sex spouses. The Attorney General’s statement concludes that the Defense of Marriage Act (DOMA) is unconstitutional under a heightened standard of scrutiny, as it applies to legally married same-sex couples. As a result, the Department of Justice will no longer defend DOMA in litigation. However, DOMA is still law and the Attorney General states that the Executive Branch will continue to enforce the law. So, for now, the IRS will continue to require imputed income for health care coverage of domestic partners and same-sex spouses that are not tax-dependents of employees. But the statement opens the door to a future Congressional repeal of the law or further judicial findings of unconstitutionality.