This month, retroactive to January 1, Google will begin reimbursing its U.S. employees who pay federal tax on health benefits for their same-sex domestic partners. Google now belongs to a small contingency of employers who are actively trying to offset tax code inequities.
Employees have to pay federal tax on the health benefits that their employer offers their domestic partner. An employee does not have to pay the federal tax for health benefits used for their spouse or children because they are the employee's tax dependent.
To offset the tax, some companies reimburse their employees for the taxes paid on domestic partner health benefits, known as "grossing up." The Bill and Melinda Gates Foundation has been reimbursing domestic partners, regardless of sexual orientation, for several years.
Although Google is reducing discrimination by paying the taxes for same-sex domestic partners, it could be accused by opposite-sex domestic partners of discrimination on the basis of sexual orientation. Google's reasoning is that opposite-sex domestic partners could get married.
Employee rights attorneys say a lawsuit is possible, but improbable, given the pro-google feeling by the majority of google employees and the relatively few people that would find themselves in a position to sue.
Most employers do not reimburse domestic partners of either gender for taxes paid on health benefits. Many say that it is up to Congress to fix any inequities in the tax code and not them.
Who pays tax on domestic partner benefits (San Francisco Chronicle)