Domestic partner benefits are those benefits that are extended to unmarried partners who share a household. Some states and cities require that these benefits be extended by companies they do business with, and an increasing number of companies are offering them voluntarily. However, these policies are fairly new and definitions may vary widely. Here is a general guide to the legal issues surrounding domestic partner benefits.
Defining a “Domestic Partner”
Not all jurisdictions or companies define a domestic partner in the same way. However, many definitions include some or all of the following:
- An adult over the age of 18 – Domestic partner benefits generally do not apply to underage partners.
- Not related too closely for marriage – A domestic partnership is generally considered an alternative to marriage, so relatives do not qualify.
- In an exclusive, committed relationship – As a domestic partnership is an alternative to marriage, the partners themselves must define the relationship under similar terms.
- Financially interdependent – Although the domestic partner need not be financially dependent on the employee partner, the finances should be intermingled.
Additionally, the domestic partnership may be required to be officially or unofficially documented. For example, some locations allow domestic partnerships to be registered. In these jurisdictions, registration may be required for benefits to apply. In locations where no such registration exists, the partnership may be required to last six months or a year before becoming eligible for benefits.
The benefits that are extended to domestic partnerships vary widely. Many companies are reluctant to extend health benefits, fearing that costs would skyrocket. In most states, these benefits are not required to be extended to domestic partnerships, although this is slowly changing.
Basic domestic partnership benefits generally cover minimal cost items, such as use of company property, permission to attend official functions, sick leave and relocation expenses. These benefits are certainly helpful, but many feel that they are not enough.
Domestic partner benefits are not treated the same as marriage benefits by the IRS. The employee generally must count the benefits extended to his or her partner as taxable income. Thus tax must be paid on the full premium, not only the portion paid by the employee.
If the partner is a legal dependent of the employee, then this tax need not be paid. A dependent is generally someone who lives in the employee’s household and receives more than half of his or her support from the employee.
IRS regulations are extremely complicated and change frequently. It is highly recommended that those who receive these benefits consult a tax expert to determine the tax implications of domestic partner benefits.