How did same-sex civil-union partners adjust employer health-coverage wages on Illinois's historical federal 'as-if-married' return?

Plain-English summary

Illinois's historical procedure removed partner health-coverage value from the pro-forma federal wages when a federally recognized spouse's coverage would have been excluded. Same-sex civil-union partners then had to choose a joint or married-filing-separately Illinois return and build it from a federal “as-if-married” return.

The published example addressed employee-paid premiums withheld from wages. The GIL clarified that the same principle applied to employer subsidies: exclude the federally taxed value on the pro-forma return to the extent federal law would have excluded it for spouses.

If the civil-union partner was already a federal tax dependent, the coverage was excluded on the actual federal return, so no additional pro-forma wage adjustment was needed.

What this means for you

Treat this page as historical guidance. For an old return, reconstruct both the actual federal wage treatment and the counterfactual spousal treatment that Illinois required at that time.

Common questions

Q: Did the adjustment cover employer-paid subsidies?
A: Yes, to the extent they would have been excluded for federally recognized spouses.

Q: Was an adjustment needed when the partner was already a federal dependent?
A: No.

Citations and references

• Illinois Department of Revenue's historical “Same-Sex Civil Unions” filing notice, quoted in the GIL

Subject

Returns

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/income-tax/2012.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/income-tax/2012/it-12-0003.pdf

Original ruling text

IT 12-0003-GIL 02/07/2012 RETURNS
General Information Letter: Preparation of pro-forma federal returns by partners to
same-sex civil unions explained.
February 7, 2012
Dear:
This is in response to your letter dated February 1, 2012, in which you request a letter ruling. The
nature of your request and the information you have provided require that we respond with a General
Information Letter, which is designed to provide general information, is not a statement of Department
policy and is not binding on the Department. See 86 Ill. Adm. Code 1200.120(b) and (c), which may
be found on the Department's web site at www. tax.illinois.gov.
In your letter you have stated the following:
We represent several Illinois employers that provide health care benefits to same-sex
civil union partners though self-insured group health plan arrangements. We are writing
to request additional information concerning the guidance published on your website
entitled, “Same-Sex Civil Unions.” The second bullet point, under the section entitled,
“Special situations you may encounter while completing your federal ‘as-if-married’
return,” provides:
For example, if your employer-provided health insurance covers your partner, the
premiums you paid for your partner’s coverage would not be included in your
taxable wages shown on your W-2 form if federal law treated you as spouses,
but they will be included in your taxable wages if you are in a same-sex civil
union. You should exclude the cost of these premiums from your taxable wages
when completing your federal “as-if-married” return. Contact your employer to
determine the amounts needed to make this adjustment.
We are looking for information concerning how an employer should determine, for an
employee covering his or her domestic partner, “the premiums you paid for your
partner’s coverage.” We interpret this guidance to mean an amount equal to the portion
of the employee-only health plan premium (or payroll contribution) attributable to the
domestic partner. Please confirm our understanding is correct.
Also, this guidance appears inconsistent with the treatment of health costs on actual
federal income tax returns. Under federal tax rules, an employee’s income includes the
full fair market value of the coverage provided to a non-federal tax dependent civil union
party, including the value of any employer subsidy for that coverage. Under your
guidance, the value of that employer subsidy would appear to remain taxable wages for
Illinois purposes. Please confirm that you intend the Illinois tax treatment to be
inconsistent with the federal treatment.
Response
The notice from which you quote informs same-sex partners to civil unions that they must choose to
file either a joint Illinois income tax return or married-filing separately returns, and that in either case
they must complete a pro-forma federal income tax return for use as the basis for completing the
Illinois return. The notice states:

IT 12-0003-GIL
February 7, 2012
Page 2

Complete your federal “as-if-married” return(s), including all schedules and attachments,
applying all the federal rules for the married filing status you choose (see a list of special
situations below). Enter the federal “as-if-married” return information where Illinois
requires federal information.
The notice also contains a few specific examples of issues that will arise in the completion of the proforma federal returns, and states, “This list contains examples and is not an all-inclusive list.”
The particular example you quote deals with a situation in which an employee is paying for employerprovided health insurance for the employee’s same-sex civil union partner by having amounts
withheld from wages. The withheld amounts are included in the employee’s federally-taxable wages,
but would not be included if federal law recognized the civil union as a marriage. The employee is
directed to exclude the withheld wages on his or her pro-forma federal return.
As you correctly point out, this example is not all-encompassing. It does not specifically address
situations in which the health insurance is subsidized, so that some or all of the premiums or other
costs are paid by the employer without withholding from the employee. However, the same principle
would apply, that the amounts included in the employee’s federally-taxed wages would be excluded
from taxable wages on the employee’s pro-forma federal return to the extent they would have been
excluded from federally-taxed wages if federal law recognized the civil union as a marriage. The
example also does not address the situation where the employee’s partner is a dependent for federal
income tax purposes, and so any withholding or subsidies for health care costs for the partner would
be excluded from federally-taxed wages in the same manner as they would if federal law recognized
the civil union as a marriage. In that case, the employee’s taxable wages on the pro-forma return
would be identical to the taxable wages on the actual federal return.
If you have additional questions, or believe that additional guidance should be added to the existing
notice, please do not hesitate to contact me.
As stated above, this is a general information letter which does not constitute a statement of policy
that applies, interprets or prescribes the tax laws, and it is not binding on the Department. If you are
not under audit and you wish to obtain a binding Private Letter Ruling regarding your factual situation,
please submit all of the information set out in items 1 through 8 of Section 1200.110(b). If you have
any further questions, you may contact me at (217) 782-7055.
Sincerely,

Paul S. Caselton
Deputy General Counsel – Income Tax