Labor & Employment Law Blog

Yesterday, Governor Edmund G. Brown, Jr., signed Assembly Bill 36, which conforms California law to federal law to allow tax exclusions or deductions for employers that provide health care coverage to employee dependents who are under age 27.  The Legislative Counsel's Digest states:

AB 36, Perea. Income and employment taxes: federal conformity: Health Care and Education Reconciliation Act of 2010. The Personal Income Tax Law and the Corporation Tax Law, in specified conformity with federal income tax laws, provide certain gross income exclusions, as specified. This bill would, under both laws, provide additional conformity with federal income tax laws by adopting specified provisions of the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 relating to gross income exclusions for reimbursements for medical care expenses under specified plans for dependents, as specified. Existing law excludes from the definition of "wages," for purposes of the unemployment insurance law, remuneration in excess of $7,000 paid to an individual by an employer during any calendar year, with respect to employment. That law also excludes from the definition of "wages" the amount paid by an employer for insurance or annuities, or into a fund to provide for any payment made to or on behalf of an employee or any of his or her dependents under a plan or system, as specified, on account of sickness or accident disability, medical or hospitalization expenses in connection with sickness or accident disability, or death. This bill would, under the unemployment insurance law, provide additional conformity with federal law by adopting specified provisions of the Health Care and Education Reconciliation Act of 2010 relating to an exclusion from wages for amounts expended for medical care. This bill would take effect immediately as a tax levy.

Click here to download and read the text of this new law.

We recommend employers that provide such health care benefits or that are considering providing such health care benefits consult with competent tax professions to determine how to best take advantage of this new law that takes effect immediately.