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On November 14, 2013, the Ohio Department of Taxation (“Department”) issued an information release (EW 2013-1) which has guidelines for employers that provide benefits to employees married in jurisdictions that recognize same-sex marriage.

Under federal laws, certain employer-provided benefits are excluded from an employee’s gross income for federal income tax purposes. However, many of these exclusions only apply when the benefits are provided to the employee or certain dependents of the employee (referred to as federal tax dependents). If an employer provides benefits to an individual that is not a federal tax dependent of the employee, such as a same-sex spouse before the U.S. Supreme Court made its ruling in United States v. Windsor, then the fair market value of the benefits provided must be included in the employee’s gross income for federal income tax purposes.

Following the U.S. Supreme Court’s ruling in United States v. Windsor (which struck down Section 3 of the Defense of Marriage Act (DOMA) on grounds that the federal interpretation of "marriage" and "spouse" to apply only to heterosexual unions is unconstitutional under the Due Process Clause of the Fifth Amendment), the Internal Revenue Service issued Revenue Ruling 2013-17 and Notice 2013-61, and the Department of Labor issued Technical Release No. 2013-04. This guidance provided that the marriage of same-sex individuals validly entered into in a state whose laws authorize such marriage, even if the married couple is domiciled in a state that does not recognize the validity of such same-sex marriage, will not be recognized for federal income tax purposes and employee benefit purposes.

However, under Section 11, Article XV of the Ohio Constitution, Ohio does not recognize a marriage between individuals of the same sex. Therefore, employers must include the fair market value of any employer-provided benefits provided to the same-sex spouses of employees and any dependent children of those spouses as income for Ohio income and school district income for employer withholding tax purposes. Employers are required to determine employees’ Ohio taxable gross earnings amounts in a manner consistent with this guidance. Such amounts must also be used in determining the employer’s liability for withheld Ohio income and school district income tax.

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