Some California lawmakers are pushing for new legislation (AB 36) that would prevent the state from levying income taxes on the premiums that employers pay to provide health insurance coverage to their workers' nondependent adult children, the Sacramento Bee reports.
A provision of the federal health reform law requires insurers and companies to allow children up to age 26 to enroll in their parents' health insurance policies. The mandate took effect Sept. 23, 2010.
Employer contributions for young adult coverage were exempted from counting toward taxable income under the federal tax code.
However, a loophole in California law requires the state to levy income taxes on premiums that employers pay to provide coverage to their employees' nondependent children.
AB 36 -- by Assembly Committee on Revenue and Taxation Chair Henry Perea (D-Fresno) and Assembly member Bob Blumenfield (D-Woodland Hills) -- would close the state tax loophole by exempting employer contributions for young adult coverage from being subject to state personal income taxes.
The measure would align the state tax code with the federal exemptions for young adult coverage.
A similar measure failed to pass last year because it was included in broader tax legislation that never progressed to the governor's desk.
The Franchise Tax Board estimates that California would lose out on about $92 million in tax revenue if it altered the tax code to include an exemption for young adult coverage (Calvan, Sacramento Bee, 2/7).