AR Legislators Approve Elimination of Adult Child Coverage State Tax

March 31, 2011 ( - The Arkansas Legislature has approved a bill allowing employers to extend health care coverage to employees' adult children without employees being taxed on coverage by the state, Business Insurance reports.

The bill has been sent to Governor Mike Beebe.  

The new federal health care law requires employers to extend health care coverage to employees’ adult children up to age 26. Subsequent Internal Revenue Service rules said the coverage can be extended on a tax-free basis through the end of the year in which the child turns 26, the news report explained.  

The new Arkansas bill would conform the state’s tax law to the federal health care reform law.  

Other states – including Arizona, California (see CA Bill Makes Adult Children’s Health Costs Tax Exempt), Kentucky (see KY Kills Adult Children Health Coverage State Tax), Maine, Minnesota and Oregon – have also approved conformity measures.  

Most states do not need to pass measures because their statutes are amended automatically to reflect changes in federal tax law (see How is State Tax Applied to Coverage for Adult Children under the PPACA?).