By Caroline Rule
Tax Notes Federal
July 18, 2022
Abstract: In this article, Rule provides an overview of how an employer may offer tax-deductible, abortion-related travel benefits after the recent Dobbs decision.
Taxes were almost certainly not the first thing that came to mind when the Supreme Court overruled Roe in Dobbs. But almost any seismic upheaval in our law ultimately brings federal taxes into play (“in this world nothing can be said to be certain, except death and taxes”). The tax fallout from Dobbs in large part affects whether a business may deduct the costs of its employees’ travel from a state that bans abortions to a state where it is legal and hence may offer those costs tax free to its employees. (This article does not address potential state tax law implications. Most states adopt the IRC with their own amendments; in reaction to Dobbs, anti-abortion states may enact amendments to restrict state tax deductions.)
Businesses are scrambling to assess the federal tax implications of paying for their employees’ abortion-related travel. Although this article primarily focuses on what employers may do in response to Dobbs, individuals’ taxes may also be affected. Dobbs’ tax implications are extraordinarily complex because federal tax law interrelates with, and is often inseparable from, federal and state health coverage laws and states’ laws on abortion. This article therefore comes with the caveat that it cannot address all potential federal tax implications of Dobbs, which are still percolating and may be unsettled for some time.
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