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U.S. House Focuses on Small Business Tax Credit for Health Insurance

Posted By Bob Ogle, Friday, November 18, 2011

The House Ways and Means Oversight Subcommittee is currently looking at the issue of whether small businesses are benefiting from the Small Business Health Insurance Tax Credit, which was enacted as part of the Affordable Care Act in 2010.

The Patient Protection and Affordable Care Act included a limited-time tax credit to encourage small businesses to provide health care coverage to employees. The Small Business Health Insurance Tax Credit is available to certain small businesses and covers some of the cost of employee health insurance. Click here to see more information about the tax credit including eligibility rules, amount of credit and how to determine if you qualify.

The Small Business Tax Credit covers 35 percent of an eligible small employer’s contribution to employee health insurance premiums for each tax year from 2010 to 2013. After 2013, the credit amount increases to 50 percent, but a taxpayer may only elect to take the credit for two consecutive tax years. The calculation to determine eligibility is a complex sliding scale involving employee hours of service and wages, along with certain exclusions.

As the costs of health insurance continue to rise, the Committee said it remains unclear whether the Small Business Tax Credit is beneficial to a meaningful number of small businesses or whether the Internal Revenue Service (IRS) is administering the credit appropriately.

The subcommittee recently held a hearing that focused on whether small business employers are currently benefitting from the Small Business Tax Credit, problems they may be encountering when calculating the credit, and whether the IRS is administering it in a way that ensures tax compliance. The hearing included testimony from J. Russell George, the U.S. Treasury Inspector General for Tax Administration; Sarah Hall Ingram, Commissioner of the Tax Exempt/Government Entities Division for the IRS; and officials from the American Institute of Certified Public Accountants and the National Small Business Association.


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