S 825 IS

To amend the Internal Revenue Code of 1986 to allow small business employers a credit against income tax for employee health insurance expenses paid or incurred by the employer.

April 15, 1999

Mr. DURBIN (for himself and Mr. SCHUMER) introduced the following bill; which was read twice and referred to the Committee on Finance

To amend the Internal Revenue Code of 1986 to allow small business employers a credit against income tax for employee health insurance expenses paid or incurred by the employer.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. CREDIT FOR EMPLOYEE HEALTH INSURANCE EXPENSES.

(a) IN GENERAL- Subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to business-related credits) is amended by adding at the end the following:

`SEC. 45D. EMPLOYEE HEALTH INSURANCE EXPENSES.

`(a) GENERAL RULE- For purposes of section 38, in the case of a small employer, the employee health insurance expenses credit determined under this section is an amount equal to the applicable percentage of the amount paid by the taxpayer during the taxable year for qualified employee health insurance expenses.

`(b) APPLICABLE PERCENTAGE- For purposes of subsection (a), the applicable percentage is equal to--

`(1) 60 percent in the case of self-only coverage, and

`(2) 70 percent in the case of family coverage (as defined in section 220(c)(5)).

`(c) PER EMPLOYEE DOLLAR LIMITATION- The amount of qualified employee health insurance expenses taken into account under subsection (a) with respect to any qualified employee for any taxable year shall not exceed--

`(1) $600 in the case of self-only coverage, and

`(2) $1,200 in the case of family coverage (as so defined).

`(d) DEFINITIONS- For purposes of this section--

`(1) SMALL EMPLOYER-

`(A) IN GENERAL- The term `small employer' means, with respect to any calendar year, any employer if such employer employed an average of 9 or fewer employees on business days during either of the 2 preceding calendar years. For purposes of the preceding sentence, a preceding calendar year may be taken into account only if the employer was in existence throughout such year.

`(B) EMPLOYERS NOT IN EXISTENCE IN PRECEDING YEAR- In the case of an employer which was not in existence throughout the 1st preceding calendar year, the determination under subparagraph (A) shall be based on the average number of employees that it is reasonably expected such employer will employ on business days in the current calendar year.

`(2) QUALIFIED EMPLOYEE HEALTH INSURANCE EXPENSES-

`(A) IN GENERAL- The term `qualified employee health insurance expenses' means any amount paid by an employer for health insurance coverage to the extent such amount is attributable to coverage provided to any employee while such employee is a qualified employee.

`(B) EXCEPTION FOR AMOUNTS PAID UNDER SALARY REDUCTION ARRANGEMENTS- No amount paid or incurred for health insurance coverage pursuant to a salary reduction arrangement shall be taken into account under subparagraph (A).

`(C) HEALTH INSURANCE COVERAGE- The term `health insurance coverage' has the meaning given such term by section 9832(b)(1).

`(3) QUALIFIED EMPLOYEE-

`(A) IN GENERAL- The term `qualified employee' means, with respect to any period, an employee of an employer if the total amount of wages paid or incurred by such employer to such employee at an annual rate during the taxable year exceeds $5,000 but does not exceed $16,000.

`(B) TREATMENT OF CERTAIN EMPLOYEES- For purposes of subparagraph (A), the term `employee' shall include--

`(i) an employee within the meaning of section 401(c)(1), and

`(ii) a leased employee within the meaning of section 414(n).

`(C) WAGES- The term `wages'--

`(i) has the meaning given such term by section 3121(a) (determined without

regard to any dollar limitation contained in such section), and

`(ii) in the case of an employee described in subparagraph (B)(i), includes the net earnings from self-employment (as defined in section 1402(a) and as so determined).

`(D) INFLATION ADJUSTMENT-

`(i) IN GENERAL- In the case of any taxable year beginning in a calendar year after 1999, the $16,000 amount contained in subparagraph (A) shall be increased by an amount equal to--

`(I) such dollar amount, multiplied by

`(II) the cost-of-living adjustment under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting `calendar year 1998' for `calendar year 1992' in subparagraph (B) thereof.

`(ii) ROUNDING- If any increase determined under clause (i) is not a multiple of $100, such amount shall be rounded to the nearest multiple of $100.

`(e) CERTAIN RULES MADE APPLICABLE- For purposes of this section, rules similar to the rules of section 52 shall apply.

`(f) DENIAL OF DOUBLE BENEFIT- No deduction or credit under any other provision of this chapter shall be allowed with respect to qualified employee health insurance expenses taken into account under subsection (a).'

(b) CREDIT TO BE PART OF GENERAL BUSINESS CREDIT- Section 38(b) of the Internal Revenue Code of 1986 (relating to current year business credit) is amended by striking `plus' at the end of paragraph (11), by striking the period at the end of paragraph (12) and inserting `, plus', and by adding at the end the following:

`(13) the employee health insurance expenses credit determined under section 45D.'

(c) NO CARRYBACKS- Subsection (d) of section 39 of the Internal Revenue Code of 1986 (relating to carryback and carryforward of unused credits) is amended by adding at the end the following:

`(9) NO CARRYBACK OF SECTION 45D CREDIT BEFORE EFFECTIVE DATE- No portion of the unused business credit for any taxable year which is attributable to the employee health insurance expenses credit determined under section 45D may be carried back to a taxable year ending before the date of the enactment of section 45D.'

(d) CLERICAL AMENDMENT- The table of sections for subpart D of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by adding at the end the following:

`Sec. 45D. Employee health insurance expenses.'

(e) EFFECTIVE DATE- The amendments made by this section shall apply to amounts paid or incurred in taxable years beginning after the date of the enactment of this Act.

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