House File 2119 - Introduced
HOUSE FILE
BY KAUFMANN, DIX, TYMESON,
STRUYK, SODERBERG, SCHUELLER,
HUTTER, CARROLL, SCHICKEL,
LUKAN, WISE, SHOMSHOR,
OLDSON, and QUIRK
Passed House, Date Passed Senate, Date
Vote: Ayes Nays Vote: Ayes Nays
Approved
A BILL FOR
1 An Act relating to small employer health insurance income tax
2 credits and providing effective and retroactive applicability
3 dates.
4 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
5 TLSB 5695YH 81
6 av/je/5
PAG LIN
1 1 Section 1. NEW SECTION. 422.11M SMALL EMPLOYER HEALTH
1 2 INSURANCE TAX CREDITS.
1 3 1. The taxes imposed under this division, less the credits
1 4 allowed under sections 422.12 and 422.12B, shall be reduced by
1 5 a small employer health insurance tax credit.
1 6 a. A tax credit may be claimed by a small employer that
1 7 purchases health insurance coverage, as defined in section
1 8 513B.2, for the small employer's employees and their
1 9 dependents for the first time. The amount of the tax credit
1 10 equals ten percent of the cost to the small employer of
1 11 purchasing the first year of the health insurance coverage.
1 12 The tax credit shall be taken over five years. A small
1 13 employer is entitled to claim twenty percent of the amount of
1 14 the tax credit for the first tax year for which the health
1 15 insurance coverage is purchased and twenty percent of the
1 16 amount of the credit for each consecutive year thereafter that
1 17 the small employer continues to purchase health insurance
1 18 coverage for a total of five tax years. However, any credit
1 19 in excess of the tax liability for the tax year is
1 20 nonrefundable but may be credited to the tax liability for the
1 21 following seven years or until depleted, whichever is the
1 22 earlier.
1 23 b. A tax credit may be claimed by a small employer that
1 24 purchases health insurance coverage, as defined in section
1 25 513B.2, for the small employer's employees and their
1 26 dependents. The amount of the tax credit equals ten percent
1 27 of the cost to the small employer of purchasing the health
1 28 insurance coverage for the tax year for which the credit is
1 29 taken. However, any credit in excess of the tax liability for
1 30 the tax year is nonrefundable but may be credited to the tax
1 31 liability for the following seven years or until depleted,
1 32 whichever is the earlier. A small employer shall claim this
1 33 tax credit only once. A small employer that has claimed the
1 34 tax credit provided under paragraph "a" is not eligible to
1 35 claim a tax credit under this paragraph.
2 1 2. If a small employer elects to take a small employer
2 2 health insurance tax credit, the small employer shall reduce,
2 3 by the amount used in the computation of the credit, the
2 4 deduction for Iowa income tax purposes of the cost of the
2 5 health insurance premiums paid by the employer during the tax
2 6 year for which the tax credit is computed, that is deductible
2 7 for federal tax purposes.
2 8 3. If a small employer that has claimed a small employer
2 9 health insurance tax credit is merged with another business or
2 10 is divided into separate businesses, any resulting business
2 11 which is at least fifteen percent directly or indirectly owned
2 12 or controlled by the owners or controllers of the original
2 13 small employer is entitled to claim any amounts of the small
2 14 employer health insurance tax credit that remain so long as
2 15 the resulting business continues to purchase the health
2 16 insurance coverage during each tax year for which the credit
2 17 is claimed.
2 18 4. An individual may claim a small employer health
2 19 insurance tax credit allowed a partnership, limited liability
2 20 company, S corporation, estate, or trust electing to have the
2 21 income taxed directly to the individual. The amount claimed
2 22 by the individual shall be based on the pro rata share of the
2 23 individual's earnings of the partnership, limited liability
2 24 company, S corporation, estate, or trust.
2 25 5. a. For the purposes of this section, "small employer"
2 26 means a person actively engaged in business who is self=
2 27 employed or to which all of the following apply:
2 28 (1) On at least fifty percent of the employer's working
2 29 days during the preceding year, employed at least two and not
2 30 more than fifty full=time equivalent eligible employees.
2 31 In determining the number of eligible employees, companies
2 32 which are affiliated companies or which are eligible to file a
2 33 combined tax return for purposes of state taxation are
2 34 considered one employer.
2 35 (2) The annualized, average hourly wage paid by the
3 1 employer is equal to or greater than one hundred percent of
3 2 the average county wage.
3 3 b. For purposes of this definition, "average county wage"
3 4 means the annualized, average hourly wage calculated by the
3 5 department of workforce development which equals the least of
3 6 the following:
3 7 (1) The annualized, average hourly wage paid by all
3 8 businesses in the entire county.
3 9 (2) The annualized, average hourly wage paid by all
3 10 businesses in the county located outside the largest city of
3 11 the county.
3 12 (3) The annualized, average hourly wage paid by all
3 13 businesses other than the largest employer in the entire
3 14 county.
3 15 Sec. 2. Section 422.33, Code Supplement 2005, is amended
3 16 by adding the following new subsection:
3 17 NEW SUBSECTION. 20. a. The taxes imposed under this
3 18 division shall be reduced by small employer health insurance
3 19 tax credits.
3 20 (1) A tax credit may be claimed by a small employer that
3 21 purchases health insurance coverage, as defined in section
3 22 513B.2, for the small employer's employees and their
3 23 dependents for the first time. The amount of the tax credit
3 24 equals ten percent of the cost to the small employer of
3 25 purchasing the first year of such health insurance coverage.
3 26 The credit shall be taken over five tax years. A small
3 27 employer is entitled to claim twenty percent of the amount of
3 28 the small employer health insurance tax credit for the first
3 29 tax year for which the health insurance coverage is purchased
3 30 and twenty percent of the amount of the credit for each
3 31 consecutive year thereafter that the small employer continues
3 32 to purchase the health insurance coverage for a total of five
3 33 tax years. However, any credit in excess of the tax liability
3 34 for the tax year is nonrefundable but may be credited to the
3 35 tax liability for the following seven years or until depleted,
4 1 whichever is the earlier.
4 2 (2) A tax credit may be claimed by a small employer that
4 3 purchases health insurance coverage, as defined in section
4 4 513B.2, for the small employer's employees and their
4 5 dependents. The amount of the tax credit equals ten percent
4 6 of the cost to the small employer of purchasing the health
4 7 insurance coverage for the tax year for which the credit is
4 8 taken. However, any credit in excess of the tax liability for
4 9 the tax year is nonrefundable but may be credited to the tax
4 10 liability for the following seven years or until depleted,
4 11 whichever is the earlier. A small employer shall claim this
4 12 tax credit only once. A small employer that has claimed the
4 13 tax credit provided under paragraph "a" is not eligible to
4 14 claim a tax credit under this paragraph.
4 15 b. If a small employer elects to take the small employer
4 16 health insurance tax credit, the small employer shall reduce,
4 17 by the purchase amount used in the computation of the credit,
4 18 the deduction for Iowa income tax purposes of the cost of
4 19 health insurance premiums paid by the employer during the tax
4 20 year in which the tax credit is computed, that is deductible
4 21 for federal tax purposes.
4 22 c. If a small employer that has claimed the small employer
4 23 health insurance tax credit is merged with another business or
4 24 is divided into separate businesses, any resulting business
4 25 which is at least fifteen percent directly or indirectly owned
4 26 or controlled by the owners or controllers of the original
4 27 small employer is entitled to claim any amounts of the small
4 28 employer health insurance tax credit that remain so long as
4 29 the resulting business continues to purchase the health
4 30 insurance coverage during each tax year for which the credit
4 31 is claimed.
4 32 d. (1) For the purposes of this subsection, "small
4 33 employer" means a person actively engaged in business who is
4 34 self=employed or to which all of the following apply:
4 35 (a) On at least fifty percent of the employer's working
5 1 days during the preceding year, employed at least two and not
5 2 more than fifty full=time equivalent eligible employees. In
5 3 determining the number of eligible employees, companies which
5 4 are affiliated companies or which are eligible to file a
5 5 combined tax return for purposes of state taxation are
5 6 considered one employer.
5 7 (b) The annualized, average hourly wage paid by the
5 8 employer is equal to or greater than one hundred percent of
5 9 the average county wage.
5 10 (2) For purposes of this definition, "average county wage"
5 11 means the annualized, average hourly wage calculated by the
5 12 department of workforce development which equals the least of
5 13 the following:
5 14 (a) The annualized, average hourly wage paid by all
5 15 businesses in the entire county.
5 16 (b) The annualized, average hourly wage paid by all
5 17 businesses in the county located outside the largest city of
5 18 the county.
5 19 (c) The annualized, average hourly wage paid by all
5 20 businesses other than the largest employer in the entire
5 21 county.
5 22 Sec. 3. EFFECTIVE AND RETROACTIVE APPLICABILITY DATES.
5 23 This Act, being deemed of immediate importance, takes effect
5 24 upon enactment and applies retroactively to January 1, 2006,
5 25 for tax years beginning on or after that date.
5 26 EXPLANATION
5 27 This bill provides individual and corporate income tax
5 28 credits to certain small employers for 10 percent of their
5 29 cost of purchasing one year of health insurance coverage for
5 30 their employees and their dependents.
5 31 A tax credit may be claimed by a small employer that
5 32 purchases such health insurance coverage for the first time,
5 33 in the amount of 10 percent of the cost of purchasing the
5 34 health insurance for the first year. A small employer which
5 35 claims the credit is allowed to claim 20 percent of the amount
6 1 of the tax credit for the first tax year the insurance
6 2 coverage is purchased and 20 percent of the amount of the
6 3 credit for each consecutive year thereafter that the small
6 4 employer continues to purchase the health insurance coverage
6 5 for a total of five tax years.
6 6 A tax credit may also be claimed by a small employer that
6 7 has been purchasing such health insurance coverage in the
6 8 amount of 10 percent of the cost of purchasing such coverage
6 9 for the tax year for which the credit is taken. A small
6 10 employer is allowed to claim this credit only once. A small
6 11 employer that has claimed a tax credit for the cost of
6 12 providing the first year of such health insurance coverage
6 13 cannot claim this tax credit.
6 14 "Small employer" is defined as a person actively engaged in
6 15 business who is self=employed or who, on at least 50 percent
6 16 of the employer's working days during the preceding year,
6 17 employed at least two and not more than 50 full=time
6 18 equivalent eligible employees and paid those employees an
6 19 annualized, average hourly wage that is equal to or greater
6 20 than 100 percent of the average county wage.
6 21 "Average county wage" is defined to mean the annualized,
6 22 average hourly wage, calculated by the department of workforce
6 23 development, which equals the least of the annualized hourly
6 24 wage paid by all businesses in the entire county, the
6 25 annualized average hourly wage paid by all businesses in the
6 26 county located outside the largest city of the county, or the
6 27 annualized, average hourly wage paid by all businesses other
6 28 than the largest employer in the county.
6 29 "Health insurance coverage" is defined to mean benefits
6 30 consisting of health care provided directly through insurance
6 31 or reimbursement, or otherwise, and including items and
6 32 services paid for as health care under a hospital or health
6 33 service policy or certificate, hospital or health service plan
6 34 contract, or health maintenance organization contract offered
6 35 by a carrier.
7 1 The bill takes effect upon enactment and applies
7 2 retroactively to January 1, 2006, for tax years beginning on
7 3 or after that date.
7 4 LSB 5695YH 81
7 5 av:rj/je/5