House File 871 - Introduced
HOUSE FILE
BY COMMITTEE ON WAYS AND MEANS
(SUCCESSOR TO HF 689)
Passed House, Date Passed Senate, Date
Vote: Ayes Nays Vote: Ayes Nays
Approved
A BILL FOR
1 An Act providing for income tax credits for the cost of
2 purchasing health insurance coverage by certain small
3 employers and providing effective and retroactive
4 applicability dates.
5 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
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PAG LIN
1 1 Section 1. NEW SECTION. 422.11K SMALL EMPLOYER HEALTH
1 2 INSURANCE COVERAGE TAX CREDIT.
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 coverage tax credit. The
1 6 tax credit may be claimed by a small employer that purchases
1 7 health insurance coverage, as defined in section 513B.2, for
1 8 the small employer's employees and their dependents for the
1 9 first time. The amount of the tax credit equals one hundred
1 10 percent of the cost to the small employer of purchasing the
1 11 first year of the health insurance coverage. The tax credit
1 12 shall be taken over five tax years as provided in subsection
1 13 2.
1 14 2. a. A small employer is entitled to claim twenty
1 15 percent of the amount of the small employer health insurance
1 16 coverage tax credit for the first tax year for which the
1 17 health insurance coverage is purchased and twenty percent of
1 18 the amount of the credit for each consecutive year thereafter
1 19 that the small employer continues to purchase health insurance
1 20 coverage for a total of five tax years. However, any credit
1 21 in excess of the tax liability for the tax year is
1 22 nonrefundable but may be credited to the tax liability for the
1 23 following seven years or until depleted, whichever is the
1 24 earlier.
1 25 b. If a small employer that has claimed the small employer
1 26 health insurance coverage tax credit is merged with another
1 27 business or is divided into separate businesses, any resulting
1 28 business which is at least fifteen percent directly or
1 29 indirectly owned or controlled by the owners or controllers of
1 30 the original small employer, is entitled to claim any amounts
1 31 of the small employer health insurance coverage credit that
1 32 remain so long as the resulting business continues to purchase
1 33 the health insurance coverage during each tax year for which
1 34 the credit is claimed.
1 35 3. An individual may claim a small employer health
2 1 insurance coverage tax credit allowed a partnership, limited
2 2 liability company, S corporation, estate, or trust electing to
2 3 have the income taxed directly to the individual. The amount
2 4 claimed by the individual shall be based on the pro rata share
2 5 of the individual's earnings of the partnership, limited
2 6 liability company, S corporation, estate, or trust.
2 7 4. a. For the purposes of this section "small employer"
2 8 means a person actively engaged in business, to which all of
2 9 the following apply:
2 10 (1) On at least fifty percent of the employer's working
2 11 days during the preceding year, employed not less than two and
2 12 not more than twenty full=time equivalent eligible employees.
2 13 In determining the number of eligible employees, companies
2 14 which are affiliated companies or which are eligible to file a
2 15 combined tax return for purposes of state taxation are
2 16 considered one employer.
2 17 (2) The annualized, average hourly wage paid by the
2 18 employer is equal to or greater than one hundred percent of
2 19 the average county wage.
2 20 b. For purposes of this definition, "average county wage"
2 21 means the annualized, average hourly wage calculated by the
2 22 department of workforce development which equals the least of
2 23 the following:
2 24 (1) The annualized, average hourly wage paid by all
2 25 businesses in the entire county.
2 26 (2) The annualized, average hourly wage paid by all
2 27 businesses in the county located outside the largest city of
2 28 the county.
2 29 (3) The annualized, average hourly wage paid by all
2 30 businesses other than the largest employer in the entire
2 31 county.
2 32 Sec. 2. Section 422.33, Code 2005, is amended by adding
2 33 the following new subsection:
2 34 NEW SUBSECTION. 17. a. The taxes imposed under this
2 35 division shall be reduced by a small employer health insurance
3 1 coverage tax credit. The tax credit may be claimed by a small
3 2 employer, as defined in section 513B.2, that purchases health
3 3 insurance coverage for the small employer's employees and
3 4 their dependents for the first time. The amount of the tax
3 5 credit equals one hundred percent of the cost to the small
3 6 employer of purchasing the first year of such health insurance
3 7 coverage. The credit shall be taken over five tax years as
3 8 provided in paragraph "b".
3 9 b. (1) A small employer is entitled to claim twenty
3 10 percent of the amount of the small employer health insurance
3 11 coverage tax credit for the first tax year for which the
3 12 health insurance coverage is purchased and twenty percent of
3 13 the amount of the credit for each consecutive year thereafter
3 14 that the small employer continues to purchase the health
3 15 insurance coverage for a total of five tax years. However,
3 16 any credit in excess of the tax liability for the tax year is
3 17 nonrefundable but may be credited to the tax liability for the
3 18 following seven years or until depleted, whichever is the
3 19 earlier.
3 20 (2) If a small employer that has claimed the small
3 21 employer health insurance coverage tax credit is merged with
3 22 another business or is divided into separate businesses, any
3 23 resulting business which is at least fifteen percent directly
3 24 or indirectly owned or controlled by the owners or controllers
3 25 of the original small employer, is entitled to claim any
3 26 amounts of the small employer health insurance coverage credit
3 27 that remain so long as the resulting business continues to
3 28 purchase the health insurance coverage during each tax year
3 29 for which the credit is claimed.
3 30 c. (1) For the purposes of this subsection "small
3 31 employer" means a person actively engaged in business, to
3 32 which all of the following apply:
3 33 (a) On at least fifty percent of the employer's working
3 34 days during the preceding year, employed not less than two and
3 35 not more than twenty full=time equivalent eligible employees.
4 1 In determining the number of eligible employees, companies
4 2 which are affiliated companies or which are eligible to file a
4 3 combined tax return for purposes of state taxation are
4 4 considered one employer.
4 5 (b) The annualized, average hourly wage paid by the
4 6 employer is equal to or greater than one hundred percent of
4 7 the average county wage.
4 8 (2) For purposes of this definition, "average county wage"
4 9 means the annualized, average hourly wage calculated by the
4 10 department of workforce development which equals the least of
4 11 the following:
4 12 (a) The annualized, average hourly wage paid by all
4 13 businesses in the entire county.
4 14 (b) The annualized, average hourly wage paid by all
4 15 businesses in the county located outside the largest city of
4 16 the county.
4 17 (c) The annualized, average hourly wage paid by all
4 18 businesses other than the largest employer in the entire
4 19 county.
4 20 Sec. 3. EFFECTIVE AND RETROACTIVE APPLICABILITY DATES.
4 21 This Act, being deemed of immediate importance, takes effect
4 22 upon enactment and applies retroactively to January 1, 2005,
4 23 for tax years beginning on or after that date.
4 24 EXPLANATION
4 25 This bill provides an individual and corporate income tax
4 26 credit for a small employer that purchases health insurance
4 27 coverage for its employees and their dependents for the first
4 28 time.
4 29 A small employer is defined as a person actively engaged in
4 30 business who on at least 50 percent of the employer's working
4 31 days during the preceding year, employed not less than two and
4 32 not more than 25 full=time equivalent eligible employees and
4 33 paid those employees an annualized, average hourly wage that
4 34 is equal to or greater than 100 percent of the average county
4 35 wage. "Average county wage" is defined to mean the
5 1 annualized, average hourly wage, calculated by the department
5 2 of workforce development, which equals the least of the
5 3 annualized, average hourly wage paid by all businesses in the
5 4 entire county, the annualized, average hourly wage paid by all
5 5 businesses in the county located outside the largest city of
5 6 the county, or the annualized, average hourly wage paid by all
5 7 businesses other than the largest employer in the county.
5 8 "Health insurance coverage" is defined to mean benefits
5 9 consisting of health care provided directly through insurance
5 10 or reimbursement, or otherwise, and including items and
5 11 services paid for as health care under a hospital or health
5 12 service policy or certificate, hospital or health service plan
5 13 contract, or health maintenance organization contract offered
5 14 by a carrier.
5 15 The amount of the credit equals 100 percent of the first
5 16 year's cost to a small employer of purchasing health insurance
5 17 coverage for its employees and their dependents for the first
5 18 time. A small employer is entitled to claim 20 percent of the
5 19 amount of the small employer health insurance coverage credit
5 20 for the first tax year for which the health insurance coverage
5 21 is purchased and 20 percent of the amount of the credit for
5 22 each consecutive year thereafter that the small employer
5 23 continues to purchase the health insurance coverage for a
5 24 total of five tax years.
5 25 The bill takes effect upon enactment and applies
5 26 retroactively to January 1, 2005, for tax years beginning on
5 27 or after that date.
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