Senate File 506 - Introduced SENATE FILE 506 BY COMMITTEE ON WAYS AND MEANS (SUCCESSOR TO SF 248) A BILL FOR An Act providing for a small employer health insurance tax 1 credit as a percentage of the federal credit and including 2 retroactive applicability provisions. 3 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 4 TLSB 1899SV (3) 84 tw/sc

S.F. 506 Section 1. NEW SECTION . 422.12A Small employer health 1 insurance tax credit. 2 1. The taxes imposed under this division, less the credits 3 allowed under section 422.12, shall be reduced by a small 4 employer health insurance tax credit equal to twenty-five 5 percent of the federal small employer health insurance tax 6 credit provided in section 45R of the Internal Revenue Code. 7 The tax credit provided in this section is available to 8 eligible small employers. 9 2. An individual may claim the tax credit allowed to a 10 partnership, limited liability company, S corporation, estate, 11 or trust that elects to have the income taxed directly to the 12 individual. The amount claimed by the individual shall be 13 based upon the pro rata share of the individual’s earnings of 14 the partnership, limited liability company, S corporation, 15 estate, or trust. 16 3. Any credit in excess of the tax liability is refundable. 17 In lieu of claiming a refund, the taxpayer may elect to have 18 the excess shown on the taxpayer’s final, completed return 19 credited to the tax liability for the following tax year. 20 4. For purposes of this section, “eligible small employer” 21 means a taxpayer who has ten or fewer full-time employees and 22 who otherwise meets the requirements of the small employer 23 health insurance tax credit allowed under section 45R of the 24 Internal Revenue Code. 25 Sec. 2. Section 422.33, Code 2011, is amended by adding the 26 following new subsection: 27 NEW SUBSECTION . 13. The taxes imposed under this division 28 shall be reduced by a small employer health insurance tax 29 credit authorized pursuant to section 422.12A. 30 Sec. 3. RETROACTIVE APPLICABILITY. This Act applies 31 retroactively to January 1, 2011, for tax years beginning on 32 or after that date. 33 EXPLANATION 34 The federal Patient Protection and Affordable Care Act (Pub. 35 -1- LSB 1899SV (3) 84 tw/sc 1/ 2

S.F. 506 L. No. 111-148) provided for a small employer health insurance 1 income tax credit of up to 50 percent for eligible small 2 employers. This bill provides for a credit against Iowa income 3 tax liability in an amount equal to 25 percent of the federal 4 credit for employers with 10 or fewer full-time employees. The 5 tax credit is refundable or may be carried forward to the next 6 tax year and is available against the individual and corporate 7 income taxes. 8 The bill applies retroactively to January 1, 2011, for tax 9 years beginning on or after that date. 10 -2- LSB 1899SV (3) 84 tw/sc 2/ 2