House File 871 - Reprinted
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:
6 TLSB 2242HV 81
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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 elects to take the small employer
1 26 health insurance coverage tax credit, the small employer shall
1 27 reduce, by the amount used in the computation of the credit,
1 28 the deduction for Iowa income tax purposes of the cost of
1 29 health insurance premiums paid by the employer during the tax
1 30 year in which the tax credit is computed, that is deductible
1 31 for federal tax purposes.
1 32 c. If a small employer that has claimed the small employer
1 33 health insurance coverage tax credit is merged with another
1 34 business or is divided into separate businesses, any resulting
1 35 business which is at least fifteen percent directly or
2 1 indirectly owned or controlled by the owners or controllers of
2 2 the original small employer, is entitled to claim any amounts
2 3 of the small employer health insurance coverage credit that
2 4 remain so long as the resulting business continues to purchase
2 5 the health insurance coverage during each tax year for which
2 6 the credit is claimed.
2 7 3. An individual may claim a small employer health
2 8 insurance coverage tax credit allowed a partnership, limited
2 9 liability company, S corporation, estate, or trust electing to
2 10 have the income taxed directly to the individual. The amount
2 11 claimed by the individual shall be based on the pro rata share
2 12 of the individual's earnings of the partnership, limited
2 13 liability company, S corporation, estate, or trust.
2 14 4. a. For the purposes of this section "small employer"
2 15 means a person actively engaged in business, to which all of
2 16 the following apply:
2 17 (1) On at least fifty percent of the employer's working
2 18 days during the preceding year, employed not less than two and
2 19 not more than twenty full=time equivalent eligible employees.
2 20 In determining the number of eligible employees, companies
2 21 which are affiliated companies or which are eligible to file a
2 22 combined tax return for purposes of state taxation are
2 23 considered one employer.
2 24 (2) The annualized, average hourly wage paid by the
2 25 employer is equal to or greater than one hundred percent of
2 26 the average county wage.
2 27 b. For purposes of this definition, "average county wage"
2 28 means the annualized, average hourly wage calculated by the
2 29 department of workforce development which equals the least of
2 30 the following:
2 31 (1) The annualized, average hourly wage paid by all
2 32 businesses in the entire county.
2 33 (2) The annualized, average hourly wage paid by all
2 34 businesses in the county located outside the largest city of
2 35 the county.
3 1 (3) The annualized, average hourly wage paid by all
3 2 businesses other than the largest employer in the entire
3 3 county.
3 4 Sec. 2. Section 422.33, Code 2005, is amended by adding
3 5 the following new subsection:
3 6 NEW SUBSECTION. 17. a. The taxes imposed under this
3 7 division shall be reduced by a small employer health insurance
3 8 coverage tax credit. The tax credit may be claimed by a small
3 9 employer that purchases health insurance coverage, as defined
3 10 in section 513B.2, for the small employer's employees and
3 11 their dependents for the first time. The amount of the tax
3 12 credit equals one hundred percent of the cost to the small
3 13 employer of purchasing the first year of such health insurance
3 14 coverage. The credit shall be taken over five tax years as
3 15 provided in paragraph "b".
3 16 b. (1) A small employer is entitled to claim twenty
3 17 percent of the amount of the small employer health insurance
3 18 coverage tax credit for the first tax year for which the
3 19 health insurance coverage is purchased and twenty percent of
3 20 the amount of the credit for each consecutive year thereafter
3 21 that the small employer continues to purchase the health
3 22 insurance coverage for a total of five tax years. However,
3 23 any credit in excess of the tax liability for the tax year is
3 24 nonrefundable but may be credited to the tax liability for the
3 25 following seven years or until depleted, whichever is the
3 26 earlier.
3 27 (2) If a small employer elects to take the small employer
3 28 health insurance coverage tax credit, the small employer shall
3 29 reduce, by the amount used in the computation of the credit,
3 30 the deduction for Iowa income tax purposes of the cost of
3 31 health insurance premiums paid by the employer during the tax
3 32 year in which the tax credit is computed, that is deductible
3 33 for federal tax purposes.
3 34 (3) If a small employer that has claimed the small
3 35 employer health insurance coverage tax credit is merged with
4 1 another business or is divided into separate businesses, any
4 2 resulting business which is at least fifteen percent directly
4 3 or indirectly owned or controlled by the owners or controllers
4 4 of the original small employer, is entitled to claim any
4 5 amounts of the small employer health insurance coverage credit
4 6 that remain so long as the resulting business continues to
4 7 purchase the health insurance coverage during each tax year
4 8 for which the credit is claimed.
4 9 c. (1) For the purposes of this subsection "small
4 10 employer" means a person actively engaged in business, to
4 11 which all of the following apply:
4 12 (a) On at least fifty percent of the employer's working
4 13 days during the preceding year, employed not less than two and
4 14 not more than twenty full=time equivalent eligible employees.
4 15 In determining the number of eligible employees, companies
4 16 which are affiliated companies or which are eligible to file a
4 17 combined tax return for purposes of state taxation are
4 18 considered one employer.
4 19 (b) The annualized, average hourly wage paid by the
4 20 employer is equal to or greater than one hundred percent of
4 21 the average county wage.
4 22 (2) For purposes of this definition, "average county wage"
4 23 means the annualized, average hourly wage calculated by the
4 24 department of workforce development which equals the least of
4 25 the following:
4 26 (a) The annualized, average hourly wage paid by all
4 27 businesses in the entire county.
4 28 (b) The annualized, average hourly wage paid by all
4 29 businesses in the county located outside the largest city of
4 30 the county.
4 31 (c) The annualized, average hourly wage paid by all
4 32 businesses other than the largest employer in the entire
4 33 county.
4 34 Sec. 3. EFFECTIVE AND RETROACTIVE APPLICABILITY DATES.
4 35 This Act, being deemed of immediate importance, takes effect
5 1 upon enactment and applies retroactively to January 1, 2005,
5 2 for tax years beginning on or after that date.
5 3 HF 871
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