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108th CONGRESS
1st Session
S. 1901
To amend the Internal Revenue Code of 1986 to provide for a tax credit
for offering employer-based health insurance coverage and to provide
for the establishment of health insurance purchasing pools.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
November 20, 2003
Mr. Bayh introduced the following bill; which was read twice and
referred to the Committee on Finance
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to provide for a tax credit
for offering employer-based health insurance coverage and to provide
for the establishment of health insurance purchasing pools.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Small Business Health Care Act of
2003''.
SEC. 2. 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. 45G. EMPLOYEE HEALTH INSURANCE EXPENSES.
``(a) General Rule.--For purposes of section 38, in the case of a
qualified 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.--
``(1) In general.--For purposes of subsection (a), the
applicable percentage is--
``(A) 50 percent in the case of an employer with
less than 26 qualified employees,
``(B) 40 percent in the case of an employer with
more than 25 but less than 36 qualified employees,
``(C) 30 percent in the case of an employer with
more than 35 but less than 51 qualified employees,
``(D) 20 percent in the case of an employer with
more than 50 but less than 76 qualified employees, and
``(E) 10 percent in the case of an employer with
more than 75 but less than 101 qualified employees.
``(2) High contribution bonus.--With respect to any taxable
year during which a qualified small employer pays 100 percent
of qualified employee health insurance expenses for the
qualified employees of the small employer, the applicable
percentage otherwise determined for such taxable year under the
preceding paragraph shall be increased by 5 percentage points.
``(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 the maximum employer contribution for self-only coverage or
family coverage (as applicable) determined under section 8906(a) of
title 5, United States Code, for the calendar year in which such
taxable year begins.
``(d) Definitions and Special Rules.--For purposes of this
section--
``(1) Qualified small employer.--
``(A) In general.--The term `qualified small
employer' means any small employer which--
``(i) provides eligibility for health
insurance coverage (after any waiting period
(as defined in section 9801(b)(4))) to all
qualified employees of the employer,
``(ii) pays at least 70 percent of the cost
of such coverage (60 percent in the case of
family coverage) for each qualified employee,
and
``(iii) in the case of a small employer
which is located in a State which has
established a health insurance purchasing pool
under section 3 of the Small Business Health
Care Act of 2003, joins such pool.
``(B) Transition rule for new plans.--
``(i) In general.--If a small employer (or
any predecessor) did not provide health
insurance coverage to the qualified employees
of the employer during the employer's
precompliance period, then subparagraph (A)
shall be applied to such employer for the first
5 taxable years following such period by
substituting `50 percent' for `70 percent' in
clause (ii) (or for `60 percent' in such
clause, in the case of family coverage).
``(ii) Precompliance period.--For purposes
of clause (i), the precompliance periods are--
``(I) the period beginning with the
small employer's taxable year preceding
its first taxable year beginning after
the date of the enactment of this
section, and
``(II) the period beginning with
the small employer's taxable year
preceding the first taxable year for
which the employer meets the
requirement of subparagraph (A)(i).
An employer not in existence for any period
shall be treated in the same manner as an
employer which is in existence and not
providing coverage.
``(C) Small employer.--
``(i) In general.--For purposes of this
paragraph, the term `small employer' means,
with respect to any calendar year, any employer
if such employer employed an average of not
less than 2 and not more than 100 qualified
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.
``(ii) 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 clause (i) shall be based on the average
number of qualified 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.--The term `qualified employee'
means an employee of an employer who, with respect to any
period, is not provided health insurance coverage under--
``(A) a health plan of the employee's spouse,
``(B) title XVIII, XIX, or XXI of the Social
Security Act,
``(C) chapter 17 of title 38, United States Code,
``(D) chapter 55 of title 10, United States Code,
``(E) chapter 89 of title 5, United States Code, or
``(F) any other provision of law.
``(4) Employee--The term `employee'--
``(A) means any individual, with respect to any
calendar year, who is reasonably expected to receive at
least $5,000 and not more than $100,000 of compensation
from the employer during such year,
``(B) does not include an employee within the
meaning of section 401(c)(1), and
``(C) includes a leased employee within the meaning
of section 414(n).
``(5) Compensation.--The term `compensation' means amounts
described in section 6051(a)(3).
``(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 (14),
by striking the period at the end of paragraph (15) and inserting ``,
plus'', and by adding at the end the following:
``(16) the employee health insurance expenses credit
determined under section 45G.''.
(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:
``(11) No carryback of section 45g 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 45G may be carried
back to a taxable year ending before the date of the enactment
of section 45G.''.
(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. 45G. Employee health insurance
expenses.''.
(e) Employer Outreach.--The Internal Revenue Service shall, in
conjunction with the Small Business Administration, develop materials
and implement an educational program to ensure that business personnel
are aware of--
(1) the eligibility criteria for the tax credit provided
under section 45G of the Internal Revenue Code of 1986 (as
added by this section),
(2) the methods to be used in calculating such credit, and
(3) the documentation needed in order to claim such credit,
so that the maximum number of eligible businesses may claim the tax
credit.
(f) 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.
SEC. 3. HEALTH INSURANCE PURCHASING POOLS.
(a) Matching Funds for Operation of Pools.--
(1) In general.--In the case of a State or a unit of local
government that establishes a health insurance purchasing pool,
the Secretary of Health and Human Services shall provide, from
the funds allocated under subsection (b), a grant equal to the
applicable percentage of the administrative costs associated
with such pool.
(2) Applicable percentage.--For purposes of paragraph (1),
the applicable percentage is--
(A) 75 percent for the initial year of the grant;
(B) 50 percent for year succeeding the year to
which subparagraph (A) is applicable;
(C) 25 percent for the year succeeding the year to
which subparagraph (B) is applicable; and
(D) zero thereafter.
(3) Special rule for local government purchasing pools.--
The Secretary of Health and Human Services shall not provide a
grant under this section to any unit of a local government
unless such unit of local government submits to the Secretary a
certificate from the State in which such unit of local
government is located authorizing such grant.
(4) Health insurance purchasing pool.--For purposes of this
section, the term ``health insurance purchasing pool'' means a
purchasing pool for small employers (as defined under section
45G of the Internal Revenue Code of 1986) for the purpose of
providing health insurance coverage (as defined in such
section) to qualified employees (as defined in such section).
(b) Funding.--Out of the money in the Treasury of the United States
not otherwise appropriated, there are authorized and appropriated such
sums as are necessary to carry out this section.
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