To amend the Internal Revenue Code of 1986 to allow small businesses a refundable income tax credit to offset the cost of providing health care coverage for employees.

Summary: Small Business Health Care Relief Act of 2008 - Amends the Internal Revenue Code to allow certain small business owners with 50 or fewer employees a refundable tax credit for the payment of a portion of the health care expenses of their employees.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Small Business Health Care Relief 
Act of 2008''.

SEC. 2. REFUNDABLE CREDIT FOR SMALL BUSINESSES WHICH PROVIDE HEALTH 
              CARE COVERAGE FOR EMPLOYEES.

    (a) In General.--Subpart C of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to refundable credits) 
is amended by redesignating section 36 as section 37 and by inserting 
after section 35 the following new section:

``SEC. 36. SMALL BUSINESSES PROVIDING HEALTH CARE COVERAGE FOR 
              EMPLOYEES.

    ``(a) In General.--In the case of an eligible small business, there 
shall be allowed as a credit against the tax imposed by this subtitle 
for the taxable year an amount equal to the applicable percentage of 
the expenses paid or incurred by the taxpayer for qualified health care 
coverage of eligible employees, their spouses, and dependents (within 
the meaning of section 213(a)).
    ``(b) Applicable Percentage.--For purposes of this section, the 
term `applicable percentage' means--
            ``(1) 50 percent if qualified health care coverage is 
        provided by the taxpayer to an average (on days during the 
        taxable year) of 10 or fewer eligible employees of the 
        taxpayer,
            ``(2) 25 percent if qualified health care coverage is 
        provided by the taxpayer to an average (on such days) of at 
        least 10 but not more than 25 eligible employees of the 
        taxpayer, and
            ``(3) 15 percent if qualified health care coverage is 
        provided by the taxpayer to an average (on such days) of more 
        than 25 eligible employees of the taxpayer.
    ``(c) Eligible Small Business.--For purposes of this section, the 
term `eligible small business' means any taxpayer engaged in a trade or 
business if the taxpayer meets the requirements of the following 
paragraphs:
            ``(1) 50 or fewer employees.--
                    ``(A) In general.--A taxpayer meets the 
                requirements of this paragraph if the taxpayer employs 
                an average of 50 or fewer employees on business days 
                during the preceding taxable year.
                    ``(B) Taxpayer not in existence.--In any case in 
                which the taxpayer is an entity and is not in existence 
                throughout the preceding taxable year, subparagraph (A) 
                shall be applied by substituting `taxable year' for 
                `preceding taxable year'.
            ``(2) Gross receipts limitation.--
                    ``(A) In general.--A taxpayer meets the 
                requirements of this paragraph if the gross receipts of 
                the taxpayer for the preceding taxable year do not 
                exceed $10,000,000.
                    ``(B) Taxpayer not in existence.--In any case in 
                which the taxpayer is an entity and is not in existence 
                throughout the preceding taxable year, subparagraph (A) 
                shall be applied by substituting `taxable year' for 
                `preceding taxable year'.
                    ``(C) Special rules.--For purposes of subparagraph 
                (A), the rules of subparagraphs (B) and (C) of section 
                448(c)(3) shall apply.
            ``(3) Plan offering requirement.--A taxpayer meets the 
        requirements of the paragraph if--
                    ``(A) the taxpayer offers qualified health 
                coverage, on the same terms and conditions, to at least 
                90 percent of the taxpayer's eligible employees, and
                    ``(B) such offering is made at least annually and 
                at such other times and in such manner as the Secretary 
                shall prescribe.
            ``(4) Plan participation requirement.--
                    ``(A) In general.--A taxpayer meets the 
                requirements of the paragraph if the average daily 
                percentage of eligible employees who are provided with 
                qualified health coverage by the taxpayer during the 
                taxable year is not less than such average for the 
                preceding taxable year.
                    ``(B) Exceptions.--
                            ``(i) Not in existence.--Subparagraph (A) 
                        shall not apply if the trade or business was 
                        not in existence throughout the preceding 
                        taxable year.
                            ``(ii) Business decline.--Under regulations 
                        prescribed by the Secretary, subparagraph (A) 
                        shall not apply to the extent that any 
                        reduction in such percentage is the result of a 
                        reduction in the number of employees of the 
                        taxpayer on account of a reduction in the gross 
                        receipts of the taxpayer.
            ``(5) Minimum employer payment.--A taxpayer meets the 
        requirements of the paragraph if at least 65 percent of the 
        cost of qualified health coverage provided to each eligible 
        employee is borne by the employer (determined without regard to 
        this section).
    ``(d) Eligible Employees.--For purposes of this section, the term 
`eligible employee' means any employee of the taxpayer if--
            ``(1) such employee is not covered under--
                    ``(A) any 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, and
            ``(2) such employee is not a part-time or seasonal 
        employee.
    ``(e) Qualified Health Coverage.--For purposes of this section, the 
term `qualified health coverage' means coverage under a health plan 
provided by the employer which is substantially equivalent on an 
actuarial basis to coverage provided chapter 89 of title 5, United 
States Code.
    ``(f) Special Rules.--For purposes of this section--
            ``(1) Treatment of predecessors.--Any reference in 
        paragraphs (1), (2), and (4) of subsection (c) to an entity 
        shall include a reference to any predecessor of such entity.
            ``(2) Controlled groups.--All persons treated as a single 
        employer under subsection (b) or (c) of section 52 shall be 
        treated as 1 person.
            ``(3) Mergers and acquisitions.--Rules similar to the rules 
        of subparagraphs (A) and (B) of section 41(f)(3) shall apply.
            ``(4) Employee to include self-employed.--The term 
        `employee' includes an individual who is an employee within the 
        meaning of section 401(c)(1) (relating to self-employed 
        individuals).
            ``(5) Exception for amounts paid under salary reduction 
        arrangements.--No amount paid or incurred pursuant to a salary 
        reduction arrangement shall be taken into account under 
        subsection (a).''.
    (b) Denial of Double Benefit.--Section 280C of such Code is amended 
by adding at the end the following new subsection:
    ``(h) Credit for Small Business Health Insurance Expenses.--
            ``(1) In general.--No deduction shall be allowed for that 
        portion of the expenses (otherwise allowable as a deduction) 
        taken into account in determining the credit under section 36 
        for the taxable year which is equal to the amount of the credit 
        allowed for such taxable year under section 36(a).
            ``(2) Controlled groups.--Paragraph (3) of subsection (b) 
        shall apply for purposes of this subsection.''.
    (c) Technical Amendments.--
            (1) Paragraph (2) of section 1324(b) of title 31, United 
        States Code, is amended by inserting ``or 36'' after ``section 
        35''.
            (2) The table of sections for subpart C of part IV of 
        subchapter A of chapter 1 of the Internal Revenue Code of 1986 
        is amended by striking the item relating to section 36 and 
        inserting the following new items:

``Sec. 36. Small businesses providing health care coverage for 
                            employees.
``Sec. 37. Overpayments of tax.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.