I 

108TH CONGRESS 

1ST SESSION H. R. 3607

To amend the Internal Revenue Code of 1986 to provide a refundable tax 

credit to small businesses for the costs of qualified health insurance. 

IN THE HOUSE OF REPRESENTATIVES 

NOVEMBER 21, 2003

Ms. HOOLEY of Oregon (for herself, Mr. FROST, Mr. WU, Mrs. MCCARTHY

of New York, Mr. DEFAZIO, Mr. EVANS, Mr. GRIJALVA, Ms. KAPTUR, 

Ms. WOOLSEY, and Ms. DEGETTE) introduced the following bill; which 

was referred to the Committee on Ways and Means 

A BILL

To amend the Internal Revenue Code of 1986 to provide 

a refundable tax credit to small businesses for the costs 

of qualified health insurance.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Keeping Small Busi5 nesses Health Act of 2003’’. 
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1 SEC. 2. REFUNDABLE CREDIT FOR SMALL BUSINESSES 

2 PROVIDING HEALTH INSURANCE COVERAGE 

3 FOR EMPLOYEES. 

4 (a) IN GENERAL.—Subpart C of part IV of sub5 chapter A of chapter 1 of the Internal Revenue Code of 

6 1986 (relating to refundable credits) is amended by redes7 ignating section 36 as section 37 and by inserting after 

8 section 35 the following new section: 

9 ‘‘SEC. 36. SMALL BUSINESS HEALTH INSURANCE EXPENSES. 

10 ‘‘(a) IN GENERAL.—There shall be allowed as a cred11 it against the tax imposed by this chapter for the taxable 

12 year an amount equal to the applicable percentage of the 

13 amounts paid during the taxable year by the taxpayer for 

14 qualified health insurance for employees of the taxpayer 

15 and spouses and dependents of such employees. 

16 ‘‘(b) APPLICABLE PERCENTAGE.—The applicable 

17 percentage shall be determined in accordance with the fol18 lowing table:

‘‘Total number of employees 

of taxpayer: 

The applicable 

percentage is: 

25 or fewer ............................................................................... 60 percent

26 to 100 ................................................................................. 40 percent

101 or more ............................................................................. 0 percent.

19 ‘‘(c) LIMITATIONS.—The credit allowed under this 

20 section shall be zero for any taxable year if—

21 ‘‘(1) less than 65 percent of the cost of the cov22 erage (without regard to this section) for such year 

23 is borne by the employer, 
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1 ‘‘(2) the plan provides qualified health insur2 ance to less than 75 percent of the employees of the 

3 employer for such year, 

4 ‘‘(3) the percentage of the cost of the coverage 

5 (without regard to this section) for such year which 

6 is borne by the employer is less than the percentage 

7 of the cost of such coverage for any prior year which 

8 was borne by such employer, or 

9 ‘‘(4) the health benefits provided under the plan 

10 for such year are less than the health benefits pro11 vided under the plan for any prior year. 

12 ‘‘(d) SELF-EMPLOYED INDIVIDUALS.—For purposes 

13 of this section, a self-employed individual (within the 

14 meaning of section 401(c)) shall be treated as an em15 ployee. 

16 ‘‘(e) QUALIFIED HEALTH INSURANCE.—For pur17 poses of this section, the term ‘qualified health insurance’ 

18 means insurance which constitutes medical care (as de19 fined in section 213(d)); except that such term shall not 

20 include any insurance if substantially all of its coverage 

21 is of excepted benefits described in section 9832(c). 

22 ‘‘(f) AGGREGATION RULE.—For purposes of this sec23 tion, all persons treated as a single employer under sub24 section (a) or (b) of section 52 or subsection (n) or (o) 

25 of section 414 shall be treated as one person.’’. 
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1 (b) DENIAL OF DOUBLE BENEFIT.—Section 280C of 

2 such Code is amended by adding at the end the following 

3 new subsection: 

4 ‘‘(d) CREDIT FOR SMALL BUSINESS HEALTH INSUR5 ANCE EXPENSES.—

6 ‘‘(1) IN GENERAL.—No deduction shall be al7 lowed for that portion of the expenses (otherwise al8 lowable as a deduction) taken into account in deter9 mining the credit under section 36 for the taxable 

10 year which is equal to the amount of the credit de11 termined for such taxable year under section 36(a). 

12 ‘‘(2) CONTROLLED GROUPS.—Persons treated 

13 as one person under section 36(f) shall be treated as 

14 one person for purposes of this section.’’

15 (c) CONFORMING AMENDMENTS.—

16 (1) Paragraph (2) of section 1324(b) of title 

17 31, United States Code, is amended by inserting ‘‘or 

18 from section 36 of such Code’’ before the period at 

19 the end. 

20 (2) The table of sections for subpart C of part 

21 IV of subchapter A of chapter 1 of the Internal Rev22 enue Code of 1986 is amended by striking the item 

23 relating to section 36 and inserting the following 

24 new items:

‘‘Sec. 36. Small business cost of providing health insurance coverage for employees. 

‘‘Sec. 37. Overpayment of taxes.’’.
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1 (d) EFFECTIVE DATE.—The amendments made by 

2 this section shall apply to taxable years beginning after 

3 December 31, 2003.

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