II 

110TH CONGRESS 

1ST SESSION S. 99 

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

for small business employee health insurance expenses. 

IN THE SENATE OF THE UNITED STATES 

JANUARY 4, 2007 

Mr. KERRY 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 

a refundable credit for small business employee health 

insurance expenses. 

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 ‘‘Small Business Health 

5 Care Tax Credit Act’’. 

6 SEC. 2. CREDIT FOR EMPLOYEE HEALTH INSURANCE EX7 PENSES. 

8 (a) IN GENERAL.—Subpart D of part IV of sub9 chapter A of chapter 1 of the Internal Revenue Code of 


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1 1986 (relating to business-related credits) is amended by 

2 adding at the end the following: 

3 ‘‘SEC. 45O. EMPLOYEE HEALTH INSURANCE EXPENSES. 

4 ‘‘(a) GENERAL RULE.—For purposes of section 38, 

5 in the case of a qualified small employer, the employee 

6 health insurance expenses credit determined under this 

7 section is an amount equal to the applicable percentage 

8 of the amount paid by the taxpayer during the taxable 

9 year for qualified employee health insurance expenses. 

10 ‘‘(b) APPLICABLE PERCENTAGE.—For purposes of 

11 subsection (a), the applicable percentage is— 

12 ‘‘(1) 50 percent in the case of an employer with 

13 less than 10 qualified employees, 

14 ‘‘(2) 25 percent in the case of an employer with 

15 more than 9 but less than 25 qualified employees, 

16 and 

17 ‘‘(3) 20 percent in the case of an employer with 

18 more than 24 but less than 50 qualified employees. 

19 ‘‘(c) PER EMPLOYEE DOLLAR LIMITATION.—The 

20 amount of qualified employee health insurance expenses 

21 taken into account under subsection (a) with respect to 

22 any qualified employee for any taxable year shall not ex23 ceed— 

24 ‘‘(1) $4,000 for self-only coverage, and 

25 ‘‘(2) $10,000 for family coverage. 


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1 ‘‘(d) DEFINITIONS AND SPECIAL RULES.—For pur2 poses of this section— 

3 ‘‘(1) QUALIFIED SMALL EMPLOYER.— 

4 ‘‘(A) IN GENERAL.—The term ‘qualified 

5 small employer’ means any small employer 

6 which— 

7 ‘‘(i) provides eligibility for health in8 surance coverage (after any waiting period 

9 (as defined in section 9801(b)(4))) to all 

10 qualified employees of the employer, and 

11 ‘‘(ii) pays at least 50 percent of the 

12 cost of such coverage for each qualified 

13 employee. 

14 ‘‘(B) SMALL EMPLOYER.— 

15 ‘‘(i) IN GENERAL.—For purposes of 

16 this paragraph, the term ‘small employer’ 

17 means, with respect to any taxable year, 

18 any employer if— 

19 ‘‘(I) the average gross receipts of 

20 such employer for the preceding 3 tax21 able years does not exceed 

22 $5,000,000, and 

23 ‘‘(II) such employer employed an 

24 average of more than 1 but less than 

25 50 qualified employees on business 


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1 days during the preceding taxable 

2 year. 

3 ‘‘(ii) AGGREGATE GROSS ASSETS.— 

4 For purposes of clause (i)(I), the term ‘ag5 gregate gross assets’ shall have meaning 

6 given such term by section 1202(d)(2). 

7 ‘‘(iii) EMPLOYERS NOT IN EXISTENCE

8 IN PRECEDING YEAR.—For purposes of 

9 clause (i)(II)— 

10 ‘‘(I) a preceding taxable year 

11 may be taken into account only if the 

12 employer was in existence throughout 

13 such year, and 

14 ‘‘(II) in the case of an employer 

15 which was not in existence throughout 

16 the preceding taxable year, the deter17 mination of whether such employer is 

18 a qualified small employer shall be 

19 based on the average number of em20 ployees that it is reasonably expected 

21 such employer will employ on business 

22 days in the current taxable year. 

23 ‘‘(iv) AGGREGATION RULES.—All per24 sons treated as a single employer under 

25 subsection (a) or (b) of section 52 or subVerDate Aug 31 2005 00:29 Jan 09, 2007 Jkt 059200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S99.IS S99

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1 section (m) or (o) of section 414 shall be 

2 treated as one person for purposes of this 

3 subparagraph. 

4 ‘‘(v) PREDECESSORS.—The Secretary 

5 may prescribe regulations which provide 

6 for references in this subparagraph to an 

7 employer to be treated as including ref8 erences to predecessors of such employer. 

9 ‘‘(2) QUALIFIED EMPLOYEE HEALTH INSUR10 ANCE EXPENSES.— 

11 ‘‘(A) IN GENERAL.—The term ‘qualified 

12 employee health insurance expenses’ means any 

13 amount paid by an employer for health insur14 ance coverage to the extent such amount is at15 tributable to coverage provided to any employee 

16 while such employee is a qualified employee. 

17 ‘‘(B) EXCEPTION FOR AMOUNTS PAID

18 UNDER SALARY REDUCTION ARRANGEMENTS.— 

19 No amount paid or incurred for health insur20 ance coverage pursuant to a salary reduction 

21 arrangement shall be taken into account under 

22 subparagraph (A). 

23 ‘‘(C) HEALTH INSURANCE COVERAGE.— 

24 The term ‘health insurance coverage’ has the 

25 meaning given such term by section 9832(b)(1). 


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1 ‘‘(3) QUALIFIED EMPLOYEE.— 

2 ‘‘(A) IN GENERAL.—The term ‘qualified 

3 employee’ means an employee of an employer 

4 who, with respect to any period, is not provided 

5 health insurance coverage under— 

6 ‘‘(i) a health plan of the employee’s 

7 spouse, 

8 ‘‘(ii) title XVIII, XIX, or XXI of the 

9 Social Security Act, 

10 ‘‘(iii) chapter 17 of title 38, United 

11 States Code, 

12 ‘‘(iv) chapter 55 of title 10, United 

13 States Code, 

14 ‘‘(v) chapter 89 of title 5, United 

15 States Code, or 

16 ‘‘(vi) any other provision of law. 

17 ‘‘(B) EMPLOYEE.—The term ‘employee’— 

18 ‘‘(i) means any individual, with re19 spect to any calendar year, who is reason20 ably expected to receive not more than 

21 $50,000 of compensation from the em22 ployer during such year, 

23 ‘‘(ii) does not include an employee 

24 within the meaning of section 401(c)(1), 

25 and 


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1 ‘‘(iii) includes a leased employee with2 in the meaning of section 414(n). 

3 ‘‘(C) COMPENSATION.—The term ‘com4 pensation’ means amounts described in section 

5 6051(a)(3). 

6 ‘‘(D) INFLATION ADJUSTMENT.— 

7 ‘‘(i) IN GENERAL.—In the case of a 

8 taxable year beginning after 2007, the 

9 $50,000 amount in subparagraph (B)(i) 

10 shall be increased by an amount equal to— 

11 ‘‘(I) such dollar amount, multi12 plied by 

13 ‘‘(II) the cost-of-living adjust14 ment determined under section 1(f)(3) 

15 for the calendar year in which the tax16 able year begins, determined by sub17 stituting ‘calendar year 2006’ for ‘cal18 endar year 1992’ in subparagraph (B) 

19 thereof. 

20 ‘‘(ii) ROUNDING.—If any amount as 

21 adjusted under clause (i) is not a multiple 

22 of $1,000, such amount shall be rounded 

23 to the next lowest multiple of $1,000. 

24 ‘‘(4) NO QUALIFIED EMPLOYEES EXCLUDED.— 

25 Subsection (a) shall not apply to an employer for 


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1 any period unless at all times during such period 

2 health insurance coverage is available to all qualified 

3 employees of such employer under similar terms. 

4 ‘‘(e) PORTION OF CREDIT MADE REFUNDABLE.— 

5 ‘‘(1) IN GENERAL.—The aggregate credits al6 lowed to a taxpayer under subpart C shall be in7 creased by the lesser of— 

8 ‘‘(A) the credit which would be allowed 

9 under subsection (a) without regard to this sub10 section and the limitation under section 38(c), 

11 or 

12 ‘‘(B) the amount by which the aggregate 

13 amount of credits allowed by this subpart (de14 termined without regard to this subsection) 

15 would increase if the limitation imposed by sec16 tion 38(c) for any taxable year were increased 

17 by the amount of employer payroll taxes im18 posed on the taxpayer during the calendar year 

19 in which the taxable year begins. 

20 The amount of the credit allowed under this sub21 section shall not be treated as a credit allowed under 

22 this subpart and shall reduce the amount of the 

23 credit otherwise allowable under subsection (a) with24 out regard to section 38(c). 


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1 ‘‘(2) EMPLOYER PAYROLL TAXES.—For pur2 poses of this subsection— 

3 ‘‘(A) IN GENERAL.—The term ‘employer 

4 payroll taxes’ means the taxes imposed by— 

5 ‘‘(i) section 3111(b), and 

6 ‘‘(ii) sections 3211(a) and 3221(a) 

7 (determined at a rate equal to the rate 

8 under section 3111(b)). 

9 ‘‘(B) SPECIAL RULE.—A rule similar to 

10 the rule of section 24(d)(2)(C) shall apply for 

11 purposes of subparagraph (A). 

12 ‘‘(f) DENIAL OF DOUBLE BENEFIT.—No deduction 

13 or credit under any other provision of this chapter shall 

14 be allowed with respect to qualified employee health insur15 ance expenses taken into account under subsection (a).’’. 

16 (b) CREDIT TO BE PART OF GENERAL BUSINESS

17 CREDIT.—Section 38(b) of the Internal Revenue Code of 

18 1986 (relating to current year business credit) is amended 

19 by striking ‘‘plus’’ at the end of paragraph (30), by strik20 ing the period at the end of paragraph (31) and inserting 

21 ‘‘, plus’’, and by adding at the end the following: 

22 ‘‘(32) the employee health insurance expenses 

23 credit determined under section 45O.’’. 

24 (c) CLERICAL AMENDMENT.—The table of sections 

25 for subpart D of part IV of subchapter A of chapter 1 


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1 of the Internal Revenue Code of 1986 is amended by add2 ing at the end the following: 

‘‘Sec. 45O. Employee health insurance expenses.’’. 

3 (d) EFFECTIVE DATE.—The amendments made by 

4 this section shall apply to amounts paid or incurred in tax5 able years beginning after December 31, 2006. 

Æ 


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