II 

108TH CONGRESS 

1ST SESSION S. 1972

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

for small employer-based health insurance coverage in States in which 

such coverage is mandated, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

NOVEMBER 25, 2003

Mrs. BOXER 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 small employer-based health insurance coverage in States in which such coverage is mandated, and for other purposes.

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 State 

5 Mandated Health Insurance Assistance Act of 2003’’. 
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1 SEC. 2. CREDIT FOR EMPLOYEE HEALTH INSURANCE EX2 PENSES RELATED TO STATE MANDATES. 

3 (a) IN GENERAL.—Subpart D of part IV of sub4 chapter A of chapter 1 of the Internal Revenue Code of 

5 1986 (relating to business-related credits) is amended by 

6 adding at the end the following: 

7 ‘‘SEC. 45G. EMPLOYEE HEALTH INSURANCE EXPENSES RE8 LATED TO STATE MANDATES. 

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

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

11 health insurance expenses credit determined under this 

12 section is an amount equal to 50 percent of the amount 

13 paid by the taxpayer during the taxable year for qualified 

14 employee health insurance expenses. 

15 ‘‘(b) PER EMPLOYEE DOLLAR LIMITATION.—The 

16 amount of qualified employee health insurance expenses 

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

18 any qualified employee for any taxable year shall not ex19 ceed the maximum employer contribution for self-only cov20 erage or family coverage (as applicable) determined under 

21 section 8906(a) of title 5, United States Code, for the cal22 endar year in which such taxable year begins. 

23 ‘‘(c) DEFINITIONS AND SPECIAL RULES.—For pur24 poses of this section—

25 ‘‘(1) QUALIFIED SMALL EMPLOYER.—
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1 ‘‘(A) IN GENERAL.—The term ‘qualified 

2 small employer’ means any small employer 

3 which—

4 ‘‘(i) provides eligibility for health in5 surance coverage (after any waiting period 

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

7 qualified employees of the employer, and 

8 ‘‘(ii) operates in a State in which the 

9 employer must provide such eligibility 

10 under State law. 

11 ‘‘(C) SMALL EMPLOYER.—

12 ‘‘(i) IN GENERAL.—For purposes of 

13 this paragraph, the term ‘small employer’ 

14 means, with respect to any calendar year, 

15 any employer if such employer employed 

16 an average of not less than 2 and not more 

17 than 500 qualified employees on business 

18 days during either of the 2 preceding cal19 endar years. For purposes of the preceding 

20 sentence, a preceding calendar year may be 

21 taken into account only if the employer 

22 was in existence throughout such year. 

23 ‘‘(ii) EMPLOYERS NOT IN EXISTENCE

24 IN PRECEDING YEAR.—In the case of an 

25 employer which was not in existence 
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1 throughout the 1st preceding calendar 

2 year, the determination under clause (i) 

3 shall be based on the average number of 

4 qualified employees that it is reasonably 

5 expected such employer will employ on 

6 business days in the current calendar year. 

7 ‘‘(2) QUALIFIED EMPLOYEE HEALTH INSUR8 ANCE EXPENSES.—

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

10 employee health insurance expenses’ means any 

11 amount paid by an employer for health insur12 ance coverage to the extent such amount is at13 tributable to coverage provided to any employee 

14 while such employee is a qualified employee. 

15 ‘‘(B) EXCEPTION FOR AMOUNTS PAID

16 UNDER SALARY REDUCTION ARRANGEMENTS.—

17 No amount paid or incurred for health insur18 ance coverage pursuant to a salary reduction 

19 arrangement shall be taken into account under 

20 subparagraph (A). 

21 ‘‘(C) HEALTH INSURANCE COVERAGE.—

22 The term ‘health insurance coverage’ has the 

23 meaning given such term by paragraph (1) of 

24 section 9832(b) (determined by disregarding 
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1 the last sentence of paragraph (2) of such sec2 tion). 

3 ‘‘(3) QUALIFIED EMPLOYEE.—The term ‘quali4 fied employee’ means an employee of an employer 

5 who, with respect to any period, provides services to 

6 such employer in a State described in paragraph 

7 (1)(A)(ii) and is not provided health insurance cov8 erage under—

9 ‘‘(A) a health plan of the employee’s 

10 spouse, 

11 ‘‘(B) title XVIII, XIX, or XXI of the So12 cial Security Act, 

13 ‘‘(C) chapter 17 of title 38, United States 

14 Code, 

15 ‘‘(D) chapter 55 of title 10, United States 

16 Code, 

17 ‘‘(E) chapter 89 of title 5, United States 

18 Code, or 

19 ‘‘(F) any other provision of law. 

20 ‘‘(4) EMPLOYEE—The term ‘employee’—

21 ‘‘(A) means any individual, with respect to 

22 any calendar year, who is reasonably expected 

23 to receive at least $5,000 of compensation from 

24 the employer during such year, 
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1 ‘‘(B) does not include an employee within 

2 the meaning of section 401(c)(1), and 

3 ‘‘(C) includes a leased employee within the 

4 meaning of section 414(n).

5 ‘‘(5) COMPENSATION.—The term ‘compensa6 tion’ means amounts described in section 

7 6051(a)(3). 

8 ‘‘(d) CERTAIN RULES MADE APPLICABLE.—For pur9 poses of this section, rules similar to the rules of section 

10 52 shall apply. 

11 ‘‘(e) DENIAL OF DOUBLE BENEFIT.—No deduction 

12 or credit under any other provision of this chapter shall 

13 be allowed with respect to qualified employee health insur14 ance expenses taken into account under subsection (a).’’. 

15 (b) CREDIT TO BE PART OF GENERAL BUSINESS

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

17 1986 (relating to current year business credit) is amended 

18 by striking ‘‘plus’’ at the end of paragraph (14), by strik19 ing the period at the end of paragraph (15) and inserting 

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

21 ‘‘(16) the employee health insurance expenses 

22 credit determined under section 45G.’’. 

23 (c) CREDIT ALLOWED AGAINST MINIMUM TAX.—

24 (1) IN GENERAL.—Subsection (c) of section 38 

25 of the Internal Revenue Code of 1986 (relating to 
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1 limitation based on amount of tax) is amended by 

2 redesignating paragraph (4) as paragraph (5) and 

3 by inserting after paragraph (3) the following new 

4 paragraph: 

5 ‘‘(4) SPECIAL RULES FOR EMPLOYEE HEALTH

6 INSURANCE CREDIT.—

7 ‘‘(A) IN GENERAL.—In the case of the em8 ployee health insurance credit—

9 ‘‘(i) this section and section 39 shall 

10 be applied separately with respect to the 

11 credit, and 

12 ‘‘(ii) in applying paragraph (1) to the 

13 credit—

14 ‘‘(I) the amounts in subpara15 graphs (A) and (B) thereof shall be 

16 treated as being zero, and 

17 ‘‘(II) the limitation under para18 graph (1) (as modified by subclause 

19 (I)) shall be reduced by the credit al20 lowed under subsection (a) for the 

21 taxable year (other than the employee 

22 health insurance credit). 

23 ‘‘(B) EMPLOYEE HEALTH INSURANCE

24 CREDIT.—For purposes of this subsection, the 

25 term ‘employee health insurance credit’ means 
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1 the credit allowable under subsection (a) by rea2 son of section 45G(a).’’. 

3 (2) CONFORMING AMENDMENTS.—Subclause 

4 (II) of section 38(c)(2)(A)(ii) and subclause (II) of 

5 section 38(c)(3)(A)(ii) are each amended by insert6 ing ‘‘or the employee health insurance credit’’ after 

7 ‘‘employee credit’’.

8 (d) NO CARRYBACKS.—Subsection (d) of section 39 

9 of the Internal Revenue Code of 1986 (relating to 

10 carryback and carryforward of unused credits) is amended 

11 by adding at the end the following: 

12 ‘‘(11) NO CARRYBACK OF SECTION 45G CREDIT

13 BEFORE EFFECTIVE DATE.—No portion of the un14 used business credit for any taxable year which is 

15 attributable to the employee health insurance ex16 penses credit determined under section 45G may be 

17 carried back to a taxable year ending before the date 

18 of the enactment of section 45G.’’.

19 (e) CLERICAL AMENDMENT.—The table of sections 

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

21 of the Internal Revenue Code of 1986 is amended by add22 ing at the end the following:

‘‘Sec. 45G. Employee health insurance expenses related to State 

mandates.’’.

23 (f) EMPLOYER OUTREACH.—The Internal Revenue 

24 Service shall, in conjunction with the Small Business Ad-
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1 ministration, develop materials and implement an edu2 cational program to ensure that business personnel are 

3 aware of—

4 (1) the eligibility criteria for the tax credit pro5 vided under section 45G of the Internal Revenue 

6 Code of 1986 (as added by this section), 

7 (2) the methods to be used in calculating such 

8 credit, and 

9 (3) the documentation needed in order to claim 

10 such credit, 

11 so that the maximum number of eligible businesses may 

12 claim the tax credit.

13 (g) EFFECTIVE DATE.—The amendments made by 

14 this section shall apply to amounts paid or incurred in tax15 able years beginning after the date of the enactment of 

16 this Act.

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