I
107TH CONGRESS
2D SESSION
H. R. 5174
To amend the Internal Revenue Code of 1986 to provide incentives to small
businesses to provide health insurance to their employees.
IN THE HOUSE OF REPRESENTATIVES
JULY 22, 2002
Ms. DUNN of Washington (for herself, Mr. NEAL of Massachusetts, and Mrs.
THURMAN) introduced the following bill; which was referred to the Com-
mittee on Ways and Means
A BILL
To amend the Internal Revenue Code of 1986 to provide
incentives to small businesses to provide health insurance
to their employees.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Small Business Health
Insurance Affordability Act of 2002’’.
SEC. 2. REFUNDABLE CREDIT FOR SMALL BUSINESSES
PROVIDING HEALTH INSURANCE COVERAGE
FOR EMPLOYEES.
(a) IN GENERAL.—Subpart C of part IV of sub-
chapter A of chapter 1 of the Internal Revenue Code of
1986 (relating to refundable credits) is amended by redes-
ignating section 35 as section 36 and by inserting after
section 34 the following new section:
‘‘SEC. 35. SMALL BUSINESS COST OF PROVIDING HEALTH
INSURANCE COVERAGE FOR EMPLOYEES.
‘‘(a) IN GENERAL.—At the election of the employer,
there shall be allowed as a credit against the tax imposed
by this chapter for the taxable year an amount equal to
the applicable percentage of the qualified premiums paid
during the taxable year by the taxpayer.
‘‘(b) APPLICABLE PERCENTAGE.—For purposes of
subsection (a), the applicable percentage shall be deter-
mined in accordance with the following table:
‘‘Total number of employees
of taxpayer:
The applicable percentage is:
10 or fewer ....................................
50 percent.
11 to 15 .........................................
25 percent.
16 or more .....................................
0 percent.
‘‘(c) LIMITATIONS.—
‘‘(1) MAXIMUM
EMPLOYEE
COMPENSATION.—
No amount paid for a qualified premium shall be
taken into account under subsection (a) if such
amount is paid or incurred with respect to any em-
ployee to whom the taxpayer paid wages of $40,000
or more for the calendar year ending with or in the
taxable year of the taxpayer.
‘‘(2) 
MINIMUM
EMPLOYEE
SERVICE.—No
amount paid for a qualified premium shall be taken
into account under subsection (a) if such amount is
paid or incurred with respect to any employee unless
such employee has performed at least 400 hours of
service for the employer during the taxable year of
the employer.
‘‘(3) INFLATION ADJUSTMENT.—In the case of
a calendar year after 2003, the dollar amount con-
tained in paragraph (1) shall be increased by an
amount equal to—
‘‘(A) such dollar amount, multiplied by
‘‘(B) the cost-of-living adjustment deter-
mined under section 1(f)(3) for such calendar
year by substituting ‘calendar year 2002’ for
‘calendar year 1992’ in subparagraph (B)
thereof.
Any increase under this paragraph which is not a
multiple of $100 shall be rounded to the next lowest
multiple of $100.
‘‘(d) DEFINITIONS AND SPECIAL RULES.—For pur-
poses of this section—
‘‘(1) QUALIFIED PREMIUMS.—The term ‘quali-
fied premiums’ means premiums paid by the tax-
payer for qualified health insurance for any em-
ployee of the taxpayer, and the employee’s spouse
and dependents, but only if the employer pays not
less than 75 percent of the aggregate premiums for
such insurance for the taxable year. For purposes of
the preceding sentence, the term ‘premium’ shall
have the same meaning as when used in section
4980B(f)(4).
‘‘(2) QUALIFIED
HEALTH
INSURANCE.—The
term ‘qualified health insurance’ means insurance
which constitutes medical care (as defined in section
213(d)); except that such term shall not include any
insurance if substantially all of its coverage is of ex-
cepted benefits described in section 9832(c).
‘‘(3) WAGES.—The term ‘wages’ shall have the
meaning given to such term by subsection (b) of sec-
tion 3306 (determined without regard to any dollar
limitation contained in such section).
‘‘(4) AGGREGATION
RULE.—For purposes of
this section, all persons treated as a single employer
under subsection (a) or (b) of section 52 or sub-
section (n) or (o) of section 414 shall be treated as
one person.