‘‘(i) provided to any employee (as de-
fined in subsection 3101(a)(3) of such 
Act), or 
‘‘(ii) for the employer, in the case of 
a self-employed individual. 
‘‘(B) EXCEPTION
FOR
AMOUNTS
PAID 
UNDER SALARY REDUCTION ARRANGEMENTS.— 
No amount paid or incurred for health insur-
ance coverage pursuant to a salary reduction 
arrangement shall be taken into account under 
subparagraph (A). 
‘‘(3) FULL-TIME EMPLOYEE.—The term ‘full- 
time employee’ means, with respect to any period, an 
employee (as defined in section 3101(a)(3) of such 
Act) of an employer if the average number of hours 
worked by such employee in the preceding taxable 
year for such employer was at least 35 hours per 
week. 
‘‘(d) INFLATION ADJUSTMENT.— 
‘‘(1) IN GENERAL.—For each taxable year after 
2010, the dollar amounts specified in subsections 
(b)(2)(A), (b)(2)(B), and (c)(1)(A)(iii) (after the ap-
plication of this paragraph) shall be the amounts in 
effect in the preceding taxable year or, if greater, 
the product of— 
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‘‘(A) the corresponding dollar amount 
specified in such subsection, and 
‘‘(B) the ratio of the index of wage infla-
tion (as determined by the Bureau of Labor 
Statistics) for August of the preceding calendar 
year to such index of wage inflation for August 
of 2009. 
‘‘(2) ROUNDING.—If any amount determined 
under paragraph (1) is not a multiple of $100, such 
amount shall be rounded to the next lowest multiple 
of $100. 
‘‘(e) APPLICATION OF CERTAIN RULES IN DETER-
MINATION OF EMPLOYER SIZE.—For purposes of this sec-
tion— 
‘‘(1) APPLICATION OF AGGREGATION RULE FOR 
EMPLOYERS.—All persons treated as a single em-
ployer under subsection (b), (c), (m), or (o) of sec-
tion 414 shall be treated as 1 employer. 
‘‘(2) EMPLOYERS NOT IN EXISTENCE IN PRE-
CEDING YEAR.—In the case of an employer which 
was not in existence for the full preceding taxable 
year, the determination of whether such employer 
meets the requirements of this section shall be based 
on the average number of full-time employees that it 
is reasonably expected such employer will employ on 
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business days in the employer’s first full taxable 
year. 
‘‘(3) PREDECESSORS.—Any reference in this 
subsection to an employer shall include a reference 
to any predecessor of such employer. 
‘‘(f) COORDINATION WITH ADVANCE PAYMENTS OF 
CREDIT.—With respect to any taxable year, the amount 
which would (but for this subsection) be allowed as a cred-
it to the taxpayer under subsection (a) shall be reduced 
by the aggregate amount paid on behalf of such taxpayer 
under section 7527A for months beginning in such taxable 
year. If the amount determined under this subsection is 
less than zero, the taxpayer shall owe additional tax in 
such amount under this chapter. 
‘‘(g) CREDITS FOR NONPROFIT ORGANIZATIONS.— 
Any credit which would be allowable under subsection (a) 
with respect to a qualified small business if such qualified 
small business were not exempt from tax under this chap-
ter shall be treated as a credit allowable under this sub-
part to such qualified small business.’’. 
(b) ADVANCE PAYMENTS OF CREDIT.—Chapter 77 
of the Internal Revenue Code of 1986 is amended by in-
serting after section 7527 the following new section: 
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‘‘SEC. 7527A. ADVANCE PAYMENT OF CREDIT FOR HEALTH 
INSURANCE COSTS FOR QUALIFIED SMALL 
EMPLOYERS. 
‘‘(a) GENERAL RULE.—Not later than December 31, 
2009, the Secretary shall establish a program for making 
monthly payments on behalf of qualified small employers 
to the program established under title XXX of the Public 
Health Service Act. The amount of the monthly payment 
for a qualified small employer shall be one-twelfth of the 
amount of the credit for the tax year to which the qualified 
small employer is entitled under section 36. If a monthly 
payment is made by the Secretary for which the employer 
is not entitled to a corresponding credit, the employer shall 
owe additional tax in such amount under this chapter. 
‘‘(b) QUALIFIED SMALL EMPLOYER.—For purposes 
of this section, the term ‘qualified small employer’ has the 
meaning given such term in section 36(c)(1).’’. 
(c) CONFORMING AMENDMENTS.— 
(1) The table of sections for subpart D of part 
IV of subchapter A of chapter 1 of the Internal Rev-
enue Code of 1986 is amended by adding at the end 
the following new items: 
‘‘Sec. 45O. Small business employee health insurance credit.’’. 
(2) The table of sections for chapter 77 of such 
Code is amended by inserting after the item relating 
to section 7527 the following new item: 
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‘‘Sec. 7527A. Advance payment of credit for health insurance costs for qualified 
small employers.’’. 
(d) DEDUCTIBILITY.—The payment of premiums by 
a participating employer under this Act shall be consid-
ered to be an ordinary and necessary expense in carrying 
on a trade or business for purposes of the Internal Rev-
enue Code of 1986 and shall be deductible. 
(e) EFFECTIVE DATE.—The amendments made by 
this section shall apply to amounts paid or incurred in tax-
able years beginning after December 31, 2009. 
Æ 
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