enforcement of such provisions) shall supercede any State 
law that conflicts with such provisions.’’. 
SEC. 4. CREDIT FOR SMALL BUSINESS EMPLOYEE HEALTH 
INSURANCE EXPENSES. 
(a) IN GENERAL.—Subpart D of part IV of sub-
chapter A of chapter 1 of the Internal Revenue Code of 
1986 (relating to credits) is amended by inserting after 
section 45N the following new section: 
‘‘SEC. 45O. SMALL BUSINESS EMPLOYEE HEALTH INSUR-
ANCE CREDIT. 
‘‘(a) DETERMINATION OF CREDIT.—In the case of a 
qualified small employer, there shall be allowed as a credit 
against the tax imposed by this chapter for the taxable 
year an amount equal to the credit amount described in 
subsection (b). 
‘‘(b) GENERAL CREDIT AMOUNT.—For purposes of 
this section— 
‘‘(1) IN
GENERAL.—The credit amount de-
scribed in this subsection is the product of— 
‘‘(A) the amount specified in paragraph 
(2), 
‘‘(B) the employer size factor specified in 
paragraph (3), and 
‘‘(C) the percentage of year factor specified 
in paragraph (4). 
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‘‘(2) APPLICABLE AMOUNT.—For purposes of 
paragraph (1)— 
‘‘(A) 
IN
GENERAL.—The 
applicable 
amount is equal to— 
‘‘(i) $1,000 for each employee of the 
employer who receives self-only health in-
surance coverage through the employer, 
‘‘(ii) $2,000 for each employee of the 
employer who receives family health insur-
ance coverage through the employer, and 
‘‘(iii) $1,500 for each employee of the 
employer who receives health insurance 
coverage for 2 adults or 1 adult and 1 or 
more children through the employer. 
‘‘(B) BONUS FOR PAYMENT OF GREATER 
PERCENTAGE
OF
PREMIUMS.—The applicable 
amount otherwise specified in subparagraph (A) 
shall be increased by $200 in the case of sub-
paragraph (A)(i), $400 in the case of subpara-
graph (A)(ii), and $300 in the case of subpara-
graph (A)(iii), for each additional 10 percent of 
the qualified employee health insurance ex-
penses exceeding 60 percent which are paid by 
the qualified small employer. 
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‘‘(3) EMPLOYER SIZE FACTOR.—For purposes 
of paragraph (1), the employer size factor is the per-
centage determined in accordance with the following 
table: 
‘‘If the employer size is: 
The percent-
age is: 
10 or fewer full-time employees 
100% 
More than 10 but not more than 20 full-time employees 
80% 
More than 20 but not more than 30 full-time employees 
60% 
More than 30 but not more than 40 full-time employees 
40% 
More than 40 but not more than 50 full-time employees 
20% 
More than 50 full-time employees 
0% 
‘‘(4) PERCENTAGE OF YEAR FACTOR.—For pur-
poses of paragraph (1), the percentage of year factor 
is equal to the ratio of— 
‘‘(A) the number of months during the tax-
able year for which the employer paid or in-
curred qualified employee health insurance ex-
penses, and 
‘‘(B) 12. 
‘‘(c) DEFINITIONS AND SPECIAL RULES.—For pur-
poses of this section— 
‘‘(1) QUALIFIED SMALL EMPLOYER.— 
‘‘(A) IN
GENERAL.—The term ‘qualified 
small employer’ means any employer (as defined 
in section 3101(a)(4) of the Public Health 
Service Act) which— 
‘‘(i) either— 
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‘‘(I) purchases health insurance 
coverage for its employees in a small 
group market in a State which meets 
the requirements under subparagraph 
(B), or 
‘‘(II) with respect to any taxable 
year beginning after 2011, is a par-
ticipating employer (as defined in sec-
tion 3101(a)(8) of such Act) in the 
program under title XXX of such Act, 
‘‘(ii) pays or incurs at least 60 per-
cent of the qualified employee health insur-
ance expenses of such employer or is self- 
employed, and 
‘‘(iii) employed an average of 50 or 
fewer full-time employees during the pre-
ceding taxable year or was a self-employed 
individual with either not less than $5,000 
in net earnings or not less than $15,000 in 
gross earnings from self-employment in the 
preceding taxable year. 
‘‘(B) STATE SMALL GROUP MARKET RE-
QUIREMENTS.—A State meets the requirements 
of this subparagraph if— 
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‘‘(i) during calendar years 2010 and 
2011, the State— 
‘‘(I) defines its small group mar-
ket to include groups of one (so that 
self-employed individuals are eligible 
for coverage in such market), 
‘‘(II) prohibits the use of health- 
status related factors and other fac-
tors 
described 
in 
section 
3107(d)(5)(A) of such Act, and 
‘‘(III) has in effect rating rules 
that 
comply 
with 
section 
3107(d)(5)(A) of such Act (except 
that such rules may impose limits on 
rating variation in addition to those 
provided for in such section), 
‘‘(ii) during calendar years 2012 and 
2013, the State— 
‘‘(I) 
meets 
the 
requirements 
under clause (i), and 
‘‘(II) maintains a State-wide pur-
chasing pool that provides purchasers 
in the small group market a choice of 
health benefit plans, with comparative 
information provided concerning such 
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plans and the premiums charged for 
such plans made available through the 
Internet, and 
‘‘(iii) for calendar years after 2013, 
the State— 
‘‘(I) 
meets 
the 
requirements 
under clauses (i)(I), (i)(II), and 
(ii)(II), and 
‘‘(II) has in effect rating rules 
that comply with paragraph (2)(B) or 
(3) of section 3107(d) of such Act, 
whichever is in effect for such cal-
endar year (except that such rules 
may impose limits on rating variation 
in addition to those provided for in 
such section). 
‘‘(2) QUALIFIED
EMPLOYEE
HEALTH
INSUR-
ANCE EXPENSES.— 
‘‘(A) IN
GENERAL.—The term ‘qualified 
employee health insurance expenses’ means any 
amount paid by an employer or an employee of 
such employer for health insurance coverage 
under such Act to the extent such amount is at-
tributable to coverage— 
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