I 
109TH CONGRESS 
1ST SESSION H. R. 2001
To amend the Internal Revenue Code of 1986 to provide tax incentives 
to encourage small business health plans, and for other purposes. 
IN THE HOUSE OF REPRESENTATIVES 
APRIL 28, 2005
Mr. MOORE of Kansas (for himself, Mr. ROSS, Mr. BOYD, Mrs. TAUSCHER, 
Mr. SCHIFF, and Mr. HOLDEN) introduced the following bill; which was 
referred to the Committee on Ways and Means, and in addition to the 
Committees on Energy and Commerce and Small Business, for a period 
to be subsequently determined by the Speaker, in each case for consider-
ation of such provisions as fall within the jurisdiction of the committee 
concerned 
A BILL 
To amend the Internal Revenue Code of 1986 to provide 
tax incentives to encourage small business health plans, 
and for other purposes.
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 Expansion Act of 2005’’.
SEC. 2. CREDIT FOR HEALTH INSURANCE EXPENSES OF 
SMALL BUSINESSES. 
(a) IN GENERAL.—Subpart D of part IV of sub-
chapter A of chapter 1 of the Internal Revenue Code of 
1986 (relating to business-related credits) is amended by 
adding at the end the following: 
‘‘SEC. 45J. SMALL BUSINESS HEALTH INSURANCE EX-
PENSES. 
‘‘(a) GENERAL RULE.—For purposes of section 38, 
in the case of a small employer, the health insurance credit 
determined under this section for the taxable year is an 
amount equal to the applicable percentage of the expenses 
paid or incurred by the taxpayer during the taxable year 
for health insurance coverage for such year provided under 
a new health plan for employees of such employer. 
‘‘(b) APPLICABLE PERCENTAGE.—For purposes of 
subsection (a), the applicable percentage is—
‘‘(1) in the case of insurance purchased as a 
member of a qualified health benefit purchasing coa-
lition (as defined in section 9841), 40 percent, and 
‘‘(2) in the case of insurance not described in 
paragraph (1), 30 percent. 
‘‘(c) LIMITATIONS.—
‘‘(1) PER
EMPLOYEE
DOLLAR
LIMITATION.—
The amount of expenses taken into account under
subsection (a) with respect to any employee for any 
taxable year shall not exceed—
‘‘(A) in the case of insurance purchased as 
a member of a coalition referred to in sub-
section (b)(1)—
‘‘(i) $800 in the case of self-only cov-
erage, and 
‘‘(ii) $2,000 in the case of family cov-
erage, and 
‘‘(B) in any other case—
‘‘(i) $600 in the case of self-only cov-
erage, and 
‘‘(ii) $1,500 in the case of family cov-
erage. 
In the case of an employee who is covered by a new 
health plan of the employer for only a portion of 
such taxable year, the limitation under the preceding 
sentence shall be an amount which bears the same 
ratio to such limitation (determined without regard 
to this sentence) as such portion bears to the entire 
taxable year. 
‘‘(2) PERIOD OF COVERAGE.—Expenses may be 
taken into account under subsection (a) only with 
respect to coverage for the 4-year period beginning
on the date the employer establishes a new health 
plan. 
‘‘(3) EMPLOYER MUST BEAR 65 PERCENT OF 
COST.—Expenses may be taken into account under 
subsection (a) only if at least 65 percent of the cost 
of the coverage (without regard to this section) is 
borne by the employer. 
‘‘(d) DEFINITIONS.—For purposes of this section—
‘‘(1) HEALTH
INSURANCE
COVERAGE.—The 
term ‘health insurance coverage’ has the meaning 
given such term by section 9832(b)(1). 
‘‘(2) NEW HEALTH PLAN.—
‘‘(A) IN GENERAL.—The term ‘new health 
plan’ means any arrangement of the employer 
established after the date of the enactment of 
this section which provides health insurance 
coverage to employees if—
‘‘(i) such employer (and any prede-
cessor employer) did not establish or main-
tain such arrangement (or any similar ar-
rangement) at any time during the 2 cal-
endar years ending prior to the taxable 
year in which the credit under this section 
is first allowed, and
‘‘(ii) 
such 
arrangement 
provides 
health insurance coverage to at least 70 
percent of the qualified employees of such 
employer. 
‘‘(B) QUALIFIED EMPLOYEE.—
‘‘(i) IN GENERAL.—The term ‘quali-
fied employee’ means any employee of an 
employer if the annual rate of such em-
ployee’s compensation (as defined in sec-
tion 414(s)) does not exceed $40,000. 
‘‘(ii) TREATMENT
OF
CERTAIN
EM-
PLOYEES.—The term ‘employee’ shall in-
clude a leased employee within the mean-
ing of section 414(n). 
‘‘(iii) REDUCTION OF CREDIT FOR EM-
PLOYEES EARNING MORE THAN $30,000.—
If the annual rate of an employee’s com-
pensation (as defined in section 414(s)) ex-
ceeds $30,000, the applicable limitation 
under subsection (c)(1) (determined with-
out regard to this clause) shall be reduced 
(but not below zero) by an amount which 
bears the same ratio to such limitation as 
such excess bears to $10,000.
‘‘(iv) EMPLOYEES
HAVING
FAMILY 
COVERAGE.—In the case of an employee 
who has family coverage—
‘‘(I) clause (i) shall be applied by 
substituting ‘$50,000’ for ‘$40,000’, 
and 
‘‘(II) clause (iii) shall be applied 
by 
substituting 
‘$40,000’ 
for 
‘$30,000’. 
‘‘(3) SMALL EMPLOYER.—The term ‘small em-
ployer’ has the meaning given to such term by sec-
tion 4980D(d)(2); except that only qualified employ-
ees shall be taken into account. 
‘‘(e) SPECIAL RULES.—
‘‘(1) CERTAIN RULES MADE APPLICABLE.—For 
purposes of this section, rules similar to the rules of 
section 52 shall apply. 
‘‘(2) AMOUNTS
PAID
UNDER
SALARY
REDUC-
TION ARRANGEMENTS.—No amount paid or incurred 
pursuant to a salary reduction arrangement shall be 
taken into account under subsection (a). 
‘‘(3) INFLATION ADJUSTMENT.—In the case of 
any taxable year beginning in a calendar year after 
2006, each dollar amount contained in subsections
(c)(1) and (d)(2)(B) 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 the calendar 
year in which the taxable year begins, deter-
mined by substituting ‘calendar year 2005’ for 
‘calendar year 1992’ in subparagraph (B) 
thereof. 
Any increase determined under the preceding sen-
tence shall be rounded to the nearest multiple of 
$50. 
‘‘(f) TERMINATION.—This section shall not apply to 
expenses paid or incurred by an employer with respect to 
any arrangement established on or after January 1, 
2010.’’. 
(b) CREDIT TO BE PART OF GENERAL BUSINESS 
CREDIT.—Section 38(b) of such Code (relating to current 
year business credit) is amended by striking ‘‘plus’’ at the 
end of paragraph (18), by striking the period at the end 
of paragraph (19) and inserting ‘‘, plus’’, and by adding 
at the end the following: 
‘‘(20) in the case of a small employer (as de-
fined in section 45J(d)(3)), the health insurance 
credit determined under section 45J(a).’’.
(c) DENIAL OF DOUBLE BENEFIT.—Section 280C of 
such Code is amended by adding at the end the following 
new subsection: 
‘‘(e) CREDIT FOR SMALL BUSINESS HEALTH INSUR-
ANCE EXPENSES.—
‘‘(1) IN GENERAL.—No deduction shall be al-
lowed for that portion of the expenses (otherwise al-
lowable as a deduction) taken into account in deter-
mining the credit under section 45J for the taxable 
year which is equal to the amount of the credit de-
termined for such taxable year under section 45J(a). 
‘‘(2) CONTROLLED
GROUPS.—Persons treated 
as a single employer under subsection (a) or (b) of 
section 52 shall be treated as 1 person for purposes 
of this section.’’. 
(d) CLERICAL AMENDMENT.—The table of sections 
for subpart D of part IV of subchapter A of chapter 1 
of such Code is amended by adding at the end the fol-
lowing:
‘‘Sec. 45J. Small business health insurance expenses.’’.
(e) EFFECTIVE DATE.—The amendments made by 
this section shall apply to amounts paid or incurred in tax-
able years beginning after December 31, 2005.
SEC. 3. CERTAIN GRANTS BY PRIVATE FOUNDATIONS TO 
QUALIFIED HEALTH BENEFIT PURCHASING 
COALITIONS. 
(a) IN GENERAL.—Section 4942 of the Internal Rev-
enue Code of 1986 (relating to taxes on failure to dis-
tribute income) is amended by adding at the end the fol-
lowing: 
‘‘(k) CERTAIN QUALIFIED HEALTH BENEFIT PUR-
CHASING COALITION DISTRIBUTIONS.—
‘‘(1) IN GENERAL.—For purposes of subsection 
(g), sections 170, 501, 507, 509, and 2522, and this 
chapter, a qualified health benefit purchasing coali-
tion distribution by a private foundation shall be 
considered to be a distribution for a charitable pur-
pose. 
‘‘(2) 
QUALIFIED
HEALTH
BENEFIT
PUR-
CHASING COALITION DISTRIBUTION.—For purposes 
of paragraph (1)—
‘‘(A) IN
GENERAL.—The term ‘qualified 
health benefit purchasing coalition distribution’ 
means any amount paid or incurred by a pri-
vate foundation to or on behalf of a qualified 
health benefit purchasing coalition (as defined 
in section 9841) for purposes of payment or re-
imbursement of amounts paid or incurred in
connection with the establishment and mainte-
nance of such coalition. 
‘‘(B) EXCLUSIONS.—Such term shall not 
include any amount used by a qualified health 
benefit purchasing coalition (as so defined)—
‘‘(i) for the purchase of real property, 
‘‘(ii) as payment to, or for the benefit 
of, members (or employees or affiliates of 
such members) of such coalition, or 
‘‘(iii) for any expense paid or incurred 
more than 48 months after the date of es-
tablishment of such coalition. 
‘‘(3) TERMINATION.—This subsection shall not 
apply—
‘‘(A) to qualified health benefit purchasing 
coalition distributions paid or incurred after 
December 31, 2010, and 
‘‘(B) with respect to start-up costs of a co-
alition which are paid or incurred after Decem-
ber 31, 2012.’’. 
(b) QUALIFIED HEALTH BENEFIT PURCHASING CO-
ALITION.—
(1) IN GENERAL.—Chapter 100 of such Code 
(relating to group health plan requirements) is
amended by adding at the end the following new 
subchapter: 
‘‘Subchapter D—Qualified Health Benefit 
Purchasing Coalition
‘‘Sec. 9841. Qualified health benefit purchasing coalition.
‘‘SEC. 9841. QUALIFIED HEALTH BENEFIT PURCHASING CO-
ALITION. 
‘‘(a) IN GENERAL.—A qualified health benefit pur-
chasing coalition is a private not-for-profit corporation 
which—
‘‘(1) sells health insurance through State li-
censed health insurance issuers in the State in which 
the employers to which such coalition is providing 
insurance are located, and 
‘‘(2) establishes to the Secretary, under State 
certification procedures or other procedures as the 
Secretary may provide by regulation, that such coali-
tion meets the requirements of this section. 
‘‘(b) BOARD OF DIRECTORS.—
‘‘(1) IN GENERAL.—Each purchasing coalition 
under this section shall be governed by a Board of 
Directors. 
‘‘(2) ELECTION.—The Secretary shall establish 
procedures governing election of such Board.