I 
109TH CONGRESS 
1ST SESSION 
H. R. 118
To amend the Internal Revenue Code of 1986 to provide a refundable tax 
credit to small businesses for the costs of qualified health insurance. 
IN THE HOUSE OF REPRESENTATIVES 
JANUARY 4, 2005
Ms. HOOLEY introduced the following bill; which was referred to the 
Committee on Ways and Means 
A BILL 
To amend the Internal Revenue Code of 1986 to provide 
a refundable tax credit to small businesses for the costs 
of qualified health insurance.
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 ‘‘Keeping Small Busi-
nesses Healthy Act of 2005’’. 
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 36 as section 37 and by inserting after 
section 35 the following new section: 
‘‘SEC. 36. SMALL BUSINESS HEALTH INSURANCE EXPENSES. 
‘‘(a) IN GENERAL.—There shall be allowed as a cred-
it against the tax imposed by this chapter for the taxable 
year an amount equal to the applicable percentage of the 
amounts paid during the taxable year by the taxpayer for 
qualified health insurance for employees of the taxpayer 
and spouses and dependents of such employees. 
‘‘(b) APPLICABLE
PERCENTAGE.—The applicable 
percentage shall be determined in accordance with the fol-
lowing table:
‘‘Total number of employees 
of taxpayer: 
The applicable 
percentage is: 
25 or fewer ...............................................................................
60 percent
26 to 100 .................................................................................
40 percent
101 or more .............................................................................
0 percent.
‘‘(c) LIMITATIONS.—The credit allowed under this 
section shall be zero for any taxable year if—
‘‘(1) less than 65 percent of the cost of the cov-
erage (without regard to this section) for such year 
is borne by the employer, 
‘‘(2) the plan provides qualified health insur-
ance to less than 75 percent of the employees of the 
employer for such year, 
‘‘(3) the percentage of the cost of the coverage 
(without regard to this section) for such year which
is borne by the employer is less than the percentage 
of the cost of such coverage for any prior year which 
was borne by such employer, or 
‘‘(4) the health benefits provided under the plan 
for such year are less than the health benefits pro-
vided under the plan for any prior year. 
‘‘(d) SELF-EMPLOYED INDIVIDUALS.—For purposes 
of this section, a self-employed individual (within the 
meaning of section 401(c)) shall be treated as an em-
ployee. 
‘‘(e) QUALIFIED HEALTH INSURANCE.—For pur-
poses of this section, the term ‘qualified health insurance’ 
means insurance which constitutes medical care (as de-
fined in section 213(d)); except that such term shall not 
include any insurance if substantially all of its coverage 
is of excepted benefits described in section 9832(c). 
‘‘(f) AGGREGATION RULE.—For purposes of this sec-
tion, all persons treated as a single employer under sub-
section (a) or (b) of section 52 or subsection (n) or (o) 
of section 414 shall be treated as one person.’’. 
(b) 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 36 for the taxable 
year which is equal to the amount of the credit de-
termined for such taxable year under section 36(a). 
‘‘(2) CONTROLLED
GROUPS.—Persons treated 
as one person under section 36(f) shall be treated as 
one person for purposes of this section.’’
(c) CONFORMING AMENDMENTS.—
(1) Paragraph (2) of section 1324(b) of title 
31, United States Code, is amended by inserting ‘‘or 
36’’ after ‘‘section 35’’. 
(2) The table of sections for subpart C of part 
IV of subchapter A of chapter 1 of the Internal Rev-
enue Code of 1986 is amended by striking the item 
relating to section 36 and inserting the following 
new items:
‘‘36. Small business cost of providing health insurance coverage for employees. 
‘‘37. Overpayment of taxes.’’.
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2005.
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