Tax Credit for Small Businesses

Senate Introduces Small Business Tax Credit Companion Bill

Last week, Senator Debbie Stabenow (D-MI) introduced S. 1254, legislation to expand the ACA’s Small Business Tax Credit (SBTC), joining H.R. 432, companion legislation introduced in January by Representative Suzan DelBene (D-WA). The SBTC was included as part of the ACA to encourage small employers to provide health insurance to their employees, as roughly half of small employers offer health benefits to their workers. Unfortunately, many employers have been unable to claim the credit due to the current eligibility limitations. These bills would expand the availability of the SBTC to more small employers to help more employers claim the credit and offer their employees coverage. Currently, credits are available to eligible small employers of up to 25 full-time equivalent employees (FTEs) that pay an average annual wage of less than $50,000. Full credits are available to eligible small employers of up to 10 FTEs with an average annual wage of $25,000 or less.  As a result of these limited qualification parameters, many employers who wanted to be able to access the SBTC simply don’t qualify, which has resulted in fewer employers claiming the credit than had been expected. Initial projections showed that as many as 4 million small employers would claim the credit through 2019, claiming $40 billion worth of credits; however, there has been less than $1 billion actually claimed. Most small employers who didn’t claim the credit said it was because the wage eligibility standards were too stringent, while others cited the overly complicated process for calculating the credit, which discouraged many from even applying. Stabenow’s bill would provide a 50% credit for all businesses with 50 or fewer employees, with a phase-out starting at $50,000 in average wages. The bill would further strike the two-year limit for the tax credit, allowing employers to claim the credit on an annual basis. DelBene’s bill would only increase the length that employers could claim the credit from two to three years, instead of in perpetuity. Her bill would also tie the calculation to up to 330% of the federal poverty level ($80,190 for a family of four), increase the threshold for eligible individuals from 10 to 20, and raise the size of businesses eligible from 25 to 50. Additionally, DelBene’s bill would eliminate the requirement that employers contribute the same percentage of the cost for each employee’s plan and simplify calculations by eliminating the current cap of employer contributions to average premiums in the state. Senators Gary Peters (D-MI) and Tammy Baldwin (D-WI) joined Senator Stabenow as original cosponsors to S. 1254. Peters had previously been the primary sponsor of House legislation when he served in that chamber. Joining Representative DelBene on the House bill included Representatives Ron Kind (D-WI), Dutch Ruppersberger (D-MD), and Ann Kuster (D-NH) as original cosponsors. Additional cosponsors include Peter DeFazio (D-OR), Raul Grijalva (D-AZ), Derek Kilmer (D-WA), Ed Perlmutter (D-CO), Adrian Espaillat (D-NY), Joe Courtney (D-CT), Brian Higgins (D-NY), and Mike Thompson (D-CA). NAHU supports this legislation to expand the availability of the SBTC to give small employers meaningful access to affordable coverage for their employees.