Expansion and modification of credit for employee health insurance expenses of small employers

(a)

Expansion of definition of eligible small employer

Subparagraph (A) of section 45R(d)(1) of the Internal Revenue Code of 1986 is amended by striking 25 and inserting 50. (b)

Amendment to phaseout determination

Subsection (c) of section 45R of the Internal Revenue Code of 1986 is amended to read as follows:

(c)

Phaseout of credit amount based on number of employees and average wages

The amount of the credit determined under subsection (b) (without regard to this subsection) shall be adjusted (but not below zero) by multiplying such amount by the product of— (1)the lesser of— (A)a fraction the numerator of which is the excess (if any) of 50 over the total number of full-time equivalent employees of the employer and the denominator of which is 30, and (B)1, and (2)the lesser of— (A)a fraction the numerator of which is the excess (if any) of— (i)the dollar amount in effect under subsection (d)(3)(B) for the taxable year, multiplied by 2, over (ii)the average annual wages of the employer for such taxable year, and

the denominator of which is the dollar amount so in effect under subsection (d)(3)(B), and

(B)1.

(c)

Partially phased out credit allowed for insurance outside an Exchange

(1)

In general

Section 45R of the Internal Revenue Code of 1986 is amended by redesignating subsections (h) and (i) as subsections (i) and (j), respectively, and by inserting after subsection (g) the following new subsection:

(h)

Partially phased out credit allowed for insurance outside an Exchange for 2014

(1)

In general

If an eligible small employer offers to its employees in a manner other than through an Exchange a health plan that meets the requirements of paragraph (2), the following modifications shall apply with respect to a taxable year beginning in 2014: (A)

Qualified health plan

This section and section 280C(h) shall be applied for such taxable year by treating such plan as a qualified health plan. (B)

Reduced credit percentage

Subsection (b) shall be applied— (i)by substituting 25 percent for 35 percent, (ii)by substituting 35 percent for 50 percent, and (iii)without regard to through an Exchange in paragraph (1) thereof. (C)

Contribution arrangements

Subsection (d)(4) shall be applied without regard to through an exchange. (D)

Credit period

(i)

In general

The credit under this section shall be determined without regard to whether such taxable year is in a credit period. (ii)

Year taken into account as portion of credit period in subsequent years

For purposes of applying this section to taxable years beginning after 2014 in which the employer offers a qualified health plan (without regard to subparagraph (A)) to its employees through an Exchange, subsection (e)(2) shall be applied by substituting 2-consecutive-taxable for 3-consecutive-taxable. (2)

Requirements

A health plan meets the requirements of this paragraph if such plan— (A)provides the essential health benefits package described in section 1302(a) of the Patient Protection and Affordable Care Act, and (B)is offered by a health insurance issuer that— (i)is licensed and in good standing to offer health insurance coverage in each State in which such issuer offers health insurance coverage, and (ii)if such issuer offers health plans through an Exchange, agrees to charge the same premium rate for each qualified health plan of the issuer without regard to whether the plan is offered through an Exchange or whether the plan is offered directly from the issuer or through an agent.

(2)

Conforming amendment

Section 6055(b)(2)(C) of such Code is amended by striking Exchange and inserting Exchange (or a plan with respect to which a credit is allowed under section 45R by reason of subsection (h) thereof). (d)

Extension of credit period

Paragraph (2) of section 45R(e) of the Internal Revenue Code of 1986 is amended by striking 2-consecutive-taxable and inserting 3-consecutive-taxable. (e)

Average annual wage limitation

Subparagraph (B) of section 45R(d)(3) of the Internal Revenue Code of 1986 is amended to read as follows:

(B)

Dollar amount

For purposes of paragraph (1)(B) and subsection (c)(2), the dollar amount in effect under this paragraph is the amount equal to 110 percent of the poverty line (within the meaning of section 36B(d)(3)) for a family of 4.

(f)

Elimination of uniform percentage contribution requirement

Paragraph (4) of section 45R(d) of the Internal Revenue Code of 1986 is amended by striking a uniform percentage (not less than 50 percent) and inserting at least 50 percent. (g)

Elimination of cap relating to average local premiums

Subsection (b) of section 45R of the Internal Revenue Code of 1986 is amended by striking the lesser of and all that follows and inserting the aggregate amount of nonelective contributions the employer made on behalf of its employees during the taxable year under the arrangement described in subsection (d)(4) for premiums for qualified health plans offered by the employer to its employees through an Exchange.. (h)

Credit availability for family members in certain cases

Clause (iv) of section 45R(e)(1)(A) of the Internal Revenue Code of 1986 is amended to read as follows:

(iv)any individual who is a spouse or dependent (within the meaning of section 152) of an individual described in clause (i), (ii), or (iii).

(i)

Effective date

The amendments made by this section shall apply to amounts paid or incurred in taxable years beginning after December 31, 2013.