[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[S. 825 Introduced in Senate (IS)]







106th CONGRESS
  1st Session
                                 S. 825

  To amend the Internal Revenue Code of 1986 to allow small business 
  employers a credit against income tax for employee health insurance 
               expenses paid or incurred by the employer.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             April 15, 1999

Mr. Durbin (for himself and Mr. Schumer) introduced the following bill; 
     which was read twice and referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
  To amend the Internal Revenue Code of 1986 to allow small business 
  employers a credit against income tax for employee health insurance 
               expenses paid or incurred by the employer.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. CREDIT FOR EMPLOYEE HEALTH INSURANCE EXPENSES.

    (a) In General.--Subpart D of part IV of subchapter 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. 45D. EMPLOYEE HEALTH INSURANCE EXPENSES.

    ``(a) General Rule.--For purposes of section 38, in the case of a 
small employer, the employee health insurance expenses credit 
determined under this section is an amount equal to the applicable 
percentage of the amount paid by the taxpayer during the taxable year 
for qualified employee health insurance expenses.
    ``(b) Applicable Percentage.--For purposes of subsection (a), the 
applicable percentage is equal to--
            ``(1) 60 percent in the case of self-only coverage, and
            ``(2) 70 percent in the case of family coverage (as defined 
        in section 220(c)(5)).
    ``(c) Per Employee Dollar Limitation.--The amount of qualified 
employee health insurance expenses taken into account under subsection 
(a) with respect to any qualified employee for any taxable year shall 
not exceed--
            ``(1) $600 in the case of self-only coverage, and
            ``(2) $1,200 in the case of family coverage (as so 
        defined).
    ``(d) Definitions.--For purposes of this section--
            ``(1) Small employer.--
                    ``(A) In general.--The term `small employer' means, 
                with respect to any calendar year, any employer if such 
                employer employed an average of 9 or fewer employees on 
                business days during either of the 2 preceding calendar 
                years. For purposes of the preceding sentence, a 
                preceding calendar year may be taken into account only 
                if the employer was in existence throughout such year.
                    ``(B) Employers not in existence in preceding 
                year.--In the case of an employer which was not in 
                existence throughout the 1st preceding calendar year, 
                the determination under subparagraph (A) shall be based 
                on the average number of employees that it is 
                reasonably expected such employer will employ on 
                business days in the current calendar year.
            ``(2) Qualified employee health insurance expenses.--
                    ``(A) In general.--The term `qualified employee 
                health insurance expenses' means any amount paid by an 
                employer for health insurance coverage to the extent 
                such amount is attributable to coverage provided to any 
                employee while such employee is a qualified employee.
                    ``(B) Exception for amounts paid under salary 
                reduction arrangements.--No amount paid or incurred for 
                health insurance coverage pursuant to a salary 
                reduction arrangement shall be taken into account under 
                subparagraph (A).
                    ``(C) Health insurance coverage.--The term `health 
                insurance coverage' has the meaning given such term by 
                section 9832(b)(1).
            ``(3) Qualified employee.--
                    ``(A) In general.--The term `qualified employee' 
                means, with respect to any period, an employee of an 
                employer if the total amount of wages paid or incurred 
                by such employer to such employee at an annual rate 
                during the taxable year exceeds $5,000 but does not 
                exceed $16,000.
                    ``(B) Treatment of certain employees.--For purposes 
                of subparagraph (A), the term `employee' shall 
                include--
                            ``(i) an employee within the meaning of 
                        section 401(c)(1), and
                            ``(ii) a leased employee within the meaning 
                        of section 414(n).
                    ``(C) Wages.--The term `wages'--
                            ``(i) has the meaning given such term by 
                        section 3121(a) (determined without regard to 
any dollar limitation contained in such section), and
                            ``(ii) in the case of an employee described 
                        in subparagraph (B)(i), includes the net 
                        earnings from self-employment (as defined in 
                        section 1402(a) and as so determined).
                    ``(D) Inflation adjustment.--
                            ``(i) In general.--In the case of any 
                        taxable year beginning in a calendar year after 
                        1999, the $16,000 amount contained in 
                        subparagraph (A) shall be increased by an 
                        amount equal to--
                                    ``(I) such dollar amount, 
                                multiplied by
                                    ``(II) the cost-of-living 
                                adjustment under section 1(f)(3) for 
                                the calendar year in which the taxable 
                                year begins, determined by substituting 
                                `calendar year 1998' for `calendar year 
                                1992' in subparagraph (B) thereof.
                            ``(ii) Rounding.--If any increase 
                        determined under clause (i) is not a multiple 
                        of $100, such amount shall be rounded to the 
                        nearest multiple of $100.
    ``(e) Certain rules made applicable.--For purposes of this section, 
rules similar to the rules of section 52 shall apply.
    ``(f) Denial of Double Benefit.--No deduction or credit under any 
other provision of this chapter shall be allowed with respect to 
qualified employee health insurance expenses taken into account under 
subsection (a).''
    (b) Credit To Be Part of General Business Credit.--Section 38(b) of 
the Internal Revenue Code of 1986 (relating to current year business 
credit) is amended by striking ``plus'' at the end of paragraph (11), 
by striking the period at the end of paragraph (12) and inserting ``, 
plus'', and by adding at the end the following:
            ``(13) the employee health insurance expenses credit 
        determined under section 45D.''
    (c) No Carrybacks.--Subsection (d) of section 39 of the Internal 
Revenue Code of 1986 (relating to carryback and carryforward of unused 
credits) is amended by adding at the end the following:
            ``(9) No carryback of section 45D credit before effective 
        date.--No portion of the unused business credit for any taxable 
        year which is attributable to the employee health insurance 
        expenses credit determined under section 45D may be carried 
        back to a taxable year ending before the date of the enactment 
        of section 45D.''
    (d) Clerical Amendment.--The table of sections for subpart D of 
part IV of subchapter A of chapter 1 of the Internal Revenue Code of 
1986 is amended by adding at the end the following:

                              ``Sec. 45D. Employee health insurance 
                                        expenses.''
    (e) Effective Date.--The amendments made by this section shall 
apply to amounts paid or incurred in taxable years beginning after the 
date of the enactment of this Act.
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