[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[S. 53 Introduced in Senate (IS)]







108th CONGRESS
  1st Session
                                 S. 53

  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

                            January 7, 2003

  Mr. Durbin (for himself and Mrs. Clinton) 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. 45G. 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 sum of--
            ``(1) the expense amount described in subsection (b), and
            ``(2) the expense amount described in subsection (c),
paid by the taxpayer during the taxable year.
    ``(b) Subsection (b) Expense Amount.--For purposes of this 
section--
            ``(1) In general.--The expense amount described in this 
        subsection is the applicable percentage of the amount of 
        qualified employee health insurance expenses of each qualified 
        employee.
            ``(2) Applicable percentage.--For purposes of paragraph 
        (1), the applicable percentage is equal to--
                    ``(A) 25 percent in the case of self-only coverage, 
                and
                    ``(B) 35 percent in the case of family coverage (as 
                defined in section 220(c)(5)).
            ``(3) Per employee dollar limitation.--The amount of 
        qualified employee health insurance expenses taken into account 
        under paragraph (1) with respect to any qualified employee for 
        any taxable year shall not exceed--
                    ``(A) $750 in the case of self-only coverage, and
                    ``(B) $2,450 in the case of family coverage (as so 
                defined).
    ``(c) Subsection (c) Expense Amount.--For purposes of this 
section--
            ``(1) In general.--The expense amount described in this 
        subsection is, with respect to any taxable year during which a 
        small employer pays qualified employee health insurance 
        expenses for the applicable coverage percentage of the eligible 
        qualified employees of the small employer, the applicable 
        percentage of the amount of qualified employee health insurance 
        expenses of each qualified employee.
            ``(2) Applicable coverage percentage; applicable 
        percentage.--For purposes of paragraph (1), the applicable 
        coverage percentage and applicable percentage shall be 
        determined under the following table:

                                                             Applicable
``Applicable coverage percentage:                           percentage:
    At least 70 but not more than 80 percent......          10 percent 
    At least 80 but not more than 90 percent......          15 percent 
    At least 90 percent...........................          20 percent.
            ``(3) Eligible qualified employee.--For purposes of 
        paragraph (1), the term `eligible qualified employee' means any 
        qualified employee who is not provided health insurance 
        coverage during the taxable year under--
                    ``(A) a health plan of the employee's spouse,
                    ``(B) title XVIII, XIX, or XXI of the Social 
                Security Act,
                    ``(C) chapter 17 of title 38, United States Code,
                    ``(D) chapter 55 of title 10, United States Code,
                    ``(E) chapter 89 of title 5, United States Code,
                    ``(F) the Indian Health Care Improvement Act, or
                    ``(G) any other provision of law.
    ``(d) Limitation Based on Wages.--
            ``(1) In general.--The percentage which would (but for this 
        subsection) be taken into account as the applicable percentage 
        for purposes of subsection (b)(2) or (c)(2) for the taxable 
        year shall be reduced (but not below zero) by the percentage 
        determined under paragraph (2).
            ``(2) Amount of reduction.--The percentage determined under 
        this paragraph is the percentage which bears the same ratio to 
the percentage which would be so taken into account as--
                    ``(A) the excess of--
                            ``(i) the qualified employee's wages at an 
                        annual rate during such taxable year, over
                            ``(ii) $20,000, bears to
                    ``(B) $5,000.
    ``(e) 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 25 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 $25,000.
                    ``(B) Treatment of certain employees.--For purposes 
                of subparagraph (A), the term `employee'--
                            ``(i) shall not include an employee within 
                        the meaning of section 401(c)(1), and
                            ``(ii) shall include a leased employee 
                        within the meaning of section 414(n).
                    ``(C) Wages.--The term `wages' has the meaning 
                given such term by section 3121(a) (determined without 
                regard to any dollar limitation contained in such 
                section).
                    ``(D) Inflation adjustment.--
                            ``(i) In general.--In the case of any 
                        taxable year beginning in a calendar year after 
                        2003, the $25,000 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 2002' 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.
    ``(f) Certain Rules Made Applicable.--For purposes of this section, 
rules similar to the rules of section 52 shall apply.
    ``(g) Denial of Double Benefit.--No deduction or other credit under 
any other provision of this chapter shall be allowed for that portion 
of the qualified employee health insurance expenses paid for the 
taxable year which is equal to the credit determined 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 (14), 
by striking the period at the end of paragraph (15) and inserting ``, 
plus'', and by adding at the end the following:
            ``(16) the employee health insurance expenses credit 
        determined under section 45G.''.
    (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:
            ``(11) No carryback of section 45g 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 45G may be carried 
        back to a taxable year ending before the date of the enactment 
        of section 45G.''.
    (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. 45G. 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 
December 31, 2002.
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