[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[S. 86 Introduced in Senate (IS)]







108th CONGRESS
  1st Session
                                 S. 86

To amend the Internal Revenue Code of 1986 to provide a credit for the 
             health insurance expenses of small businesses.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                            January 7, 2003

  Mrs. Clinton (for herself and Mr. Durbin) 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 provide a credit for the 
             health insurance expenses of small businesses.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Small Employer Tax Assistance for 
Health Coverage Act of 2003''.

SEC. 2. CREDIT FOR SMALL BUSINESS 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. SMALL BUSINESS EMPLOYEE HEALTH INSURANCE EXPENSES.

    ``(a) General Rule.--For purposes of section 38, in the case of an 
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) in the case of an employer with not more than 10 
        qualified employees the average annual rate of wages of whom 
        paid or incurred by such employer during the taxable year does 
        not exceed $10,000, 50 percent,
            ``(2) in the case of an employer with not more than 10 
        qualified employees the average annual rate of wages of whom 
        paid or incurred by such employer during the taxable year 
        exceeds $10,000, the excess of--
                    ``(A) 50 percent, over
                    ``(B) the percentage points equal to--
                            ``(i) the product of--
                                    ``(I) 1.667, and
                                    ``(II) the amount by which such 
                                average annual rate of wages exceeds 
                                $10,000, divided by
                            ``(ii) 1,000,
            ``(3) in the case of an employer with more than 10 
        qualified employees the average annual rate of wages of whom 
        paid or incurred by such employer during the taxable year does 
        not exceed $10,000, the excess of--
                    ``(A) 50 percent, over
                    ``(B) the percentage points equal to the product 
                of--
                            ``(i) 1.25, and
                            ``(ii) the number of qualified employees in 
                        excess of 10, and
            ``(4) in the case of an employer with more than 10 
        qualified employees the average annual rate of wages of whom 
        paid or incurred by such employer during the taxable year 
        exceeds $10,000, the excess of--
                    ``(A) the percentage which would be determined 
                under paragraph (3) for such an employer, over
                    ``(B) the percentage points equal to--
                            ``(i) the product of--
                                    ``(I) the number of qualified 
                                employees divided by 6, and
                                    ``(II) the amount by which such 
                                average annual rate of wages exceeds 
                                $10,000, divided by
                            ``(ii) 1,000.
For purposes of this subsection, the applicable percentage is equal to 
zero if the applicable percentage determined under paragraph (2), (3), 
or (4) is less than zero. For purposes of this subsection, in the case 
of an employer with not more than 50 qualified employees the average 
annual rate of wages of whom paid or incurred by such employer during 
the taxable year does not exceed $30,000, the applicable percentage 
shall not be less than the percentage otherwise determined under this 
subsection or 5 percent.
    ``(c) Per Employee Dollar Limitation.--
            ``(1) In general.--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--
                    ``(A) $2,000 in the case of self-only coverage, and
                    ``(B) $5,000 in the case of family coverage.
            ``(2) Limitation with respect to coverage for portion of 
        year.--In the case of the coverage of a qualified employee for 
        only a portion of the taxable year, the limitation under 
        paragraph (1) shall be an amount which bears the same ratio to 
        such limitation (determined without regard to this sentence) as 
        such portion bears to the entire taxable year.
    ``(d) Special Rules and Definitions.--For purposes of this 
section--
            ``(1) Determination of employment.--
                    ``(A) In general.--An employer shall be considered 
                an employer described in subsection (b) if such 
                employer employed an average of the number of employees 
                described in such subsection 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 if such coverage 
                is provided to at least 50 percent of the qualified 
                employees of the employer.
                    ``(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 
                paragraph (1) of section 9832(b) (determined by 
                disregarding the last sentence of paragraph (2) of such 
                section).
            ``(3) Qualified employee.--
                    ``(A) In general.--The term `qualified employee' 
                means any employee who normally works more than 30 
                hours per week for the employer other than an employee 
                who--
                            ``(i) is eligible to participate in any 
                        subsidized health plan (within the meaning of 
                        section 162(l)(2)) maintained by any employer 
                        of the employee or of the spouse of the 
                        employee,
                            ``(ii) is entitled to any benefits under 
                        title XVIII of the Social Security Act,
                            ``(iii) is a participant in the program 
                        under title XIX or XXI of such Act, or
                            ``(iv) is eligible for any benefit provided 
                        to such employee under--
                                    ``(I) chapter 89 of title 5, United 
                                States Code,
                                    ``(II) chapter 55 of title 10, 
                                United States Code,
                                    ``(III) chapter 17 of title 38, 
                                United States Code, or
                                    ``(IV) any medical care program 
                                under the Indian Health Care 
                                Improvement Act.
                    ``(B) Treatment of certain employees.--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).
            ``(4) 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).
    ``(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 (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 January 1, 2003.''.
    (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. Small business 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, for coverage established after the date of the 
enactment of this Act.
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