[Congressional Record Volume 150, Number 40 (Friday, March 26, 2004)]
[Senate]
[Pages S3215-S3216]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. DASCHLE:
  S. 2245. A bill to amend the Internal Revenue Code of 1986 to provide 
a small business health tax credit; to the Committee on Finance.
  Mr. DASCHLE. Mr. President, today I am introducing legislation to 
provide relief to small businesses struggling with the high cost of 
health care.
  Rising health care costs are a serious problem for most Americans. 
The average premium offered by an employer rose last year by 13.9 
percent, 4 times faster than wages. This was the third straight year of 
double-digit increases.
  The cost of health care for small businesses is even higher. Health 
care costs for businesses with 25 to 50 employees rose by 14.3 percent. 
For firms with 10 to 24 employees, premiums rose by 15.2 percent, and 
for firms with 3 to 9 workers, they increased by 16.6 percent. In many 
cases, the increases faced by individual small businesses is 
significantly larger. I've heard from businesses in my State about 
premium increases as high as 40 percent in one year.
  For many small business owners, increases of this size force them to 
make tough decisions regarding whether to continue offering coverage, 
whether to scale back coverage, and whether they can improve wages and 
make other improvements to their business. At a time when the number of 
uninsured Americans is growing, our economy is struggling, jobs are 
scarce, and financial uncertainty affects many too many Americans, the 
cost of health care is a tremendous problem. Skyrocketing health care 
costs could pose the single greatest obstacle to entrepreneurship and 
growth in our economy today.
  And many small businesses don't offer coverage at all, not because 
they don't want to, but because they simply cannot afford it. Both 
nationally and in South Dakota, only about 55 percent of businesses 
with 3 to 9 employees offer coverage to their employees, as compared to 
almost all large businesses--those with over 50 employees.
  Why don't small businesses offer coverage? The number one reason they 
cite is cost. A study by the Kaiser Family Foundation found that about 
72 percent of small businesses cite the high cost of insurance premiums 
as a major reason they don't offer coverage. And a study of South 
Dakota business owners found that 79 percent said they would be more 
likely to offer coverage if the costs weren't so high.
  Clearly small business owners are desperate for relief. The stories I 
hear from South Dakota business owners underscore the need.
  Last summer, Kathleen Perkins, the owner of Great Plains Coffee 
Roasting Company in Sioux Falls, wrote to me about the cost of health 
insurance. In her letter, she wrote, ``I recently lost two great 
employees because as a small business, I cannot afford to offer 
comprehensive health care to my full time employees.''
  Earlier this year, I heard from the owner of South Dakota Magazine, 
in Yankton. He shared with me the notification from his insurer 
informing him that premiums would rise 27 percent. The owner expressed 
his frustration that he faces these increases, even after experiencing 
past double-digit increases and benefit reductions.
  Yet another small business owner in Mitchell wrote to me about yearly 
rate increases of 10 to 30 percent. She used to pay 100 percent of her 
employees' cost, but she has had to shift more of the cost onto her 
employees. And still

[[Page S3216]]

she struggles. She said, ``I'm not sure how many more increases we can 
tolerate before we will discontinue this company benefit.''
  Small employers need relief. That's why the bill I'm introducing 
today would provide up to a 50-percent tax credit to help small 
employers pay for insurance for their employees. The legislation would 
provide a 50-percent credit for businesses with 25 or fewer employees, 
a 40-percent credit for businesses with between 26 and 35 employees, 
and a 30-percent credit for businesses with between 36 and 50 
employees.
  We must take additional steps to address the high cost of health 
care, the administrative waste in the system, and the growing number of 
uninsured. This tax credit is a first, important step in that process.
  I ask unanimous consent that the text of the bill be printed in the 
Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 2245

       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 Business Health Tax 
     Credit Act''.

     SEC. 2. SMALL BUSINESS TAX CREDIT FOR 50 PERCENT OF HEALTH 
                   PREMIUMS.

       (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 qualified 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) 50 percent in the case of an employer with less than 
     26 qualified employees,
       ``(2) 40 percent in the case of an employer with more than 
     25 but less than 36 qualified employees, and
       ``(3) 30 percent in the case of an employer with more than 
     35 but less than 51 qualified employees.
       ``(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 the maximum 
     employer contribution for self-only coverage or family 
     coverage (as applicable) determined under section 8906(a) of 
     title 5, United States Code, for the calendar year in which 
     such taxable year begins.
       ``(d) Definitions and Special Rules.--For purposes of this 
     section--
       ``(1) Qualified small employer.--
       ``(A) In general.--The term `qualified small employer' 
     means any small employer which provides eligibility for 
     health insurance coverage (after any waiting period (as 
     defined in section 9801(b)(4)) to all qualified employees of 
     the employer.
       ``(B) Small employer.--
       ``(i) In general.--For purposes of this paragraph, the term 
     `small employer' means, with respect to any calendar year, 
     any employer if such employer employed an average of not less 
     than 2 and not more than 50 qualified 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.
       ``(ii) 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 
     clause (i) shall be based on the average number of qualified 
     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 
     paragraph (1) of section 9832(b) (determined by disregarding 
     the last sentence of paragraph (2) of such section).
       ``(3) Qualified employee.--The term `qualified employee' 
     means an employee of an employer who, with respect to any 
     period, is not provided health insurance coverage 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, or
       ``(F) any other provision of law.
       ``(4) Employee--The term `employee'--
       ``(A) means any individual, with respect to any calendar 
     year, who is reasonably expected to receive at least $5,000 
     of compensation from the employer during such year,
       ``(B) does not include an employee within the meaning of 
     section 401(c)(1), and
       ``(C) includes a leased employee within the meaning of 
     section 414(n).
       ``(5) Compensation.--The term `compensation' means amounts 
     described in section 6051(a)(3).
       ``(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) Credit Allowed Against Minimum Tax.--
       (1) In general.--Subsection (c) of section 38 of the 
     Internal Revenue Code of 1986 (relating to limitation based 
     on amount of tax) is amended by redesignating paragraph (4) 
     as paragraph (5) and by inserting after paragraph (3) the 
     following new paragraph:
       ``(4) Special rules for employee health insurance credit.--
       ``(A) In general.--In the case of the employee health 
     insurance credit--
       ``(i) this section and section 39 shall be applied 
     separately with respect to the credit, and
       ``(ii) in applying paragraph (1) to the credit--

       ``(I) the amounts in subparagraphs (A) and (B) thereof 
     shall be treated as being zero, and
       ``(II) the limitation under paragraph (1) (as modified by 
     subclause (I)) shall be reduced by the credit allowed under 
     subsection (a) for the taxable year (other than the employee 
     health insurance credit).

       ``(B) Employee health insurance credit.--For purposes of 
     this subsection, the term `employee health insurance credit' 
     means the credit allowable under subsection (a) by reason of 
     section 45G(a).''.
       (2) Conforming amendments.--
       (A) Subclause (II) of section 38(c)(2)(A)(ii) of such Code 
     is amended by inserting ``or the employee health insurance 
     credit'' after ``employee credit''.
       (B) Subclause (II) of section 38(c)(3)(A)(ii) of such Code 
     is amended by inserting ``or the employee health insurance 
     credit'' after ``employee credit''.
       (d) 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.''.
       (e) 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.''.

       (f) Employer Outreach.--The Internal Revenue Service shall, 
     in conjunction with the Small Business Administration, 
     develop materials and implement an educational program to 
     ensure that business personnel are aware of--
       (1) the eligibility criteria for the tax credit provided 
     under section 45G of the Internal Revenue Code of 1986 (as 
     added by this section),
       (2) the methods to be used in calculating such credit,
       (3) the documentation needed in order to claim such credit, 
     and
       (4) any available health plan purchasing alliances 
     established under title II,

     so that the maximum number of eligible businesses may claim 
     the tax credit.
       (g) 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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