[Congressional Record Volume 153, Number 1 (Thursday, January 4, 2007)]
[Senate]
[Pages S108-S109]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. KERRY:
  S. 99. A bill to amend the Internal Revenue code of 1986 to provide a 
refundable credit for small business employee health insurance 
expenses; to the Committee on Finance.
  Mr. KERRY. Mr. President, today I am introducing the Small Business 
Health Care Tax Credit Act which would provide small businesses with a 
refundable tax credit to help with the cost of providing employees with 
health insurance. Recent studies show that certain groups of 
individuals are less likely to have employer-provided health insurance. 
The 2006 Kaiser Family Foundation Employer Health Benefits Survey shows 
that since 2000 the number of firms offering health benefits has 
declined from 69 percent to 61 percent in 2006. This decline in 
coverage is more prevalent in small businesses. Only 48 percent of the 
firms with less than 10 employees offer health insurance whereas, 90 
percent of the firms with 50 or more employees offer health benefits. 
Approximately 32 million Americans work for firms with fewer than 50 
employees.
  The April 2006 Commonwealth Fund Biennial Health Insurance Survey 
concluded that 41 percent of working-age Americans with incomes between 
$20,000 and $40,000 were uninsured for at least part of the past year. 
This reflects a dramatic increase in this income range, up from 28 
percent in 2001. The survey found that of the 48 million American 
adults who were uninsured in the past year, 67 percent were in families 
where at least one person worked full time.
  My legislation provides a refundable tax credit to small businesses 
designed to help provide coverage to those who are currently uninsured. 
Small businesses with less than 50 employees would be eligible to 
receive a tax credit to help with the cost of health care premiums for 
employees making more than $5,000 and less than $50,000 a year. To be 
eligible for the credit, the employer has to pay at least 50 percent of 
the health care insurance premium. The credit for businesses with fewer 
than 10 employees will be capped at 50 percent of the cost of the 
premium, and the credit amount decreases for larger businesses.
  Last year, Leonard Burman, Codirector of the Tax Policy Center, 
testified before the Senate Finance Committee and suggested a 
refundable tax credit as an incremental option to help defray higher 
administrative costs faced by small employers in purchasing health 
care. This credit will help small businesses afford health care 
premiums. It is a refundable credit, so that it will help new 
businesses that do not yet have taxable income be able to offer health 
care and provide struggling businesses with assistance so that they can 
offer health care.
  This tax credit will cut the cost of health insurance by up to 50 
percent for small business owners. It will enable small businesses to 
provide health insurance for their low- and moderate-income employees. 
Until we can agree on a comprehensive proposal that will help reduce 
the cost of health care premiums for small businesses, this legislation 
provides an appropriate option for increasing health insurance coverage 
for small businesses and their employees.
  I ask for unanimous consent that the text of the legislation be 
printed in the Record.
  There being no objection, the text of the bill was ordered to be 
printed in the Record, as follows:

                                 S. 99

       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 Care 
     Tax Credit Act''.

     SEC. 2. 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. 45O. 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--
       ``(1) 50 percent in the case of an employer with less than 
     10 qualified employees,
       ``(2) 25 percent in the case of an employer with more than 
     9 but less than 25 qualified employees, and
       ``(3) 20 percent in the case of an employer with more than 
     24 but less than 50 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--
       ``(1) $4,000 for self-only coverage, and
       ``(2) $10,000 for family coverage.
       ``(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--
       ``(i) provides eligibility for health insurance coverage 
     (after any waiting period (as defined in section 9801(b)(4))) 
     to all qualified employees of the employer, and
       ``(ii) pays at least 50 percent of the cost of such 
     coverage for each qualified employee.

[[Page S109]]

       ``(B) Small employer.--
       ``(i) In general.--For purposes of this paragraph, the term 
     `small employer' means, with respect to any taxable year, any 
     employer if--

       ``(I) the average gross receipts of such employer for the 
     preceding 3 taxable years does not exceed $5,000,000, and
       ``(II) such employer employed an average of more than 1 but 
     less than 50 qualified employees on business days during the 
     preceding taxable year.

       ``(ii) Aggregate gross assets.--For purposes of clause 
     (i)(I), the term `aggregate gross assets' shall have meaning 
     given such term by section 1202(d)(2).
       ``(iii) Employers not in existence in preceding year.--For 
     purposes of clause (i)(II)--

       ``(I) a preceding taxable year may be taken into account 
     only if the employer was in existence throughout such year, 
     and
       ``(II) in the case of an employer which was not in 
     existence throughout the preceding taxable year, the 
     determination of whether such employer is a qualified small 
     employer shall be based on the average number of employees 
     that it is reasonably expected such employer will employ on 
     business days in the current taxable year.

       ``(iv) Aggregation rules.--All persons treated as a single 
     employer under subsection (a) or (b) of section 52 or 
     subsection (m) or (o) of section 414 shall be treated as one 
     person for purposes of this subparagraph.
       ``(v) Predecessors.--The Secretary may prescribe 
     regulations which provide for references in this subparagraph 
     to an employer to be treated as including references to 
     predecessors of such employer.
       ``(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 an 
     employee of an employer who, with respect to any period, is 
     not provided health insurance coverage under--
       ``(i) a health plan of the employee's spouse,
       ``(ii) title XVIII, XIX, or XXI of the Social Security Act,
       ``(iii) chapter 17 of title 38, United States Code,
       ``(iv) chapter 55 of title 10, United States Code,
       ``(v) chapter 89 of title 5, United States Code, or
       ``(vi) any other provision of law.
       ``(B) Employee.--The term `employee'--
       ``(i) means any individual, with respect to any calendar 
     year, who is reasonably expected to receive not more than 
     $50,000 of compensation from the employer during such year,
       ``(ii) does not include an employee within the meaning of 
     section 401(c)(1), and
       ``(iii) includes a leased employee within the meaning of 
     section 414(n).
       ``(C) Compensation.--The term `compensation' means amounts 
     described in section 6051(a)(3).
       ``(D) Inflation adjustment.--
       ``(i) In general.--In the case of a taxable year beginning 
     after 2007, the $50,000 amount in subparagraph (B)(i) shall 
     be increased by an amount equal to--

       ``(I) such dollar amount, multiplied by
       ``(II) the cost-of-living adjustment determined under 
     section 1(f)(3) for the calendar year in which the taxable 
     year begins, determined by substituting `calendar year 2006' 
     for `calendar year 1992' in subparagraph (B) thereof.

       ``(ii) Rounding.--If any amount as adjusted under clause 
     (i) is not a multiple of $1,000, such amount shall be rounded 
     to the next lowest multiple of $1,000.
       ``(4) No qualified employees excluded.--Subsection (a) 
     shall not apply to an employer for any period unless at all 
     times during such period health insurance coverage is 
     available to all qualified employees of such employer under 
     similar terms.
       ``(e) Portion of Credit Made Refundable.--
       ``(1) In general.--The aggregate credits allowed to a 
     taxpayer under subpart C shall be increased by the lesser 
     of--
       ``(A) the credit which would be allowed under subsection 
     (a) without regard to this subsection and the limitation 
     under section 38(c), or
       ``(B) the amount by which the aggregate amount of credits 
     allowed by this subpart (determined without regard to this 
     subsection) would increase if the limitation imposed by 
     section 38(c) for any taxable year were increased by the 
     amount of employer payroll taxes imposed on the taxpayer 
     during the calendar year in which the taxable year begins.
     The amount of the credit allowed under this subsection shall 
     not be treated as a credit allowed under this subpart and 
     shall reduce the amount of the credit otherwise allowable 
     under subsection (a) without regard to section 38(c).
       ``(2) Employer payroll taxes.--For purposes of this 
     subsection--
       ``(A) In general.--The term `employer payroll taxes' means 
     the taxes imposed by--
       ``(i) section 3111(b), and
       ``(ii) sections 3211(a) and 3221(a) (determined at a rate 
     equal to the rate under section 3111(b)).
       ``(B) Special rule.--A rule similar to the rule of section 
     24(d)(2)(C) shall apply for purposes of subparagraph (A).
       ``(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 (30), by striking the period at the 
     end of paragraph (31) and inserting ``, plus'', and by adding 
     at the end the following:
       ``(32) the employee health insurance expenses credit 
     determined under section 45O.''.
       (c) 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. 45O. Employee health insurance expenses.''.
       (d) Effective Date.--The amendments made by this section 
     shall apply to amounts paid or incurred in taxable years 
     beginning after December 31, 2006.
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