To amend the Internal Revenue Code of 1986 to provide for a tax credit for small employer-based health insurance coverage in States in which such coverage is mandated, and for other purposes.

November 25, 2003

Mrs. BOXER introduced the following bill; which was read twice and referred to the Committee on Finance

To amend the Internal Revenue Code of 1986 to provide for a tax credit for small employer-based health insurance coverage in States in which such coverage is mandated, and for other purposes.

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 State Mandated Health Insurance Assistance Act of 2003'.

SEC. 2. CREDIT FOR EMPLOYEE HEALTH INSURANCE EXPENSES RELATED TO STATE MANDATES.

(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 RELATED TO STATE MANDATES.

`(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 50 percent of the amount paid by the taxpayer during the taxable year for qualified employee health insurance expenses.

`(b) 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.

`(c) 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) operates in a State in which the employer must provide such eligibility under State law.

`(C) 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 500 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, provides services to such employer in a State described in paragraph (1)(A)(ii) and 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).

`(d) CERTAIN RULES MADE APPLICABLE- For purposes of this section, rules similar to the rules of section 52 shall apply.

`(e) 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- Subclause (II) of section 38(c)(2)(A)(ii) and subclause (II) of section 38(c)(3)(A)(ii) are each 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 related to State mandates.'.

(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, and

(3) the documentation needed in order to claim such credit,

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.

END