The Affordable Care Act included a small business health care tax credit designed to encourage small businesses and small tax-exempt organizations to offer health insurance coverage to their employees. Last week, the IRS issued Notice 2010-82 as well as new Form 8941, Credit for Small Employer Health Insurance Premiums, and newly revised Form 990-T, to enable small employers to determine and claim the tax credit.
The tax credit generally is available to employers, including tax-exempt organizations under Code §501(c), with fewer than 25 full-time equivalent employees for the taxable year and average annual wages of less than $50,000 per full-time equivalent. The employer must maintain a "qualifying arrangement," meaning fully insured health coverage under which the employer pays premiums for each enrolled employee in an amount equal to a uniform percentage of the premium and not less than 50% of the premium. Eligible employers may claim the credit for 2010 through 2013 and any two years after that. For 2010 through 2013, the maximum credit is 35% of premiums paid by a small business and 25% of premiums paid by a tax-exempt organization. Beginning in 2014, the credit increases to 50% and 25% respectively.
Notice 2010-82 provides details about eligibility for the tax credit, including detailed information about determining the employees who must be taken into account in determining whether the limit on the number of full-time equivalent employees is satisfied.
A small business must use Form 8941 to determine the amount of the tax credit, and then should include that amount as part of the general business credit on its income tax return. A tax-exempt organization also must determine the amount of the credit by using Form 8941 and then should claim the credit on line 44f of Form 990-T. Even though Form 990-T is primarily used to pay the tax on unrelated business income, it also should be used to claim the credit, regardless of whether any tax is due.
Notice 2010-82 may be found here. Form 8941 is here and the instructions for the form are here.