Witnesses Tell Congressional Subcommittee Small Business Health Tax Credit Is Too Complicated

A tax credit enacted to encourage small businesses and tax-exempt organizations to provide health insurance coverage for employees is too complicated and is not meeting its goal, witnesses told a congressional panel Tuesday.

The credit, passed as part of the Patient Protection and Affordable Care Act, P.L. 111-148, in 2010, was estimated by the Congressional Budget Office to cost $37 billion over 10 years and apply to approximately 4 million businesses and tax-exempt organizations. As of mid-October, only 309,000 taxpayers had claimed the credit, totaling $416 million versus the $2 billion anticipated for the tax year. To receive the credit, which offsets up to 35% of the employer’s health insurance premium costs, an employer must have 25 or fewer full-time-equivalent employees who earn average wages of $50,000 or less. The credit increases to 50% of the premium costs in 2013.