Washington, DC - Millions of American small businesses will benefit from tax credits provided by the Affordable Care Act.  Congressman John D. Dingell (D-MI15) sent the following letter to small business owners in Michigan’s 15th Congressional District after the IRS announced a number of details of how the Small Business Health Care Tax Credit works.
 

Dear Small Business Owner,

I am writing to provide you an update on the Small Business Health Care Tax Credit that was created under the Affordable Care Act.  On May 17, 2010, the Obama Administration issued new guidance on the credit. Effective immediately, eligible small businesses and non-profits that provide health coverage for their workers will receive immediate assistance.

This new guidance provides more detailed information that will make it easier for small businesses to learn if they qualify for the tax credit. It also helps small businesses determine how much of the credit they will receive, so they have full knowledge to make employee benefit decisions.

Qualifying firms include those that have fewer than 25 employees and average annual wages of $50,000 or less.  The full tax credit is available to those with 10 or fewer employees and average annual wages of $25,000 or less. This sliding-scale tax credit is worth up to 35 percent of a small business’ premium costs in 2010.  On January 1, 2014, this rate increases to 50 percent.

The Small Business Health Care Tax Credit is partially based on the number of full-time equivalent employees (FTEs). The Administration’s guidance allows employers to choose the most favorable method of determining work hours so small businesses can receive the maximum credit for which they are eligible. Employers can determine to count FTEs based on the number of hours of work, or an estimation of hours based on total days or weeks of service.

The guidance makes clear that employers who receive state tax credits or subsidies for health care will still be eligible for the full credit. It also clarifies that small businesses can use the credit for add-on dental, vision, and other limited scope coverage, in addition to traditional health insurance.
         
Finally, because the tax credit is effective as of January of this year, but the law was not enacted until March 23, 2010 there may be confusion about how small businesses can meet all of the requirements necessary for the tax credit. The Administration has provided a simplified transition relief for tax year 2010.

As you may know, in addition to the Small Business Healthcare Tax Credit, this new law will help small business owners provide affordable, quality health insurance for their employees by allowing them to purchase insurance through the new health insurance exchanges when they are up and running in 2014. This will expand their bargaining power, and will reduce overall administrative costs. The new rating rules will ban insurance companies from charging more to small businesses with sicker workers or raising rates when one worker becomes sick.  Finally, the cost containment proposals in the new law will pay dividends to small business owners.  The new law will not only to save federal dollars, but it will also reduce the rate of increase in private sector healthcare spending.

Please see the attached guidance for more information. Should you have any questions, do not hesitate to contact my office in Washington, D.C. at (202) 225-4071.

With every good wish,

                                                 Sincerely,
 

                                               

                                                  John Dingell
                                                  Member of Congress
 

Congressman Dingell has also posted a calculator in on his web site demonstrating how health care reform benefits small businesses.  To see the calculator, go to: http://www.house.gov/dingell/affordable_healthcare.shtml.