On August 23, the IRS published a Notice of Proposed Rulemaking on the tax credit for health insurance expenses of small employers, otherwise known as the Small Business Health Insurance Tax Credit. The proposed rules generally incorporate prior IRS guidance on the small business health insurance provided in Notice 2010-44 and 2010-82. See our prior post for more information on the general requirements for a small business to qualify for the health insurance tax credit and this post for more information about the Health Insurance Marketplace (SHOP) Small Employer Call Center.
The proposed rules, in additional to providing more detail about the health insurance tax credit for small employers, also provide some transition relief for those small employers that have non-calendar year plans that do not begin on the same date as their taxable year. A small employer (25 or fewer full time equivalent employees for purposes of the health insurance tax credit) will be treated as offering coverage for the entire 2014 tax year for purposes of eligibility for and calculation of the health insurance tax credit if the small employer:
- Offers coverage that begins on a date other than the first day of its tax year; and
- Offers coverage during the period before the first day of the plan year beginning in 2014 that would have qualified the employer for the credit under the rules that applied before January 1, 2014; and
- Begins offering coverage through a SHOP Exchange as of the first day of its plan year that begins in 2014.
This flexibility will help those small employers who might have otherwise qualified for the Small Business Health Insurance Tax Credit but either would have missed out on it for a portion of the year or faced the administrative challenges of terminating an existing group health plan early in order to purchase coverage through the SHOP.
The IRS has requested comments on these proposed rules. Comments and any requests for a public hearing must be submitted within 90 days after the Notice of Proposed Rulemaking is published in the Federal Register, which should occur next week.
