Administration Proposes Expanding Eligibility, Simplifying Small Employer Health Care Tax Credit

The Obama Administration’s Fiscal Year 2014 Revenue Proposals include a proposal  to expand the group of employers eligible for the Small Employer Health Care Tax Credit (Health Credit) enacted as part of the Patient Protection and Affordable Care Act (ACA) retroactive to January 1, 2013.  See General Explanations of the Administration’s Fiscal Year 2014 Revenue Proposals pages 39-40.

Current Law

Under long-standing provisions of the Internal Revenue Code (Code), the cost to an employer of providing health coverage for its employees is generally deductible as an ordinary and necessary business expense for employee compensation and the value of employer-provided health coverage is not subject to employer-paid Federal Insurance Contributions Act tax.  Meanwhile, unless the program violates the non-discrimination rules of Internal Revenue Code §105 or the employees are offered a choice in a manner that violates Code §125, employees are generally not taxed on the premiums or the value of employer-provided…