For purposes of section 38, in the case of an eligible small employer, the small employer health insurance credit determined under this section for any taxable year in the credit period is the amount determined under subsection (b).
(1) the aggregate amount of nonelective contributions the employer made on behalf of its employees during the taxable year under the arrangement described in subsection (d)(4) for premiums for qualified health plans offered by the employer to its employees through an Exchange, or
(2) the aggregate amount of nonelective contributions which the employer would have made during the taxable year under the arrangement if each employee taken into account under paragraph (1) had enrolled in a qualified health plan which had a premium equal to the average premium (as determined by the Secretary of Health and Human Services) for the small group market in the rating area in which the employee enrolls for coverage.
(1) Such amount multiplied by a fraction the numerator of which is the total number of full-time equivalent employees of the employer in excess of 10 and the denominator of which is 15.
(2) Such amount multiplied by a fraction the numerator of which is the average annual wages of the employer in excess of the dollar amount in effect under subsection (d)(3)(B) and the denominator of which is such dollar amount.
(1) In general
The term “eligible small employer” means, with respect to any taxable year, an employer—
(A) which has no more than 25 full-time equivalent employees for the taxable year,
(B) the average annual wages of which do not exceed an amount equal to twice the dollar amount in effect under paragraph (3)(B) for the taxable year, and
(C) which has in effect an arrangement described in paragraph (4).
(2) Full-time equivalent employees
(A) In general
The term “full-time equivalent employees” means a number of employees equal to the number determined by dividing—
(i) the total number of hours of service for which wages were paid by the employer to employees during the taxable year, by
(ii) 2,080.
(B) Excess hours not counted
If an employee works in excess of 2,080 hours of service during any taxable year, such excess shall not be taken into account under subparagraph (A).
(C) Hours of service
The Secretary, in consultation with the Secretary of Labor, shall prescribe such regulations, rules, and guidance as may be necessary to determine the hours of service of an employee, including rules for the application of this paragraph to employees who are not compensated on an hourly basis.
(3) Average annual wages
(A) In general
The average annual wages of an eligible small employer for any taxable year is the amount determined by dividing—
(i) the aggregate amount of wages which were paid by the employer to employees during the taxable year, by
(ii) the number of full-time equivalent employees of the employee determined under paragraph (2) for the taxable year.
(B) Dollar amount
For purposes of paragraph (1)(B) and subsection (c)(2)—
(i) 2010, 2011, 2012, and 2013
The dollar amount in effect under this paragraph for taxable years beginning in 2010, 2011, 2012, or 2013 is $25,000.
(ii) Subsequent years
In the case of a taxable year beginning in a calendar year after 2013, the dollar amount in effect under this paragraph shall be equal to $25,000, multiplied by the cost-of-living adjustment under for the calendar year, determined by substituting “calendar year 2012” for “calendar year 2016” in subparagraph (A)(ii) thereof.
(4) Contribution arrangement
An arrangement is described in this paragraph if it requires an eligible small employer to make a nonelective contribution on behalf of each employee who enrolls in a qualified health plan offered to employees by the employer through an exchange in an amount equal to a uniform percentage (not less than 50 percent) of the premium cost of the qualified health plan.
(5) Seasonal worker hours and wages not counted
For purposes of this subsection—
(A) In general
The number of hours of service worked by, and wages paid to, a seasonal worker of an employer shall not be taken into account in determining the full-time equivalent employees and average annual wages of the employer unless the worker works for the employer on more than 120 days during the taxable year.
(B) Definition of seasonal worker
The term “seasonal worker” means a worker who performs labor or services on a seasonal basis as defined by the Secretary of Labor, including workers covered by section 500.20(s)(1) of title 29, Code of Federal Regulations and retail workers employed exclusively during holiday seasons.
(1) Employee
(A) Certain employees excluded
The term “employee” shall not include—
(i) an employee within the meaning of ,
(ii) any 2-percent shareholder (as defined in ) of an eligible small business which is an S corporation,
(iii) any 5-percent owner (as defined in ) of an eligible small business, or
(iv) any individual who bears any of the relationships described in subparagraphs (A) through (G) of to, or is a dependent described in of, an individual described in clause (i), (ii), or (iii).
(B) Leased employees
The term “employee” shall include a leased employee within the meaning of .
(2) Credit period
The term “credit period” means, with respect to any eligible small employer, the 2-consecutive-taxable year period beginning with the 1st taxable year in which the employer (or any predecessor) offers 1 or more qualified health plans to its employees through an Exchange.
(3) Nonelective contribution
The term “nonelective contribution” means an employer contribution other than an employer contribution pursuant to a salary reduction arrangement.
(4) Wages
The term “wages” has the meaning given such term by (determined without regard to any dollar limitation contained in such section).
(5) Aggregation and other rules made applicable
(A) Aggregation rules
All employers treated as a single employer under subsection (b), (c), (m), or (
(B) Other rules
Rules similar to the rules of subsections (c), (d), and (e) of section 52 shall apply.
(1) In general
In the case of a tax-exempt eligible small employer, there shall be treated as a credit allowable under subpart C (and not allowable under this subpart) the lesser of—
(A) the amount of the credit determined under this section with respect to such employer, or
(B) the amount of the payroll taxes of the employer during the calendar year in which the taxable year begins.
(2) Tax-exempt eligible small employer
For purposes of this section, the term “tax-exempt eligible small employer” means an eligible small employer which is any organization described in which is exempt from taxation under .
(3) Payroll taxes
For purposes of this subsection—
(A) In general
The term “payroll taxes” means—
(i) amounts required to be withheld from the employees of the tax-exempt eligible small employer under ,
(ii) amounts required to be withheld from such employees under , and
(iii) amounts of the taxes imposed on the tax-exempt eligible small employer under .
(B) Special rule
A rule similar to the rule of shall apply for purposes of subparagraph (A).
(1) No credit period required
The credit shall be determined without regard to whether the taxable year is in a credit period and for purposes of applying this section to taxable years beginning after 2013, no credit period shall be treated as beginning with a taxable year beginning before 2014.
(2) Amount of credit
The amount of the credit determined under subsection (b) shall be determined—
(A) by substituting “35 percent (25 percent in the case of a tax-exempt eligible small employer)” for “50 percent (35 percent in the case of a tax-exempt eligible small employer)”,
(B) by reference to an eligible small employer’s nonelective contributions for premiums paid for health insurance coverage (within the meaning of ) of an employee, and
(C) by substituting for the average premium determined under subsection (b)(2) the amount the Secretary of Health and Human Services determines is the average premium for the small group market in the State in which the employer is offering health insurance coverage (or for such area within the State as is specified by the Secretary).
(3) Contribution arrangement
An arrangement shall not fail to meet the requirements of subsection (d)(4) solely because it provides for the offering of insurance outside of an Exchange.
Any term used in this section which is also used in the Public Health Service Act or subtitle A of title I of the Patient Protection and Affordable Care Act shall have the meaning given such term by such Act or subtitle.
The Secretary shall prescribe such regulations as may be necessary to carry out the provisions of this section, including regulations to prevent the avoidance of the 2-year limit on the credit period through the use of successor entities and the avoidance of the limitations under subsection (c) through the use of multiple entities.