The Law of Tax-Exempt Healthcare Organizations, 3rd Edition

CHAPTER TWO

Advantages and Disadvantages of Tax Exemption

• § 2.4 Alternatives to Tax-Exempt Status
• § 2.6 Small Employer Insurance Tax Credit (New)

§ 2.4 ALTERNATIVES TO TAX-EXEMPT STATUS

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, (3) qualified credit counseling organizations that desire classification as social welfare organizations (see § 1.8) (IRC § 501(q)), by reason of IRC § 501(q)(3), and (4) qualified health insurance issuers (see § 13.3) (IRC § 501(c)(29)), by reason of IRC § 501(c)(29)(B)(i).

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§ 2.6 SMALL EMPLOYER INSURANCE TAX CREDIT (NEW)

The health reform legislation enacted in 2010 introduced a small employer health insurance tax credit,⁹² effective with tax years beginning in 2010.⁹³ (An enhanced version of the credit is to become effective in 2014.) This credit is designed to encourage small employers to provide health insurance to their employees, for the first time or as maintenance of the coverage they have.

To be eligible for the credit, which is for health insurance premiums paid, the employer must be qualified. A qualified employer must (1) have fewer than 25 full-time equivalent employees (FTEs) for the tax year, (2) pay average annual wages for the year that are less than $50,000 per FTE, and (3) pay the premiums under a qualifying arrangement. A tax-exempt organization⁹⁴ may be a qualified employer.

An employer ...