What You Need to Know about the Small Business Health Care Tax Credit
How will the credit make a difference for you?

For tax years 2010 through 2013, the maximum credit is 35 percent for small business employers and 25 percent for small tax-exempt employers such as charities. An enhanced version of the credit will be effective beginning Jan. 1, 2014. Additional information about the enhanced version will be added to IRS.gov as it becomes available. In general, on Jan. 1, 2014, the rate will increase to 50 percent and 35 percent, respectively.

Here’s what this means for you. If you pay $50,000 a year toward workers’ health care premiums – and if you qualify for a 15 percent credit, you save … $7,500. If you save $7,500 a year from tax year 2010 through 2013, that’s total savings of $30,000. If, in 2014, you qualify for a slightly larger credit, say 20 percent, your savings go from $7,500 a year to $12,000 a year.

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Can you claim the credit?

Now that you know how the credit can make a difference for your business, let’s determine if you can claim it.

To be eligible, you must cover at least 50 percent of the cost of single (not family) health care coverage for each of your employees. You must also have fewer than 25 full-time equivalent employees (FTEs). Those employees must have average wages of less than $50,000 a year.

Let us break it down for you even more.

You are probably wondering: what IS a full-time equivalent employee. Basically, two half-time workers count as one full-timer. Here is an example, 20 half-time employees are equivalent to 10 full-time workers. That makes the number of FTEs 10 not 20.

For the next (2013-14) school year, CCSD expects to be approximately $60 Million short of the funding needed to completely restore current budget cuts (e.g., furlough days, increased class size and fewer instructional days) . . . resulting primarily from continued State “austerity” reductions ($24.8 Million) and years of significant decreases in the local Property Tax Digest revenue ($9 Million this year and $30 Million cumulative for 2009-2012).

The proposed Tentative Budget, which does not include a property tax/millage rate increase, addresses the major challenges facing the School District resulting from: significant declines in State and Local revenue; continued State “austerity budget reductions”; a legislatively-required Local Property Tax valuation freeze; a continued increase in student population growth; capital outlay costs for construction of schools and support facilities, land purchases for future school sites, as well as technology replacements and enhancements; opening of the new Mill Creek Middle school; escalating energy and health care costs; and the extraordinary impact of a continuing pattern of State unfunded and underfunded mandates (e.g., transportation, special education, textbooks, etc.)…requiring the utilization of additional local resources to meet critical needs.

The proposed 2010-11 Tentative Budget reflects one of the most financially challenging budget years that the School District has ever had to cope with . . . in preparing a balanced budget for consideration by the Board of Education. It addresses: continued/increasing State educational funding reductions of $25 Million in fiscal year 2010-11, which temporarily are bolstered by Federal Stimulus Funds of $3.2 Million – and which will be totally depleted in 2011-12; a significant decline of $12.8 Million in local property tax funding due to residential foreclosures, property value devaluation and a legislatively-required local property tax valuation cap/freeze; a continued increase in student population growth - projected at 653 students; capital outlay costs for construction of schools and support facilities, land purchases for future school sites, as well as technology replacements and enhancements; opening of the R.M. Moore classroom addition and the addition of 10th grade at the new River Ridge High School; escalating energy and health care costs; and the extraordinary impact of a continuing pattern of State unfunded and underfunded mandates (e.g., transportation, special education, textbooks, etc.) . . . requiring the utilization of additional local resources to meet critical needs. In addition to making over $28 Million in General Fund/Operating Budget cuts necessary as a result of these extraordinary shortfalls in State and Local revenue, and to maintain a quality educational program for our students, I am recommending a one mill property tax/millage rate increase to balance the 2010-11 Budget. All other options would cause irreparable damage to the educational services and programs offered by CCSD to its students in 2010-11 and thereafter.

The proposed 2012-13 Tentative Budget reflects another year of the most financial challenges with which the School District has ever had to cope in preparing an annual balanced budget for consideration by the Board of Education. Over the last eleven years, CCSD has witnessed over $147.6 Million of accumulative State Education Funding earnings being withheld from the School District by the State…theoretically to help balance the State’s Budget during a time period of unprecedented economic downturn and has also faced an additional $30.4 Million reduction (24.3% decline in property values) in collection of local property taxes over the last four years.

Accordingly, the 2012-13 Tentative Budget addresses: continued State Education Funding reductions (so-called “austerity cuts”) of $26.5 Million; another significant decline of $9.3 Million in local property tax funding due to residential foreclosures and property assessment devaluation; a continued increase in student population growth - projected at 292 students; capital outlay costs for construction of schools, technology replacements and enhancements; opening of the new Clark Creek Elementary School, the replacement Ball Ground Elementary School and the addition of 12th grade at the new River Ridge High School; escalating State cost shifts to local school districts in health care and teacher retirement benefits; and the extraordinary impact of a continuing pattern of State unfunded and underfunded mandates (e.g., transportation, special education, textbooks, etc.) … requiring the necessary utilization of additional budget cuts/reductions to meet critical operational needs. As a result of these continued shortfalls in State and Local revenue, and to maintain a quality educational program for our students, over $22.8 Million is required in additional operating budget cuts for 2012-13…beyond the $37.5 Million of the current year’s budget reductions/cost containment, which includes the addition of four furlough days to the already existing four days (for a total of eight furlough days) for full-time employees.

THE PRESIDENT: Oh, well, the banks, they don't want financial regulation; I guess it's just too hard. You know, that poster was nice during the campaign; we had some fun, but oh, well. (Laughter.) We didn’t work so hard to leave our problems to the next generation, the next administration. We came to solve these problems -- right here, right now. (Applause.)

Now is the time to build a clean energy economy that can put people back to work. (Applause.) Now is the time to educate every American child so they can compete in a global economy. (Applause.) Now is the time to make sure that every American has affordable health care. That's what we're fighting for! Not later, but now! (Applause.)

You fired up?

AUDIENCE: Yes!

THE PRESIDENT: I want to recognize the people in this room and the folks watching online who are helping us do exactly that. I want to thank all the Organizing for America volunteers for making calls, knocking on doors, keeping up the fight. (Applause.) You know why this is so important. You know premiums have doubled over the past decade. Some of you have seen it -- your employer said, I'm sorry, I don't want to do it to you, but I'm doubling your premiums. In some cases, what they're paying, your employers are paying is going up even faster than what you're paying. It's unsustainable. It could double again in the next decade. You know that millions of people in this country have been discriminated because they don't -- of a preexisting condition. You know that more companies are dropping coverage. You know that more and more families are struggling to pay for health care even if they have insurance, out-of-pocket costs going up faster and faster.

And you know what Tim Kaine understood and underscored -- we are closer than we've ever been. This has been a battle that has lasted since Teddy Roosevelt -- the basic principle that part of our social contract is you don't go bankrupt if you get sick; that families shouldn’t have to worry if their children need help -- (applause) -- that we are looking after each other enough to make sure that everybody has health care in this country. (Applause.)

We're closer than we've ever been. Five committees of Congress all voted out legislation. As Tim said, the differences are starting to narrow and we're going to, pretty soon, be hitting the floor of the House and the Senate with bills; then we're going to reconcile them. And then we're going to have to vote on them again. And then I'm going to sign it. (Applause.)

Now, there are still some details and some disagreements that have to be worked out.

AUDIENCE MEMBER: Single payer!

AUDIENCE MEMBER: Public option!

THE PRESIDENT: Let me say this, because somebody just brought up something. (Laughter.) Among Democrats and progressives there are a whole set of views about how we should do health care. But understand that the bill you least like in Congress right now, the one you least like of the five that are out there would provide 29 million Americans health care -- 29 million Americans who don't have it right now would get it. The bill you least like would prevent insurance companies from barring you from getting health insurance because of preexisting conditions. (Applause.) Whatever the bill you least like would set up an exchange so that people right now who are having to try to bargain for health insurance on their own are suddenly part of a pool of millions that forces insurance companies to compete for their business and give them better deals and lower rates. (Applause.)

So there are going to be some disagreements and details to work out. But to the Democrats, I want to say to you, Democrats, let's make sure that we keep our eye on the prize. (Applause.) And that is, all those millions of Americans who don't have health insurance and all those who do have health insurance that are seeing their costs go up, if we get a bill -- when we get a bill that delivers on those issues --

AUDIENCE MEMBER: When?

THE PRESIDENT: When. That's what I said. (Applause.) Then we have to do everything we can to support it. You know, sometimes Democrats can be their own worst enemies. (Applause.) Democrats are an opinionated bunch. (Applause.) You know, the other side, they just kind of -- sometimes -- do what they're told. (Laughter.) Democrats, you all are thinking for yourselves. (Applause.) I like that in you. But it's time for us to make sure that we finish the job here. We are this close. And we've got to be unified. (Applause.)

And to all those non-Democrats who may be in the audience -- (laughter) -- or who are watching our webcast, or who will hear about this on cable -- (laughter) -- I want you to know I believe in a strong and loyal opposition. I believe in a two-party system where ideas are tested and assumptions are challenged. That's made this legislation that we're working on better and more durable. That's how our democracy works. That's a good thing.