Wednesday, May 19, 2010

Tax credit for companies providing health care gets mixed review

WASHINGTON — The Obama administration Monday unveiled a tax cut for small companies that provide health insurance, but business groups gave it a mixed review.
Even if it amounts to free money, many small businesses won't qualify for the tax credit.

The full benefit goes to companies that have 10 or fewer workers with average salaries of $25,000 or less. They can get Uncle Sam to pick up 35 percent of their premiums. Sole proprietors are not eligible. Neither are firms with 25 or more employees, or average wages of $50,000 and above.

"We're thinking mom-and-pop shops with one or two employees," said James Gelfand, the U.S. Chamber of Commerce's health policy director. "For some businesses this will be helpful, but for many it will not be helpful. You have to be so small that it will be difficult."

Administration officials said they're trying to target assistance to those who need it most. "The Number 1 concern of small businesses is access to affordable health care," said Small Business Administration head Karen Mills, noting that only about half of businesses with three to 10 employees offer coverage.

"People know this means money in their pockets," Mills said.

Benefit is immediate

The major expansion of coverage under President Barack Obama's health-care overhaul law isn't slated to hap pen until 2014. Congress included the small-business tax credit as an immediate benefit partly in recognition of small businesses' political clout.

Small-business owners remain skeptical of the law. Last week the National Federation of Independent Business joined a court challenge seeking to overturn its requirement that most Americans obtain health insurance coverage.

Internal Revenue Service rules issued Monday resolved a range of questions about the tax credit that Congress didn't address. The agency generally worked to expand the number of companies that can qualify for the benefit.

For example, dental and vision benefits will be eligible, not just medical coverage. And companies that get state tax breaks to help pay premiums also can claim the federal assistance. Moreover, business owners' salaries won't be counted in figuring out the company's average wages — allowing more firms to stay under the cutoff for the federal credit.

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