BILL NUMBER: AB 71 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY JUNE 12, 2007
AMENDED IN ASSEMBLY APRIL 9, 2007
INTRODUCED BY Assembly Member Dymally
DECEMBER 4, 2006
An act to add and repeal Sections 17053.101 and 23601
to of the Revenue and Taxation Code,
relating to taxation, to take effect immediately, tax levy.
LEGISLATIVE COUNSEL'S DIGEST
AB 71, as amended, Dymally. Income and corporation tax credits:
employee health insurance.
The Personal Income Tax Law and the Corporation Tax Law authorize
various credits against the taxes imposed by those laws.
This bill , for taxable years beginning on or after January
1, 201_, and before January 1, 201_, would authorize a credit
against those taxes to a qualified small employer, as defined, in an
amount equal to the applicable percentage, as defined,
25% of the amount paid by the employer during
the taxable year for qualified employee health insurance expenses, as
defined.
This bill would take effect immediately as a tax levy.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. This act shall be known, and may be cited, as the
"Small Business Health Care Tax Credit Act".
SEC. 2. Section 17053.101 is added to the
Revenue and Taxation Code , to read:
17053.101. (a) For each taxable year beginning on or after
January 1, 201_, and before January 1, 201_, there shall be allowed
to a qualified small employer a credit against the "net tax," as
defined by Section 17039, in an amount equal to 25 percent of the
amount paid by the qualified small employer during the taxable year
for qualified health insurance expenses for qualified employees.
(b) For purposes of this section:
(1) (A) "Qualified small employer" means any small employer that
does both of the following:
(i) Offers health insurance coverage to all qualified employees of
the employer, after any applicable waiting period as defined in
Section 9801(b)(4) of the Internal Revenue Code.
(ii) Pays at least 50 percent of the cost of health insurance
coverage for each qualified employee.
(B) "Small employer" means, with respect to any taxable year, any
employer that employed an average of more than one-but fewer than
11-full-time and full-time-equivalent employees during the taxable
year. For purposes of this subparagraph, all persons treated as a
single employer under Section 52(a) or (b) of the Internal Revenue
Code or Section 414(m) or (o) of the Internal Revenue Code shall be
treated as one employer.
(2) (A) "Qualified health insurance expenses" means any amount
paid or incurred by a qualified small employer for health insurance
coverage, not to exceed five thousand dollars ($5,000) for each
qualified employee during the taxable year, to the extent that amount
is attributable to health insurance coverage provided to any
employee and the employee's spouse, if applicable, during the period
that the employee is a qualified employee.
(B) No amount paid or incurred for health insurance coverage
pursuant to a salary reduction arrangement shall be taken into
account under subparagraph (A).
(C) "Health insurance coverage" has the same meaning given that
term by Section 9832(b)(1) of the Internal Revenue Code.
(D) In any case where the qualified small employer provides health
insurance coverage to a qualified employee's dependents in addition
to health insurance coverage to the qualified employee and the
qualified employee's spouse, if applicable, the amount treated as
qualified health insurance expenses under subparagraph (A) shall not
include the incremental amounts paid by the qualified small employer
for health insurance coverage for the qualified employee's
dependents. The Franchise Tax Board may prescribe, by regulation, any
necessary rules for making the computation described in the
preceding sentence.
(3) (A) "Qualified employee" means an employee of a qualified
small employer who, with respect to any calendar year, performed more
than 50 percent of their services for the qualified small employer
for compensation within this state and has received not more than
fifty thousand dollars ($50,000) of total compensation from the
qualified small employer during the taxable year.
(B) "Qualified employee" does not include an employee that is
provided health insurance coverage under any of the following:
(i) A health plan of the employee's spouse.
(ii) Any other individual or group health plan.
(iii) Title XVIII, XIX, or XXI of the Social Security Act.
(iv) Chapter 17 of Title 38 of the United States Code.
(v) Chapter 55 of Title 10 of the United States Code.
(vi) Chapter 89 of Title 5 of the United States Code.
(vii) Any other law.
(C) "Qualified employee" shall not include an employee within the
meaning of Section 401(c)(1) of the Internal Revenue Code, relating
to self-employed individuals treated as employees.
(D) "Employee" includes a leased employee within the meaning of
Section 414(n) of the Internal Revenue Code, relating to employee
leasing.
(E) "Compensation" means amounts described in Section 3401(a) of
the Internal Revenue Code.
(c) For each taxable year beginning on or after January 1, 201_,
the compensation amount set forth in subparagraph (A) of paragraph
(3) of subdivision (b) shall be adjusted to equal the income limits
provided for under the Medi-Cal program or the Healthy Families
Program pursuant to paragraph (6) of subdivision (a) of Section
12693.70 of the Insurance Code.
(d) No deduction or other credit shall be allowed, as otherwise
provided in this part, for any costs paid or incurred for the taxable
year for which a credit is allowed under this section.
(e) In the case where the credit allowed by this section exceeds
the "net tax," the excess may be carried over to reduce the "net tax"
for the succeeding seven years.
(f) The Franchise Tax Board may prescribe those regulations as may
be necessary or appropriate to carry out the purposes of this
section.
(g) This section shall remain in effect until December 31, 201_,
and as of that date is repealed.
SEC. 3. Section 23601 is added to the
Revenue and Taxation Code , to read:
23601. (a) For each taxable year beginning on or after January 1,
201_, and before January 1, 201_, there shall be allowed to a
qualified small employer a credit against their "tax," as defined by
Section 23036, in an amount equal to 25 percent of the amount paid by
the qualified small employer during the taxable year for qualified
health insurance expenses for qualified employees.
(b) For purposes of this section:
(1) (A) "Qualified small employer" means any small employer that
does both of the following:
(i) Offers health insurance coverage to all qualified employees of
the employer, after any applicable waiting period as defined in
Section 9801(b)(4) of the Internal Revenue Code.
(ii) Pays at least 50 percent of the cost of health insurance
coverage for each qualified employee.
(B) "Small employer" means, with respect to any taxable year, any
employer that employed an average of more than one-but fewer than 11-
full-time and full-time-equivalent employees during the taxable
year. For purposes of this subparagraph, all persons treated as a
single employer under Section 52(a) or (b) of the Internal Revenue
Code or Section 414(m) or (o) of the Internal Revenue Code shall be
treated as one employer.
(2) (A) "Qualified health insurance expenses" means any amount
paid or incurred by a qualified small employer for health insurance
coverage, not to exceed five thousand dollars ($5,000) for each
qualified employee during the taxable year, to the extent that amount
is attributable to health insurance coverage provided to any
employee and the employee's spouse, if applicable, during the period
that the employee is a qualified employee.
(B) No amount paid or incurred for health insurance coverage
pursuant to a salary reduction arrangement shall be taken into
account under subparagraph (A).
(C) "Health insurance coverage" has the same meaning given that
term by Section 9832(b)(1) of the Internal Revenue Code.
(D) In any case where the qualified small employer provides health
insurance coverage to a qualified employee's dependents in addition
to health insurance coverage to the qualified employee and the
qualified employee's spouse, if applicable, the amount treated as
qualified health insurance expenses under subparagraph (A) shall not
include the incremental amounts paid by the qualified small employer
for health insurance coverage for the qualified employee's
dependents. The Franchise Tax Board may prescribe, by regulation, any
necessary rules for making the computation described in the
preceding sentence.
(3) (A) "Qualified employee" means an employee of a qualified
small employer who, with respect to any calendar year, performed more
than 50 percent of their services for the qualified small employer
for compensation within this state and has received not more than
fifty thousand dollars ($50,000) of total compensation from the
qualified small employer during the taxable year.
(B) "Qualified employee" does not include an employee that is
provided health insurance coverage under any of the following:
(i) A health plan of the employee's spouse.
(ii) Any other individual or group health plan.
(iii) Title XVIII, XIX, or XXI of the Social Security Act.
(iv) Chapter 17 of Title 38 of the United States Code.
(v) Chapter 55 of Title 10 of the United States Code.
(vi) Chapter 89 of Title 5 of the United States Code.
(vii) Any other law.
(C) "Qualified employee" shall not include an employee within the
meaning of Section 401(c)(1) of the Internal Revenue Code, relating
to self-employed individuals treated as employees.
(D) "Employee" includes a leased employee within the meaning of
Section 414(n) of the Internal Revenue Code, relating to employee
leasing.
(E) "Compensation" means amounts described in Section 3401(a) of
the Internal Revenue Code.
(c) For each taxable year beginning on or after January 1, 201_,
the compensation amount set forth in subparagraph (A) of paragraph
(3) of subdivision (b) shall be adjusted to equal the income limits
provided for under the Medi-Cal program or the Healthy Families
Program pursuant to paragraph (6) of subdivision (a) of Section
12693.70 of the Insurance Code.
(d) No deduction or other credit shall be allowed, as otherwise
provided in this part, for any costs paid or incurred for the taxable
year for which a credit is allowed under this section.
(e) In the case where the credit allowed by this section exceeds
the "tax," the excess may be carried over to reduce the "tax" for the
succeeding seven years.
(f) The Franchise Tax Board may prescribe those regulations as may
be necessary or appropriate to carry out the purposes of this
section.
(g) This section shall remain in effect until December 31, 201_,
and as of that date is repealed.
SEC. 4. This act provides for a tax levy within
the meaning of Article IV of the Constitution and shall go into
immediate effect.
SEC. 2. Section 17053.101 is added to the
Revenue and Taxation Code, to read:
17053.101. (a) There shall be allowed to a qualified small
employer a credit against the "net tax," as defined by Section 17039,
in an amount equal to the applicable percentage of the amount paid
by the employer during the taxable year for qualified employee health
insurance expenses.
(b) For purposes of subdivision (a), the applicable percentage
shall be:
(1) Fifty percent in the case of an employer with less than 10
qualified employees.
(2) Twenty-five percent in the case of an employer with more than
nine but less than 25 qualified employees.
(3) Twenty percent in the case of an employer with more than 24
but less than 50 qualified employees.
(c) The amount of qualified employee health insurance expenses
taken into account under subdivision (a) with respect to any
qualified employee for any taxable year shall not exceed:
(1) Four thousand dollars ($4,000) for self-only coverage.
(2) Ten thousand dollars ($10,000) for family coverage.
(d) For purposes of this section:
(1) (A) "Qualified small employer" means any small employer that
does both of the following:
(i) Provides eligibility for health insurance coverage, after any
waiting period as defined in Section 9801(b)(4) of the Internal
Revenue Code, to all qualified employees of the employer.
(ii) Pays at least 50 percent of the cost of that coverage for
each qualified employee.
(B) (i) "Small employer" means, with respect to any taxable year,
any employer if both of the following apply:
(I) The aggregate gross assets of the employer during the
preceding three taxable years do not exceed five million dollars
($5,000,000).
(II) The employer employed an average of more than one but less
than 50 qualified employees on business days during the preceding
taxable year.
(ii) For purposes of subclause (I) of clause (i) "aggregate gross
assets" shall have the meaning given that term by Section 1202(d)(2)
of the Internal Revenue Code.
(iii) For purposes of subclause (II) of clause (i) both of the
following shall apply:
(I) A preceding taxable year may be taken into account only if the
person operated as an employer throughout that year.
(II) In the case of a person that did not operate as an employer
throughout the preceding taxable year, the determination of whether
the person is a qualified small employer shall be based on the
average number of employees that it is reasonably expected that
person will employ on business days in the current taxable year.
(iv) All persons treated as a single employer under subsection (a)
or (b) of Section 52 of the Internal Revenue Code or subsection (m)
or (o) of Section 414 of the Internal Revenue Code shall be treated
as one person for purposes of this subparagraph.
(v) The Franchise Tax Board may prescribe rules and regulations
that provide for references in this subparagraph to a small employer
to be treated as including references to predecessors of the small
employer.
(2) (A) "Qualified employee health insurance expenses" means any
amount paid by an employer for health insurance coverage to the
extent that amount is attributable to coverage provided to any
employee while the employee is a qualified employee.
(B) No amount paid or incurred for health insurance coverage
pursuant to a salary reduction arrangement shall be taken into
account under subparagraph (A).
(C) "Health insurance coverage" has the meaning given that term by
Section 9832(b)(1) of the Internal Revenue Code.
(3) (A) "Qualified employee" means an employee of a qualified
small employer who, with respect to any period, is not provided
health insurance coverage under any of the following:
(i) A health plan of the employee's spouse.
(ii) Title XVIII, XIX, or XXI of the Social Security Act.
(iii) Chapter 17 of Title 38 of the United States Code.
(iv) Chapter 55 of Title 10 of the United States Code.
(v) Chapter 89 of Title 5 of the United States Code.
(vi) Any other law.
(B) (i) "Employee" means any individual, with respect to any
calendar year, who is reasonably expected to receive not more than
fifty thousand dollars ($50,000) of compensation from the qualified
small employer during that year.
(ii) "Employee" shall not include an employee within the meaning
of Section 401(c)(1) of the Internal Revenue Code.
(iii) "Employee" includes a leased employee within the meaning of
Section 414(n) of the Internal Revenue Code.
(C) "Compensation" means amounts described in Section 6051(a)(3)
of the Internal Revenue Code.
(D) (i) In the case of each taxable year beginning on or January
1, 2008, the fifty thousand dollar ($50,000) amount in clause (i) of
subparagraph (B) shall be increased by an amount equal to fifty
thousand dollars ($50,000) multiplied by the cost-of-living
adjustment determined under Section 1(f)(3) of the Internal Revenue
Code for the calendar year in which the taxable year begins,
determined by substituting "calendar year 2006" for "calendar year
1992" in subparagraph (B) of Section 1(f)(3).
(ii) If any amount as adjusted under clause (i) is not a multiple
of one thousand dollars ($1,000), that amount shall be rounded to the
next lowest multiple of one thousand dollars ($1,000).
(4) Subdivision (a) shall not apply to a qualified small employer
for any period unless at all times during that period health
insurance coverage is available to all qualified employees of the
employer under similar terms.
(e) No deduction or credit under any other provision of this part
shall be allowed with respect to qualified employee health insurance
expenses taken into account under this section.
(f) In this case where the credit allowed by this section exceeds
the "net tax," the excess may be carried over to reduce the "net tax"
in the following year, and succeeding years if necessary, until the
credit is exhausted.
SEC. 3. Section 23601 is added to the Revenue
and Taxation Code, to read:
23601. (a) There shall be allowed to a qualified small employer a
credit against their "tax," as defined by Section 23036, in an
amount equal to the applicable percentage of the amount paid by the
employer during the taxable year for qualified employee health
insurance expenses.
(b) For purposes of subdivision (a), the applicable percentage
shall be:
(1) Fifty percent in the case of an employer with less than 10
qualified employees.
(2) Twenty-five percent in the case of an employer with more than
nine but less than 25 qualified employees.
(3) Twenty percent in the case of an employer with more than 24
but less than 50 qualified employees.
(c) The amount of qualified employee health insurance expenses
taken into account under subdivision (a) with respect to any
qualified employee for any taxable year shall not exceed:
(1) Four thousand dollars ($4,000) for self-only coverage.
(2) Ten thousand dollars ($10,000) for family coverage.
(d) For purposes of this section:
(1) (A) "Qualified small employer" means any small employer that
does both of the following:
(i) Provides eligibility for health insurance coverage, after any
waiting period as defined in Section 9801(b)(4) of the Internal
Revenue Code, to all qualified employees of the employer.
(ii) Pays at least 50 percent of the cost of that coverage for
each qualified employee.
(B) (i) "Small employer" means, with respect to any taxable year,
any employer if both of the following apply:
(I) The aggregate gross assets of the employer during the
preceding three taxable years do not exceed five million dollars
($5,000,000).
(II) The employer employed an average of more than one but less
than 50 qualified employees on business days during the preceding
taxable year.
(ii) For purposes of subclause (I) of clause (i) "aggregate gross
assets" shall have meaning given that term by Section 1202(d)(2) of
the Internal Revenue Code.
(iii) For purposes of subclause (II) of clause (i) both of the
following shall apply:
(I) A preceding taxable year may be taken into account only if the
employer was in existence throughout that year.
(II) In the case of an employer that was not in existence
throughout the preceding taxable year, the determination of whether
the employer is a qualified small employer shall be based on the
average number of employees that it is reasonably expected that
employer will employ on business days in the current taxable year.
(iv) All persons treated as a single employer under subsection (a)
or (b) of Section 52 of the Infernal Revenue Code or subsection (m)
or (o) of Section 414 of the Internal Revenue Code shall be treated
as one person for purposes of this subparagraph.
(v) The Franchise Tax Board may prescribe rules and regulations
that provide for references in this subparagraph to a small employer
to be treated as including references to predecessors of the small
employer.
(2) (A) "Qualified employee health insurance expenses" means any
amount paid by an employer for health insurance coverage to the
extent that amount is attributable to coverage provided to any
employee while the employee is a qualified employee.
(B) No amount paid or incurred for health insurance coverage
pursuant to a salary reduction arrangement shall be taken into
account under subparagraph (A).
(C) "Health insurance coverage" has the meaning given that term by
Section 9832(b)(1) of the Internal Revenue Code.
(3) (A) "Qualified employee" means an employee of a qualified
small employer who, with respect to any period, is not provided
health insurance coverage under any of the following:
(i) A health plan of the employee's spouse.
(ii) Title XVIII, XIX, or XXI of the Social Security Act.
(iii) Chapter 17 of Title 38 of the United States Code.
(iv) Chapter 55 of Title 10 of the United States Code.
(v) Chapter 89 of Title 5 of the United States Code.
(vi) Any other law.
(B) (i) "Employee" means any individual, with respect to any
calendar year, who is reasonably expected to receive not more than
fifty thousand dollars ($50,000) of compensation from the qualified
small employer during that year.
(ii) "Employee" shall not include an employee within the meaning
of Section 401(c)(1) of the Internal Revenue Code.
(iii) "Employee" includes a leased employee within the meaning of
Section 414(n) of the Internal Revenue Code.
(C) "Compensation" means amounts described in Section 6051(a)(3)
of the Internal Revenue Code.
(D) (i) In the case of each taxable year beginning on or after
January 1, 2008, the fifty thousand dollar ($50,000) amount in clause
(i) of subparagraph (B) shall be increased by an amount equal to
fifty thousand dollars ($50,000) multiplied by the cost-of-living
adjustment determined under Section 1(f)(3) of the Internal Revenue
Code for the calendar year in which the taxable year begins,
determined by substituting "calendar year 2006" for "calendar year
1992" in subparagraph (B) of Section 1(f)(3).
(ii) If any amount as adjusted under clause (i) is not a multiple
of one thousand dollars ($1,000), that amount shall be rounded to the
next lowest multiple of one thousand dollars ($1,000).
(4) Subdivision (a) shall not apply to a qualified small employer
for any period unless at all times during that period health
insurance coverage is available to all qualified employees of the
employer under similar terms.
(e) No deduction or credit under any other provision of this part
shall be allowed with respect to qualified employee health insurance
expenses taken into account under this section.
(f) In the case where the credit allowed by this section exceeds
the "tax," the excess may be carried over to reduce the "tax" in the
following year, and succeeding years if necessary, until the credit
is exhausted.
SEC. 4. This act provides for a tax levy within
the meaning of Article IV of the Constitution and shall go into
immediate effect.