Report Title:

Relating to Taxes; Small Businesses

Description:

Allows for small businesses to receive tax credits for expenses related to providing family health care coverage to their employees.

HOUSE OF REPRESENTATIVES

H.B. NO.

1734

TWENTY-SECOND LEGISLATURE, 2004

 

STATE OF HAWAII

 


 

A BILL FOR AN ACT

 

relating to small business TAX CREDITS.

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

SECTION 1. The legislature finds that providing health care coverage for employees’ families has become an increasing economic hardship to small businesses. To contain the cost of health care coverage, many small business owners have had to make the decision not to share in the costs of providing health care for their employees’ families. This causes financial hardship and places pressure on employees who have to pay for coverage entirely out-of-pocket or risk going without health care coverage. The high cost of health care coverage may be a contributing factor to the rising number of uninsured residents in the state.

Small businesses should be encouraged to offer cost-sharing opportunities for the family coverage of their employees. Tax credits covering the cost of the family portion that small businesses contribute towards an employee’s family plan should be granted as an incentive to share in these costs.

Under the Prepaid Health Care Act employers have the option to offer a group health care plan that provides for sound basic hospital, surgical, medical, and other health care benefits for their employees' families. A plan of this type provides benefits for family coverage that is more limited than the prevalent plan in the state and may be offered if the employer contributes at least half of the cost of the coverage of dependents under such plan. The tax incentive offered by this Act is intended to increase the number of small employers offering health care coverage to their employees and contributing to the cost.

SECTION 2. Chapter 235, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§235- Small business family health care tax credit. (a) There shall be allowed to each eligible taxpayer subject to the taxes imposed by this chapter, a family health care tax credit that shall be deductible from the taxpayer's net income tax liability, if any, imposed by this chapter for the taxable year in which the investment was made.

(b) The maximum amount of the credit shall be one hundred per cent of family health care coverage costs incurred during the taxable year; provided that the amount of the credit claimed shall not exceed $200 per employee per taxable year. The eligible taxpayer shall be allowed a credit up to a maximum total credit of $10,000 per taxable year.

(c) In the case of a partnership, S corporation, estate, or trust, the tax credit allowable is for family health care coverage costs incurred by the entity for the taxable year. The cost upon which the tax credit is computed shall be determined at the entity level.

(d) The credit allowed under this section shall be claimed against the net income tax liability for the taxable year.

(e) If the tax credit under this section exceeds the taxpayer's net income tax liability, the excess credit over liability is nonrefundable and may not be carried forward.

(f) The tax credit allowed under this section shall be available for taxable years beginning after December 31, 2003.

(g) As used in this section:

"Eligible taxpayer" means a small business defined as any individual or type of organization, including any partnership, association, trust, estate, joint stock company, insurance company, or corporation, whether domestic or foreign, a debtor in possession or receiver or trustee in bankruptcy, or the legal representative of a deceased person, who has one or more regular employees but no more than fifty regular employees in the employer's employment. "Employer" does not include:

(1) The State, any of its political subdivisions, or any instrumentality of the State or its political subdivisions;

(2) The United States government or any instrumentality of the United States; and

(3) Any other state or political subdivision thereof or instrumentality of such state or political subdivision.

"Family health care coverage cost" means the costs incurred after December 31, 2003, by a small business to provide health insurance coverage to an employee’s family. To qualify for the small business family health care tax credit, the employer share contributed toward each employee’s family health plan coverage may not be less than fifty per cent of the cost of the total premium for the coverage.

"Net income tax liability" means income tax liability reduced by all other credits allowed under this chapter."

SECTION 3. New statutory material is underscored.

 

SECTION 4. This Act, upon its approval, shall apply to taxable years beginning after December 31, 2003.

INTRODUCED BY:

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