article: SECTION 1. SHORT TITLE. This Act may be cited as the ``Healthy Employees, Healthy Small Businesses Act of 2004''. SEC. 2. FINDINGS. Congress finds the following: (1) In 2002, 44,000,000 Americans were without health insurance for the entire year, and the vast majority of these uninsured people are in working families. (2) The number of employees in a business greatly affects the likelihood of whether or not its employees are offered health insurance. In 2003, 98 percent of firms with over 200 employees offered health benefits, while only 55 percent of firms with under 10 workers did. (3) Among uninsured workers in 2001, over half held jobs with companies having fewer than 100 employees. (4) The cost of health insurance for employers is very high. On average, in 2003, the total cost of an individual health plan was $3,383, of which the employee paid an average of $508 and the employer paid an average of $2875. For a family policy, the average cost was $9,068, with the employer bearing $6,656 and the employee shouldering $2,412. SEC. 3. REFUNDABLE CREDIT FOR SMALL BUSINESS EMPLOYEE HEALTH INSURANCE EXPENSES. (a) In General.--Subpart C of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 (relating to refundable credits) is amended by redesignating section 36 as section 37 and inserting after section 35 the following new section: ``SEC. 36. SMALL BUSINESS EMPLOYEE HEALTH INSURANCE EXPENSES. ``(a) Determination of Amount.--In the case of a qualified small employer, there shall be allowed as a credit against the tax imposed by this subtitle for the taxable year an amount equal to the expense amount described in subsection (b) paid by the taxpayer during the taxable year. ``(b) Subsection (b) Expense Amount.--For purposes of this section-- ``(1) In general.--The expense amount described in this subsection is the applicable percentage of the amount of qualified employee health insurance expenses of each qualified employee. ``(2) Applicable percentage.--For purposes of paragraph (1), the applicable percentage is equal to-- ``(A) for any qualified small employer described in subparagraph (A) of paragraph (4), 50 percent, ``(B) for any qualified small employer described in subparagraph (B) of paragraph (4), 35 percent, and ``(C) for any qualified small employer described in subparagraph (C) of paragraph (4), 25 percent. ``(3) Per employee dollar limitation.-- ``(A) In general.--The amount of qualified employee health insurance expenses taken into account under paragraph (1) with respect to any qualified employee for any taxable year shall not exceed-- ``(i) for any qualified small employer described in subparagraph (A) of paragraph (4)-- ``(I) $1,500 in the case of self- only coverage, and ``(II) $3,400 in the case of family coverage, ``(ii) for any qualified small employer described in subparagraph (B) of paragraph (4)-- ``(I) $1,100 in the case of self- only coverage, and ``(II) $2,400 in the case of family coverage, and ``(iii) for any qualified small employer described in subparagraph (C) of paragraph (4)-- ``(I) $750 in the case of self-only coverage, and ``(II) $1,700 in the case of family coverage. ``(B) Inflation adjustment.-- ``(i) In general.--In the case of any taxable year beginning after 2006, each dollar amount referred to in subparagraph (A) shall be increased by an amount equal to-- ``(I) such dollar amount, multiplied by ``(II) the cost-of-living adjustment determined under section (1)(f)(3) for the calendar year in which the taxable year begins, by substituting `2005' for `1992'. ``(ii) Rounding.--If any amount as adjusted under clause (i) is not a multiple of $100, such amount shall be rounded to the next lowest multiple of $100. ``(4) Qualified small employers described.--A qualified small employer is described in-- ``(A) this subparagraph if such employer employed an average of 9 or fewer employees (as determined under subsection (c)(1)(A)(ii)), ``(B) this subparagraph if such employer employed an average of more than 9 but less than 25 employees (as so determined), and ``(C) this subparagraph if such employer employed an average of more than 24 but not more than 50 employees (as so determined). ``(c) Definitions.--For purposes of this section-- ``(1) Qualified small employer.-- ``(A) In general.--The term `qualified small employer' means, with respect to any calendar year, any employer if-- ``(i) such employer pays or incurs at least 75 percent of the qualified employee health insurance expenses of each qualified employee (determined without regard to subsection (b)(3)), and ``(ii) such employer employed an average of 50 or fewer employees on business days during either of the 2 preceding calendar years. For purposes of clause (ii), a preceding calendar year may be taken into account only if the employer was in existence throughout such year. ``(B) Employers not in existence in preceding year.--In the case of an employer which was not in existence throughout the 1st preceding calendar year, the determination under subparagraph (A)(ii) shall be based on the average number of employees that it is reasonably expected such employer will employ on business days in the current calendar year. ``(2) Qualified employee health insurance expenses.-- ``(A) In general.--The term `qualified employee health insurance expenses' means any amount paid by an employer for health insurance coverage (as defined in section 9832(b)(1)) to the extent such amount is attributable to coverage provided to any employee while such employee is a qualified employee. ``(B) Exception for amounts paid under salary reduction arrangements.--No amount paid or incurred for health insurance coverage pursuant to a salary reduction arrangement shall be taken into account under subparagraph (A). ``(3) Qualified employee.-- ``(A) In general.--The term `qualified employee' means, with respect to any period, an employee of an employer if-- ``(i) the annual amount of hours in the employ of such employer by such employee is at least 400 hours, ``(ii) the total amount of wages paid or incurred by such employer to such employee at an annual rate during the taxable year is at least $5,000, and ``(iii) such employee is not eligible for-- ``(I) any benefits under title XVIII, XIX, or XXI of the Social Security Act, or ``(II) any other publicly-sponsored health insurance program. ``(B) Treatment of certain employees.--For purposes of subparagraph (A), the term `employee'-- ``(i) shall not include an employee within the meaning of section 401(c)(1), and ``(ii) shall include a leased employee within the meaning of section 414(n). ``(C) Wages.--The term `wages' has the meaning given such term by section 3121(a) (determined without regard to any dollar limitation contained in such section). ``(d) Certain Rules Made Applicable.--For purposes of this section, rules similar to the rules of section 52 shall apply. ``(e) Coordination With Deduction for Health Insurance Costs of Self-Employed Individuals.--In the case of a taxpayer who is eligible to deduct any amount under section 162(l) for the taxable year, this section shall apply only if the taxpayer elects not to claim any amount as a deduction under such section for such year.''. (b) Conforming Amendments.-- (1) Paragraph (2) of section 1324(b) of title 31, United States Code, is amended by inserting before the period ``, or from section 36 of such Code''. (2) The table of sections for subpart C of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by striking the last item and inserting the following new items: ``Sec. 36. Small business employee health insurance expenses. ``Sec. 37. Overpayments of tax.''. (e) Effective Date.--The amendments made by this section shall apply to amounts paid or incurred in taxable years beginning after December 31, 2004.
summary: Healthy Employees, Healthy Small Business Act of 2004 - Amends the Internal Revenue Code to allow certain small business employers a refundable tax credit for a portion of their employee health insurance costs.