Small Business Health Care Tax Credit May Benefit Churches

Last year the Patient Protection and Affordable Care Act was passed by Congress and signed into law by President Obama. Some changes took effect immediately, and some became effective Jan. 1, 2011. One of those changes that took effect Jan. 1 is the Small Business Health Care Tax Credit.

In Dec. 2010, the IRS clarified that the Tax Credit applies to churches and other small employers that obtain coverage through self-funded church health plans. If your church or employing organization provides coverage for one or more of your full-time or part-time employees through the Brethren Medical Plan or another health insurance plan, it may qualify for the Tax Credit. The IRS guidance also explained how clergy are to be counted under the Tax Credit and rules that apply when an employer offers more than one type of plan.

Small employers with 25 or fewer “full-time equivalent employees” and average wages of less than $50,000 may be eligible for a credit of up to 25 percent of the amount paid, if they contribute a uniform percentage of at least 50 percent toward the premiums or dues paid for their employees’ healthcare coverage. The tax credit of up to 25 percent is available for tax years 2010 through 2013.

The rules for determining full-time equivalent employees, average wages and uniform contributions, and other eligibility standards for the Tax Credit are complicated. For additional information about the Tax Credit, visit the IRS website at,,id=231928,00.html . A detailed discussion of how to calculate the Tax Credit is included in the instructions to Form 8941, which can be found at .

Understanding that health care laws are rapidly changing, Brethren Insurance Services has made available a place to submit questions. If we do not have the answer to questions, we will direct you to a place where you can get the answer. Please submit any questions to . As we receive further information, we will make it available at . Learn more about health care reform in general at .

— This report was provided by Nevin Dulabaum, president of Brethren Benefit Trust, and Willie Hisey Pierson, director of Insurance Services for BBT. It also will be sent to churches and other organizations in the denomination in the form of a letter from BBT leaders. Brethren Benefit Trust does not provide tax advice to individuals or employers. The information in this notice is provided as part of Brethren Insurance Services’ educational efforts.

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