NONPROFITS: BOOST YOUR BOTTOM LINE WITH THE SMALL BUSINESS HEALTH CARE TAX CREDIT


By James D’Ambrosio

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There’s a potential source of revenue nonprofits may not be aware of: The Small Business Health Care Tax Credit. A key provision of the Affordable Care Act, it allows small nonprofits — those with 25 or less full-time employees meeting certain requirements — a refund up to 25 percent of health insurance premiums paid for employees. Starting January 1, 2014, it increases to 35 percent (sequestration cuts are reducing refund amounts). This credit has been available since 2010; nonprofits can file claims retroactively without changing past Form 990s.

The National Council of Nonprofits reports that during a national Webinar with IRS officials and the Small Business Administration discussing how the Affordable Care Act impacts small nonprofit employers, “It was apparent that many eligible nonprofits didn’t know about the refund.” The Council notes this benefit was hard-earned with advocacy from the nonprofit community; originally, when the Affordable Care Act was moving through Congress, the tax credit for small employers did not include nonprofits.

ELIGIBILITY GUIDELINES

You should be eligible for a refund if your agency meets the following criteria:

1) Pays at least 50 percent of health insurance premiums for each employee.

2) Pays average wages of less than $50,000 per year per employee.

3) Employs fewer than 25 full-time equivalent staff.

(Note: Generally, all employees providing services for you during the tax year are taken into account in determining the number of FTEs, average annual wages, and premiums paid.)

REFUND DETAILS & FULL-TIME EQUIVALENTS 

Refunds follow a sliding scale, the smaller the charity the larger the credit. Nonprofits with 11-24 employees get smaller refunds than those with 1-10 employees. To compute full-time equivalents: Generally two (2) half-time employees are equal to one (1) full-timer. Therefore, 20 half-time employees equal 10 full-time employees.

CLAIMING THE CREDIT & GETTING ASSISTANCE

Tax-exempt organizations use Form 8941, Credit for Small Employer Health Insurance Premiums, to calculate the credit. Nonprofits include this amount on Line 44 F of the Form 990 T, Exempt Organization Business Income Tax Return. To claim the credit, nonprofits must file Form 990-T, even if you don’t usually do so. Instructions for 990-T will help verify your agency’s eligibility for a refund.

If you have tax questions about the credit or need help completing forms, call the IRS Business Help Line at 1-800-829-4933 and state that you need assistance with the Small Business Health Care Tax Credit. Explain your business is a tax-exempt nonprofit.

LINKS TO FURTHER INFORMATION

Determine refund eligibility      IRS Questions and answers     IRS Form 8941

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QUESTIONS TO READERS

a) Were you aware of this credit? b) If so, have you claimed it previously?

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