The Internal Revenue Service has posted information on how tax-exempt organizations can claim the Small Business Health Care Tax Credit.
In a recently updated Frequently Asked Questions page about the tax credit, the IRS stated that a tax-exempt employer as described in Section 501(c) of the Tax Code that is exempt from tax under Section 501(a) can claim the refundable credit by filing a Form 990-T with an attached Form 8941 showing the calculation of the claimed credit.
The tax credit, provided as part of the health care reform bill, is designed to encourage small employers to offer health care coverage. Qualifying employers must cover at least 50 percent of the cost of health care coverage for some of its workers based on the single rate, must have less than the equivalent of 25 full-time workers (for example, an employer with fewer than 50 half-time workers may be eligible), and must pay average annual wages below $50,000. Both taxable (for profit) and tax-exempt entities qualify.
The credit is worth up to 35 percent of a small business’ premium costs in 2010 or 25 percent of a tax-exempt organization’s. On Jan. 1, 2014, this rate increases to 50 percent (35 percent for tax-exempt employers).
The credit phases out gradually for entities with average wages between $25,000 and $50,000 and for entities with the equivalent of between 10 and 25 full-time workers.