IRS offers relief to employers claiming small business health care tax credits

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The Internal Revenue Service released guidance Friday to provide relief for some small employers that want to claim the Small Business Health Care Tax Credit for 2017 and later years.

The Small Business Health Care Tax Credit is supposed to help small employers that offer health insurance to employees under the Affordable Care Act. The businesses typically have to provide employees with a qualified health plan from a Small Business Health Options Program, or SHOP, Marketplace to qualify for the tax credit. Small businesses can only claim the credit for two years in a row.

The relief announced Friday by the IRS helps employers who first claim the credit for all or part of 2016 or a later taxable year for coverage offered through a SHOP Marketplace, but who don’t have SHOP Marketplace plans available that they can offer to employees for all or part of the rest of the credit period because the county where the employer is located doesn’t have any SHOP Marketplace plans available.

In many parts of the country, insurance companies have elected to drop their Obamacare policies, either because they don’t see the business as profitable or they are worried about the lack of support for the ACA in the Trump administration.

The relief provided by the IRS will enable small employers to claim the credit for health insurance coverage provided outside a SHOP Marketplace for the rest of the credit period if that coverage would have qualified under the rules that applied before Jan. 1, 2014.

In Notice 2018-27, the IRS is offering guidance about figuring the credit under these circumstances. The notice does not affect previous transition relief for the credit that was separately provided for 2014, 2015, and 2016.

For more information on whether a county had or has coverage available through a SHOP Marketplace, check out the “Who Gets the Credit” section of the Questions and Answers about the Small Business Health Care Tax Credit page on the IRS website.

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