Iowa panel approves health care incentive

Iowa Senate committee approves tax breaks for small businesses that offer health coverage

Associated Press

DES MOINES, Iowa (AP) -- Small Iowa businesses would get a tax break for covering part of their employees' health insurance under a bill advanced by a Senate committee Tuesday.

The Senate's Ways and Means committee unanimously approved the plan, which would extend a state tax break to small businesses that already receive a federal tax break for helping cover their employees' health care costs. The legislation will now move to the full Senate.

"We recognize that smaller employers might need a bigger boost," said Democratic Sen. Joe Bolkcom, of Iowa City. "It just recognizes that employers that have the most difficulty providing health insurance are those that have the fewest employees."

Under the Affordable Care Act, a small business that employs up to 24 people and chooses to cover 50 percent of their employees' health insurance costs gets a federal income tax credit. Under the Senate bill, these businesses would get an additional state income tax credit, worth a quarter of their federal savings. Non-profit businesses would also qualify.

For instance, a business that spends $50,000 a year providing health insurance for its employees would get $17,500 back from the federal break, or 35 percent of the amount spent. It would also get an additional $4,375 back from the state, or 25 percent of the federal tax break it received.

Senate Democrats estimate that more than 73,000 businesses could benefit from the legislation. A fiscal analysis by the non-partisan Legislative Services Agency estimates that the credit will cost the state $5.5 million in reduced revenue in the fiscal year that starts July 1.

A spokesman for Gov. Terry Branstad said he would have to review the legislation before taking a position.

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