Applicable Large Employers, i.e. those with 50 or more full-time or full-time equivalent employees, have reluctantly taken to the ACA’s mandate for employer-sponsored health care for its employees. And while small businesses are in a somewhat better position with federal tax credits, it’s reportedly not enough of an incentive to actually cash out.
The Government Accountability Office (GAO) issued an update regarding Code Section 45R, the small employer health insurance tax credit, during a meeting with the House Small Business Subcommittee on Economic Growth, Tax and Capital Access. In that update, the GAO found that small businesses are not utilizing this credit.
The credit has certain eligibility requirements that center around the number of full-time equivalent employees, along with financial figures of the businesses. While up to four million small businesses may be eligible for it, many are not taking advantage. This news comes as the drop from 2010 until now in the interest of claiming this credit was reported—around 188,303 claimed it in 2010, but only 181,000 did in 2014. Of their reasons for not claiming the credit, the ease of filing for it proved to be a major one. Small businesses found the process to be difficult, despite the IRS’s implementation of Form 8941.
That’s not to say small businesses have shunned health care for their employees; most don’t. However, they aren’t collecting on their credits, even as the money is waiting there and allocated for them. It’s not as much as estimated, but still a lot. The Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT) estimated that the credit would cost them $40 billion from 2012 to 2021, but that number was revised to $21 billion.
Perhaps it’s with the assumption that many small businesses won’t file for the credit, or maybe eligibility will change. Regardless of the perceived outcome, many small businesses would rather ditch the tedious task of gathering their paperwork for credit filing in exchange for paying more for employee health care.