Claiming the Small Business Health Care Tax Credit

If you're a small business owner with fewer than 25 full-time equivalent employees you may be eligible for the small business health care credit.

What is the Small Business Health Care Credit?

The small business health care tax credit, part of the Patient Protection and Affordable Care Act enacted in 2010, is specifically targeted to help small businesses and tax-exempt organizations provide health insurance for their employees. Small employers that pay at least half of the premiums for employee health insurance coverage under a qualifying arrangement may be eligible for this credit. Household employers not engaged in a trade or business also qualify.

How Does the Credit Save Me Money?

For tax years 2010 through 2013, the maximum credit is 35 percent for small business employers and 25 percent for small tax-exempt employers such as charities. An enhanced version of the credit will be effective beginning Jan. 1, 2014 and the rate will increase to 50 percent and 35 percent, respectively.

Note:The sequester, which took effect on March 1, 2013 includes a reduction to the refundable portion of the Small Business Health Care Tax Credit for certain small tax-exempt employers. As such, the refundable portion of the claim will be reduced by 8.7 percent. Without congressional intervention, this rate remains in effect until the end of fiscal year 2013 (September 30).

The amount of the credit you receive works on a sliding scale, so the smaller the business or charity, the bigger the credit. Simply put, if you have more than 10 FTEs or if the average wage is more than $25,000, the amount of the credit you receive will be less.

If you pay $50,000 a year toward workers' health care premiums--and you qualify for a 15 percent credit--you'll save $7,500. If you save $7,500 a year from tax year 2010 through 2013, that's a total savings of $30,000. And, if in 2014 you qualify for a slightly larger credit, say 20 percent, your savings go from $7,500 a year to $12,000 a year.

Is My Business Eligible for the Credit?

To be eligible for the credit, you must cover at least 50 percent of the cost of single (not family) health care coverage for each of your employees. You must also have fewer than 25 full-time equivalent employees (FTEs) and those employees must have average wages of less than $50,000 a year.

Let's take a closer look at what this means. A full-time equivalent employee is defined as either one full-time employee or two half-time employees. In other words, two half-time workers count as one full-timer or one full-time equivalent. Here is another example: 20 half-time employees are equivalent to 10 full-time workers. That makes the number of FTEs 10 not 20.

Now let's talk about average wages. Say you pay total wages of $200,000 and have 10 FTEs. To figure average wages you divide $200,000 by 10--the number of FTEs--and the result is your average wage. In this example, the average wage would be $20,000.

Can Tax-Exempt Employers Claim the Credit?

Yes. The credit is refundable for small tax-exempt employers too, so even if you have no taxable income, you may be eligible to receive the credit as a refund as long as it does not exceed your income tax withholding and Medicare tax liability.

Can I Still Claim the Credit Even If I Don't Owe Any Tax This Year?

If you are a small business employer who did not owe tax during the year, you can carry the credit back or forward to other tax years. Also, since the amount of the health insurance premium payments are more than the total credit, eligible small businesses can still claim a business expense deduction for the premiums in excess of the credit. That's both a credit and a deduction for employee premium payments.

Can I File an Amended Return and Claim the Credit for Previous Tax Years?

If you can benefit from the credit this year but forgot to claim it on your tax return there's still time to file an amended return.

Businesses that have already filed and later find that they qualified in 2010 or 2011 can still claim the credit by filing an amended return for one or both years.

February 11, 2013

SBA Number:  13-02 ADV

Contact Information:

Report:  Small Businesses Leading Nation’s Economic Recovery

Office of Advocacy Issues Report on the Small Business Economy

WASHINGTON – The economic environment is turning around for America’s small businesses despite some lingering challenges from the recession that hit the nation in 2008-2009, according to a new report released today by the U.S. Small Business Administration (SBA) Office of Advocacy, an independent office that serves as the voice for small business within the federal government.

“The Small Business Economy 2012 demonstrates that small businesses have been at the core of our economy’s growth over the past few years,” said Dr. Winslow Sargeant, Chief Counsel for Advocacy. 

“Thanks to hardworking small business owners across the country, 2011 represented the second full year of economic expansion since the peak of the recession in 2009, with small businesses representing half of the private-sector output.  We still have a lot of work to do, but this report tells an inspiring story:  output, business income and profits are rising for small businesses, and bankruptcies and unemployment are declining.”

The Small Business Economy, an annual report published by the Office of Advocacy for over 30 years, provides detailed information on the performance of America’s small businesses.  For the second year in a row, Advocacy released the full report in an online format.

“This report provides a rich collection of information about small business contributions to the economy and trends over time, and is once again available in an online format, increasing the accessibility and usability of the information,” said Sargeant. 

Highlights of the tables in this year’s report include the following:

Overall

Manufacturing sales, which dropped between 2005 and 2009, were up 11.7 percent between 2010 and 2011.  That’s similar to the 11.2 percent increase in 2009-2010.

·         After falling from 2005 to 2009, the income of our smallest businesses (proprietorships) increased by 6.0 percent from 2010 to 2011. Corporate profits, which also declined in 2005-2009, increased by 7.9 percent in the same period.

·         Startups or births of employer firms were still below pre-downturn levels – 533,945 in 2010 compared with 668,395 in 2007, but they increased from 2009 to 2010.  On the other hand, closings or deaths of employer firms, which reached a new high of 680,716 in 2009, declined to 593,347 in 2010.

Employment

·         Small firms with fewer than 500 workers outperformed large firms in net job creation in three of the four quarters of 2011, similar to a pattern that has existed since 1992 in periods when private-sector employment rose.  In contrast, job losses prevailed in almost all firm sizes for the first quarter of 2008 through the first quarter of 2010.

Demographics

·         Among the self-employed, certain demographic groups saw large increases in 2010-2011, particularly Latino, Asian, black and urban self-employed workers and the 55+ age cohort that reflects the large baby boom generation.

Financing

·         Total business lending continued to increase by June 2012; the rate of decline slowed for small business loans of all size categories.

·         Funds raised by venture capital firms increased, and disbursements increased to levels comparable to those in 2006.

Click here to read or download a complete version of the full report.

January 17, 2013

SBA Announces Changes to Contracting Program for Women-Owned Small Businesses

   WASHINGTON – Women-owned small businesses will have greater access to federal contracting opportunities as a result of changes included in the National Defense Authorization Act of 2013 (NDAA) to the U.S. Small Business Administration’s Women-Owned Small Business Federal Contract Program.

 “This new law is a prime example of how the Obama Administration is embracing a more inclusive view of entrepreneurship, helping small businesses and America succeed,” said SBA Administrator Karen Mills.  “Today, women own 30 percent of all small businesses up from just 5 percent 40 years ago.  As one of the fastest growing sectors of small business owners in the country, opening the door for women to compete for more federal contracts is a win-win.”

 The NDAA removes the anticipated award price of the contract thresholds for women-owned small businesses (WOSB) and economically disadvantaged women-owned small businesses (EDWOSB) to allow them greater access to federal contracting opportunities without limitations to the size of the contract. 

Prior to the new law, the anticipated award price of the contract for women-owned and economically disadvantaged women-owned small businesses could not exceed $6.5 million for manufacturing contracts and $4 million for all other contracts.

 The Women’s Federal Contract Program allows contracting officers to set aside specific contracts for certified WOSBs and EDWOSBs and will help federal agencies achieve the existing statutory goal of five percent of federal contracting dollars being awarded to WOSBs.

 The law also requires the SBA to conduct another study to identify and report industries underrepresented by women-owned small businesses.  As a result, more eligible women-owned businesses may be able to participate in SBA’s Women’s Federal Contract Program and compete for and win federal contracts.

The SBA is working with the Office of Federal Procurement Policy under the President’s Office of Management and Budget on the implementation including changes to the Federal Acquisition Regulations. 

Every firm that wishes to participate in the WOSB program must meet the eligibility requirements and either self-certify or obtain third party certification.  There are four approved third-party certifiers that perform eligibility exams: El Paso Hispanic Chamber of Commerce, National Women Business Owners Corporation, U.S. Women’s Chamber of Commerce, and the Women’s Business Enterprise National Council. Additional information and links about approved third-party certifiers are available at www.sba.gov/wosb.

To qualify as a WOSB, a firm must be at least fifty-one percent owned and controlled by one or more women, and primarily managed by one or more women.  The women must be U.S. citizens and the firm must be considered small according to SBA size standards.  To be deemed “economically disadvantaged,” a firm’s owners must meet specific financial requirements set forth in the program regulations. 

The WOSB Program identifies eighty-three four-digit North American Industry Classification Systems (NAICS) codes where WOSBs are underrepresented or substantially underrepresented.   Contracting officers may set aside contracts in these industries if the contract can be awarded at a fair and reasonable price and the contracting officer has a reasonable expectation that two or more WOSBs or EDWOSBs will submit offers for the contract.

For more information on the Women-Owned Small Business Program or to access the instructions, applications or database, please visit www.sba.gov/wosb. 

SBA Licenses First Nationwide Impact Investment Fund

SJF Ventures III, LP Will Invest in Cleantech and Positive Impact Businesses Across the Country

Release Date:  March 8, 2012

Internet Address: http://www.sba.gov/news

WASHINGTON – The U.S. Small Business Administration today licensed the first nationally-focused Impact Investment Fund, SJF Ventures III, LP. The fund will make equity investments in cleantech and technology companies in communities nationwide as part of an impact investment  initiative to invest up to $1.5 billion in high-growth small businesses.

“SJF Ventures III, LP is yet another important new ally in SBA’s commitment to foster small business growth and job creation in emerging sectors,” said Administrator Karen Mills.  “They’re an experienced team that is well-positioned to drive more investment in high growth, positive impact companies.  We will continue to grow this and other public-private partnerships by licensing more funds and putting more capital in the hands of small business owners to grow and create good jobs.”

SJF Ventures invests growth equity in companies with strong financial, community and environmental results.  SJF’s areas of focus include: efficiency and infrastructure; reuse and recycling; sustainable agriculture and food safety; and technology enhanced services. The third fund managed by SJF Ventures will build upon a successful track record of returns and impacts across 34 SJF portfolio companies from its first two funds.  Citi Community Capital (Citi), the community development lending and investing group of Citi, is the lead investor in SJF Ventures III, LP, an unleveraged Small Business Investment Company (SBIC) fund. The fund is committing up to $75 million of investment capital over the next five years.

The impact investment initiative is part of Startup America, a White House initiative to bring together public and private organizations to accelerate the growth of America’s entrepreneurs. The initiative uses the infrastructure of the SBA’s SBIC program, an established and successful program that operates at no cost to taxpayers. The SBIC program began in 1958 to supplement the flow of private equity capital and long-term loan funds to small businesses.  In FY 2011, the SBIC program provided $2.8 billion of financing to 1,339 U.S. small businesses.

The announcement follows on a July, 2011 SBA licensing of InvestMichigan! Mezzanine Fund whose investment targets a state or region, primarily Michigan, in SBA’s new impact investment initiative. 

The impact investment initiative will drive up to $1.5 billion into the hands of small businesses over the next five years.  It provides funding for high-growth companies that will generate not only a financial but also a “social” return by focusing on businesses located in underserved communities or communities facing barriers to capital. 

Through the initiative SBA will commit $1 billion to investment funds focused on investing in underserved markets or in sectors that have been defined as national priorities.  Impact investments can be:

• Place-based, targeting small businesses located in or employing residents of low or moderate income areas or economically distressed areas; or • Sector-based, targeting industry sectors that the Administration has identified as national priorities.  Currently only clean energy and education have been identified as priority sectors. 

To serve these markets SBA will collaborate with private, institutional investors to identify impact investments and provide expedited licensing and capital to fund managers who qualify to organize and operate an Impact Investment SBIC. SBA will provide up to a 2:1 match to private capital raised by these funds, partnering with private investors to target “impact” investments.

High-growth firms are a small part of the small business community, but they create a large number of net new jobs each year.  The initiative will help high-growth companies receive the funding they need to continue to expand and create jobs in America’s underserved communities and priority sectors.   

For more information on the impact investment initiative please visit http://www.sba.gov/content/impact-investment-initiative.

Keate Partners' Marketing & Advertising Sources   Through our national marketing program, Keate Partners is pleased to announce the following advertising sources (using a generic description of each business) used by Keate Partners on all companies we represent to provide national (confidential) exposure - in addition to our own website which provides extensive local and regional exposure with over 10,000 “hits” per month.   National and International Websites BizBuySell.com   BizQuest.com   BusinessMart.com   MergerNetwork.com     Regional Websites Alabama Arizona California Colorado District of Columbia Florida Georgia Hawaii Kansas Kentucky Maryland Massachusetts Minnesota Missouri Nevada New Mexico New York North Carolina Ohio Oregon Pennsylvania Tennessee Texas Washington Wisconsin     Capital Gains Reduction in Capital Gains Rate May Expire in 2012 2003 Tax Bill: In 2003, the US Senate narrowly passed a tax relief bill that President Bush called "a vital action that will stimulate the economy and create jobs." This new bill cut the Long Term Capital Gains Tax Rate to just 15%. Unless extended, this rate reduction expires in 2010. Historical Rates: As illustrated below, historical capital gains tax rates have fluctuated considerably. The rate is now at a 60 year low representing a windfall for business owners that sell now. Historically, the rate has changed every 4 years and while future rates are obviously impossible to predict, the next likely change will be to increase the capital gains tax to help with the large federal deficit.   Aug2009newsletter