One of the main provisions from the Patient Protection and Affordable Care Act (A.K.A. the healthcare bill, Obamacare) that will affect churches and ministries the most is the tax credit for eligible small businesses and small tax exempt organizations.
The credit will be offered to small employers, including tax exempt employers, who pay at least 50% of the cost of insuring their employees. There are three basic requirements to qualify for the credit:
- Fewer than 25 Full-Time Equivalent Employees (FTE). Two part time employees would equal one FTE.
- Average annual wages is less than $50,000 per employee.
- Premiums are paid for employees under a qualified arrangement. A “qualified arrangement” means that the organization pays at least 50% to a healthcare provider or insurance plan, which also includes church welfare benefit plans and denominational insurance plans.
For the years 2010-2013, the credit for qualified tax-exempt organziations will be for up to 25% of the cost of insurance. Starting in 2014, the credit maximum will increase to 35%.
Two other items to note:
- HRA, HSFA, and HSA employer contributions are not taken into account as part of the cost of insurance.
- Pastors are taken into account for the number of employees, but are not taken into account with respect to the average salary of employees.
There are many more issues involving the law that will be ironed out in the coming months. We will keep you posted on all items that will affect your ministry. For further reading on the tax provisions in the law, please visit the healthcare page at the IRS website.