IRS Notice 2018-27 provides limited relief for employers who wished to utilize the small employer health insurance tax credit but there were no available plans in their county.
As a reminder, the tax credit is available for a two-consecutive tax year period. It was first available for tax years beginning after December 31, 2009. To qualify for the credit, eligible small employers had to offer coverage to employees through a SHOP exchange. Employers had to claim the credit using Form 8941. The credit was available to tax exempt organizations as well.
Transition relief was previously available for tax years 2014, 2015 and 2016 for some small employers where the employer’s principal business address was in a county in which no qualified health plans (QHPs) through the exchange were available. Notice 2018-27 builds on this prior relief for 2017 and 2018.
This latest relief is more limited than prior relief in that an eligible employer must have claimed the credit for all or part of a taxable year beginning after December 31, 2015. An employer may take the credit for any remaining credit period for health insurance coverage, if no SHOP coverage was available, provided that the coverage would have qualified for the credit under the rules applicable before January 1, 2014.
The relief does not extend availability of the credit beyond the two years of the credit’s availability.
Employers have to determine whether a county had coverage available through the SHOP. The notice advises that this information is available for 2017 here. Information on whether a particular county has SHOP coverage available for 2018 and beyond can be found by checking http://www.healthcare.gov/small-business .
The notice provides examples that illustrate which employers might qualify for the tax credit.
The notice also advises that Hawaii’s State Innovation Waiver prohibits employers in Hawaii from claiming the tax credit for plan years beginning in calendar years 2017-2021/
IRS Notice 2018-27 can be found here.
IRS information on the Small Business Health Care Tax Credit can be found here.