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PRIOR PRINTER'S NOS. 3403, 3516 PRINTER'S NO. 3574
THE GENERAL ASSEMBLY OF PENNSYLVANIA
HOUSE BILL
No. 2550
Session of
2026
INTRODUCED BY MAZZOCCO, VENKAT, SAMUELSON, McNEILL, CEPEDA-
FREYTIZ, HARKINS, DEASY, BENHAM, INGLIS, WAXMAN, POWELL,
RIVERA, BOROWSKI, TIBURCIO, HOWARD, PASHINSKI, SANCHEZ, CURRY
AND MAYES, MAY 13, 2026
AS AMENDED ON SECOND CONSIDERATION, HOUSE OF REPRESENTATIVES,
JUNE 9, 2026
AN ACT
Amending the act of March 4, 1971 (P.L.6, No.2), entitled "An
act relating to tax reform and State taxation by codifying
and enumerating certain subjects of taxation and imposing
taxes thereon; providing procedures for the payment,
collection, administration and enforcement thereof; providing
for tax credits in certain cases; conferring powers and
imposing duties upon the Department of Revenue, certain
employers, fiduciaries, individuals, persons, corporations
and other entities; prescribing crimes, offenses and
penalties," providing for Small Business Health Care Premiums
Contribution Tax Credit.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. The act of March 4, 1971 (P.L.6, No.2), known as
the Tax Reform Code of 1971, is amended by adding an article to
read:
ARTICLE XIX-L
SMALL BUSINESS HEALTH CARE PREMIUMS
CONTRIBUTION TAX CREDIT
Section 1901-L. Scope of article.
This article establishes the Small Business Health Care
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Premiums Contribution Tax Credit.
Section 1902-L. Definitions.
The following words and phrases when used in this article
shall have the meanings given to them in this section unless the
context clearly indicates otherwise:
"Aggregate contribution." The total of the first $1,000 of
the contribution payment per employee during the taxable year.
The term shall not include any contribution payments toward an
individual coverage health reimbursement arrangement that do not
meet the affordability requirements as calculated by the
Exchange Authority.
"Contribution." A payment made by a qualified taxpayer to
either of the following used by an employee to pay for eligible
health insurance costs:
(1) An individual coverage health reimbursement
arrangement.
(2) A qualified small employer health reimbursement
arrangement.
"Department." The Department of Revenue of the Commonwealth.
"Eligible health insurance costs." Premiums incurred by an
employee who purchases a qualified health plan through the
Exchange Authority.
"Employee." An individual employed by a qualified taxpayer .
WHO HAS PROVIDED DOCUMENTARY EVIDENCE OF THE FOLLOWING WITH THE
EXCHANGE AUTHORITY:
(1) RESIDENCY IN THIS COMMONWEALTH.
(2) CITIZENSHIP, LAWFUL PRESENCE IN THE UNITED STATES OR
OTHER QUALIFICATIONS TO PURCHASE A HEALTH REIMBURSEMENT
ARRANGEMENT AS PROVIDED BY FEDERAL LAW.
"Exchange Authority." The Pennsylvania Health Insurance
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Exchange Authority THAT IS established under 40 Pa.C.S. §
9302(a) (relating to the Pennsylvania Health Insurance Exchange
Authority) AND THAT HAS ESTABLISHED AN OFFICE OF FRAUD
PREVENTION TO ADDRESS SUSPECTED FRAUD AND TO PREVENT FRAUD .
"Health insurance provider." The term shall have the same
meaning as "health insurance issuer" under 42 U.S.C. § 300gg-
91(b)(2) (relating to definitions).
"Health reimbursement arrangement." A tax-advantaged
arrangement that reimburses individuals for eligible health
insurance costs.
"Individual coverage health reimbursement arrangement." A
type of health reimbursement arrangement funded by an employer
that may be used to reimburse employees for certain health-
related costs subject to a maximum fixed-dollar amount for a
period of time.
"Pass-through entity." Any of the following:
(1) A partnership as defined in section 301(n.0).
(2) A Pennsylvania S corporation as defined in section
301(n.1).
(3) An unincorporated entity subject to section 307.21.
"Qualified health plan." A health plan as defined in section
1301(a) of the Affordable Care Act (Public Law 111-148, 42
U.S.C. § 18021(a)) that provides health care coverage that has
been certified by the Insurance Department as having met the
criteria specified in 40 Pa.C.S. Chs. 91 (relating to
preliminary provisions) and 93 (relating to State-based
exchange) or any other health care coverage purchased through
the Exchange Authority .
"Qualified small employer health reimbursement arrangement."
A type of health reimbursement arrangement for small business,
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as the term is defined in 26 U.S.C. § 9831(d)(2) (relating to
general exceptions).
"Qualified tax liability." The tax due under Article III,
excluding any tax withheld by an employer from an employee.
"Qualified taxpayer." An individual, partnership,
association or other entity that:
(1) is subject to the tax imposed under Article III;
(2) is required under the Internal Revenue Code of 1986
(Public Law 99-514, 26 U.S.C. § 1 et seq.) to withhold
Federal income tax from wages paid to an employee; and
(3) has 50 or fewer employees.
"Small business health care premiums contribution tax
credit." The tax credit available to a qualified taxpayer under
section 1903-L(a).
Section 1903-L. Small business health care premiums
contribution tax credit.
(a) Credit.--A qualified taxpayer may claim the small
business health care premiums contribution tax credit for a
contribution made during the taxable year and may apply the tax
credit against the qualified taxpayer's qualified tax liability.
(b) Application.--A qualified taxpayer applying to claim a
small business health care premiums contribution tax credit must
complete and submit to the department a small business health
care premiums contribution tax credit application on a form and
in a manner as determined by the department. The form shall
require the qualified taxpayer to provide the following:
(1) The names, addresses and Social Security numbers of
all employees to which the qualified taxpayer made a
contribution during the taxable year.
(2) The names, addresses and employer identification
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numbers of the health insurance providers that provided
health insurance services to each participating employee.
(3) The amount contributed to each employee's health
reimbursement arrangement.
(4) The aggregate contribution.
(c) Amount of tax credit.--The amount of the tax credit
under subsection (a) shall be equal to 100% of the aggregate
contribution.
Section 1904-L. Carryover, carryback, refund and assignment of
credit.
(a) Carryover, carryback and refund.--A qualified taxpayer
is not entitled to carry forward, carry back or obtain a refund
of all or a portion of an unused tax credit granted to the
qualified taxpayer under this article.
(b) Sale or assignment of tax credit.--A qualified taxpayer
may not sell or assign a tax credit granted to the qualified
taxpayer under this article.
Section 1905-L. Pass-through entity.
(a) Election.--The qualified taxpayer may elect in writing,
according to procedures established by the department, to
transfer all or a portion of the credit to shareholders, members
or partners in proportion to the share of the qualified
taxpayer's distributive income to which the shareholders,
members or partners are entitled .
(b) Limitation.--The same unused tax credit under subsection
(a) may not be claimed by both the pass-through entity and a
shareholder, member or partner of the pass-through entity.
(c) Time.--A shareholder, member or partner of a pass-
through entity under subsection (a) may only use a tax credit
during a taxable year for which use of the credit is authorized.
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The shareholder, member or partner of the pass-through entity
may not carry forward, carry back, obtain a refund of or sell or
assign the tax credit.
Section 1906-L. Exclusion from classes of income.
The first $5,000 in contributions made under this article to
an employee's eligible health insurance costs during the taxable
year may not be included in any of the classes of income
enumerated under section 303.
Section 1907-L. Nondiscrimination in contributions.
(a) Employees.--An employee who has incurred eligible health
insurance costs shall have equal opportunity to receive a
contribution from the employer.
(b) Duty of employers.--If an employer chooses to make
contributions for the purposes of claiming the tax credit, the
employer shall make equal contributions during the tax year to
any employee that has eligible health insurance costs.
Section 1908-L. Tax compliance.
(A) APPLICATION TO ARTICLE XVII-A.1.-- The provisions of
Article XVII-A.1 apply to the application of this article.
(B) REPORT.--THE REPORT FOR THE TAX CREDIT UNDER THIS
ARTICLE REQUIRED UNDER SECTION 1707-A.1 SHALL INCLUDE THE
FOLLOWING INFORMATION FROM THE EXCHANGE AUTHORITY:
(1) ALL OF THE FOLLOWING DATA RELATING TO SUSPECTED
FRAUD:
(I) THE NUMBER OF SUSPECTED FRAUD REPORTS RECEIVED
AND THE DOLLAR AMOUNT DURING THE PRIOR CALENDAR YEAR.
(II) THE NUMBER OF FRAUD REPORTS CONFIRMED AND THE
DOLLAR AMOUNT DURING THE PRIOR CALENDAR YEAR.
(III) THE DOLLAR AMOUNT OF ADVANCE PREMIUM TAX
CREDITS PROVIDED TO RESCINDED POLICIES DURING THE PRIOR
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CALENDAR YEAR.
(2) A COPY OF A STANDARDIZED FORM FOR INSURERS TO REPORT
SUSPECTED FRAUD RELATING TO THE EXCHANGE AUTHORITY AND A
POLICY ADOPTED BY THE EXCHANGE AUTHORITY TO RESPOND TO
INSURER RECESSION REQUESTS WITHIN ONE BUSINESS DAY AND TO
MAKE A FINAL RECESSION DETERMINATION ON SUSPECTED FRAUD
WITHIN FIVE BUSINESS DAYS.
(3) A COPY OF A WRITTEN POLICY ADOPTED BY THE EXCHANGE
AUTHORITY ON PROCEDURES TO REPORT AND RESOLVE ALLEGATIONS OF
FRAUD, INCLUDING THE REQUIRED REFERRAL OF SUSPECTED FRAUD TO
THE APPROPRIATE LAW ENFORCEMENT AGENCIES, INCLUDING THE
OFFICE OF ATTORNEY GENERAL, THE UNITED STATES DEPARTMENT OF
JUSTICE AND THE INTERNAL REVENUE SERVICE, AND CERTIFICATION
THAT ALL EMPLOYEES OF THE EXCHANGE AUTHORITY HAVE RECEIVED
ANTIFRAUD TRAINING DURING THE PRIOR YEAR.
(4) ANY PROCEDURES THAT HAVE BEEN IMPLEMENTED TO ADDRESS
SUSPECTED FRAUD AND FRAUD PREVENTION DURING THE PRIOR
CALENDAR YEAR.
Section 1909-L. Applicability.
The provisions of this article shall apply to taxable years
beginning after December 31, 2026.
Section 2. This act shall take effect in 60 days.
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