An Act amending the act of March 4, 1971 (P.L.6, No.2), known as the Tax Reform Code of 1971, providing for employer health insurance contribution tax credit; and promulgating regulations.

PRINTER'S NO. 569
THE GENERAL ASSEMBLY OF PENNSYLVANIA
HOUSE BILL
No. 565
Session of
2025
INTRODUCED BY OLSOMMER, PICKETT, KENYATTA, ROWE AND ZIMMERMAN,
FEBRUARY 12, 2025
REFERRED TO COMMITTEE ON FINANCE, FEBRUARY 12, 2025
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 employer health insurance
contribution tax credit; and promulgating regulations.
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
EMPLOYER HEALTH INSURANCE CONTRIBUTION TAX CREDIT
Section 1901-L. Scope of article.
This article establishes the Employer Health Insurance
Contribution Tax Credit.
Section 1902-L. Definitions.
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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 aggregate contribution that a
qualified taxpayer makes to all employees during the taxable
year for which the qualified taxpayer seeks the employer health
insurance contribution tax credit established under this
article, provided that only the first $500 in contributions per
employee shall count toward the aggregate contribution.
"Contribution." A payment made to a health insurance
provider by an employer to subsidize an employee's eligible
health insurance premiums.
"Department." The Department of Revenue of the Commonwealth.
"Eligible health insurance costs." Costs incurred by an
employee for premiums of a health insurance provider that are
incurred to enable the employee to be gainfully employed by a
qualified taxpayer.
"Employee." An individual employed by a qualified taxpayer.
The term does not include:
(1) An officer of an entity subject to tax under Article
IV, VIII, XV or XX.
(2) An officer of an insurance company subject to tax
under Article IX.
"Health insurance provider." The term shall have the same
meaning as "insurer" under section 201-A of the act of May 17,
1921 (P.L.789, No.285), known as The Insurance Department Act of
1921.
"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
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301(n.1).
(3) An unincorporated entity subject to section 307.21.
"Qualified tax liability." Any of the taxes due under
Article III, IV, VII, VIII, IX, XI, XV or XX or a tax under
Article XVI of the act of May 17, 1921 (P.L.682, No.284), known
as The Insurance Company Law of 1921. The term does not include
any tax withheld by an employer from an employee under Article
III.
"Qualified taxpayer." An individual, partnership,
association, corporation, governmental body or unit or agency or
other entity that:
(1) is subject to a tax imposed under Article III, IV,
VII, VIII, IX, XI, XV or XX; and
(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.
Section 1903-L. Employer health insurance contribution tax
credit.
(a) Credit.--A qualified taxpayer may claim the employer
health insurance contribution tax credit for a contribution made
during the taxable year toward an employee's eligible health
insurance premium costs and may apply the tax credit against its
qualified tax liability.
(b) Application.--A qualified taxpayer applying to claim an
employer health insurance contribution tax credit must complete
and submit to the department a health insurance 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
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all employees to which the qualified taxpayer made a
contribution during the taxable year.
(2) The names, addresses and employer identification
numbers of the health insurance providers that provided
health insurance services to each participating employee.
(3) The amount contributed to each participating
employee.
(4) The aggregate contribution.
(c) Amount of tax credit.--The tax credit amount shall be as
follows:
(1) If the contribution was made to less than 50
employees, the amount of the tax credit under subsection (a)
shall be equal to 100% of the aggregate contribution made to
employees during the tax year.
(2) If the contribution was made to 50 or more employees
but less than 100 employees, the amount of the tax credit
under subsection (a) shall be equal to 75% of the aggregate
contribution made to employees during the tax year.
(3) If the contribution was made to more than 100
employees, the amount of the tax credit under subsection (a)
shall be equal to 50% of the aggregate contribution made to
employees during the tax year.
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
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taxpayer under this article.
Section 1905-L. Pass-through entity.
(a) Election.--If the qualified taxpayer is a pass-through
entity, 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 or in any other manner designated by the qualified
taxpayer in accordance with its governance documents and without
regard to how distributive income, losses or credits are
allocated for other tax purposes.
(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.
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.
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(b) Duty of employers.--If an employer chooses to make
contributions to a health insurance provider 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. Regulations.
(a) Promulgation.--The department shall promulgate
regulations to implement the provisions of this article.
(b) Guidelines.--The department shall develop written
guidelines for the implementation of this article. The
guidelines shall be in effect until the department promulgates
regulations for the implementation of the provisions of this
article.
Section 1909-L. Tax compliance.
The provisions of Article XVII-A.1 apply to the application
of this article.
Section 1910-L. Applicability.
The provisions of this article shall apply to taxable years
beginning after December 31, 2025.
Section 2. This act shall take effect in 60 days.
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