text: SECTION 1. SHORT TITLE.
  
      This Act may be cited as the ``Healthy Employees, Healthy Small 
  Businesses Act of 2004''.
  
  SEC. 2. FINDINGS.
  
      Congress finds the following:
              (1) In 2002, 44,000,000 Americans were without health 
          insurance for the entire year, and the vast majority of these 
          uninsured people are in working families.
              (2) The number of employees in a business greatly affects 
          the likelihood of whether or not its employees are offered 
          health insurance. In 2003, 98 percent of firms with over 200 
          employees offered health benefits, while only 55 percent of 
          firms with under 10 workers did.
              (3) Among uninsured workers in 2001, over half held jobs 
          with companies having fewer than 100 employees.
              (4) The cost of health insurance for employers is very 
          high. On average, in 2003, the total cost of an individual 
          health plan was $3,383, of which the employee paid an average 
          of $508 and the employer paid an average of $2875. For a family 
          policy, the average cost was $9,068, with the employer bearing 
          $6,656 and the employee shouldering $2,412.
  
  SEC. 3. REFUNDABLE CREDIT FOR SMALL BUSINESS EMPLOYEE HEALTH INSURANCE 
                EXPENSES.
  
      (a) In General.--Subpart C of part IV of subchapter A of chapter 1 
  of the Internal Revenue Code of 1986 (relating to refundable credits) 
  is amended by redesignating section 36 as section 37 and inserting 
  after section 35 the following new section:
  
  ``SEC. 36. SMALL BUSINESS EMPLOYEE HEALTH INSURANCE EXPENSES.
  
      ``(a) Determination of Amount.--In the case of a qualified small 
  employer, there shall be allowed as a credit against the tax imposed by 
  this subtitle for the taxable year an amount equal to the expense 
  amount described in subsection (b) paid by the taxpayer during the 
  taxable year.
      ``(b) Subsection (b) Expense Amount.--For purposes of this 
  section--
              ``(1) In general.--The expense amount described in this 
          subsection is the applicable percentage of the amount of 
          qualified employee health insurance expenses of each qualified 
          employee.
              ``(2) Applicable percentage.--For purposes of paragraph 
          (1), the applicable percentage is equal to--
                      ``(A) for any qualified small employer described in 
                  subparagraph (A) of paragraph (4), 50 percent,
                      ``(B) for any qualified small employer described in 
                  subparagraph (B) of paragraph (4), 35 percent, and
                      ``(C) for any qualified small employer described in 
                  subparagraph (C) of paragraph (4), 25 percent.
              ``(3) Per employee dollar limitation.--
                      ``(A) In general.--The amount of qualified employee 
                  health insurance expenses taken into account under 
                  paragraph (1) with respect to any qualified employee 
                  for any taxable year shall not exceed--
                              ``(i) for any qualified small employer 
                          described in subparagraph (A) of paragraph 
                          (4)--
                                      ``(I) $1,500 in the case of self-
                                  only coverage, and
                                      ``(II) $3,400 in the case of family 
                                  coverage,
                              ``(ii) for any qualified small employer 
                          described in subparagraph (B) of paragraph 
                          (4)--
                                      ``(I) $1,100 in the case of self-
                                  only coverage, and
                                      ``(II) $2,400 in the case of family 
                                  coverage, and
                              ``(iii) for any qualified small employer 
                          described in subparagraph (C) of paragraph 
                          (4)--
                                      ``(I) $750 in the case of self-only 
                                  coverage, and
                                      ``(II) $1,700 in the case of family 
                                  coverage.
                      ``(B) Inflation adjustment.--
                              ``(i) In general.--In the case of any 
                          taxable year beginning after 2006, each dollar 
                          amount referred to in subparagraph (A) shall be 
                          increased by an amount equal to--
                                      ``(I) such dollar amount, 
                                  multiplied by
                                      ``(II) the cost-of-living 
                                  adjustment determined under section 
                                  (1)(f)(3) for the calendar year in 
                                  which the taxable year begins, by 
                                  substituting `2005' for `1992'.
                              ``(ii) Rounding.--If any amount as adjusted 
                          under clause (i) is not a multiple of $100, 
                          such amount shall be rounded to the next lowest 
                          multiple of $100.
              ``(4) Qualified small employers described.--A qualified 
          small employer is described in--
                      ``(A) this subparagraph if such employer employed 
                  an average of 9 or fewer employees (as determined under 
                  subsection (c)(1)(A)(ii)),
                      ``(B) this subparagraph if such employer employed 
                  an average of more than 9 but less than 25 employees 
                  (as so determined), and
                      ``(C) this subparagraph if such employer employed 
                  an average of more than 24 but not more than 50 
                  employees (as so determined).
      ``(c) Definitions.--For purposes of this section--
              ``(1) Qualified small employer.--
                      ``(A) In general.--The term `qualified small 
                  employer' means, with respect to any calendar year, any 
                  employer if--
                              ``(i) such employer pays or incurs at least 
                          75 percent of the qualified employee health 
                          insurance expenses of each qualified employee 
                          (determined without regard to subsection 
                          (b)(3)), and
                              ``(ii) such employer employed an average of 
                          50 or fewer employees on business days during 
                          either of the 2 preceding calendar years.
                  For purposes of clause (ii), a preceding calendar year 
                  may be taken into account only if the employer was in 
                  existence throughout such year.
                      ``(B) Employers not in existence in preceding 
                  year.--In the case of an employer which was not in 
                  existence throughout the 1st preceding calendar year, 
                  the determination under subparagraph (A)(ii) shall be 
                  based on the average number of employees that it is 
                  reasonably expected such employer will employ on 
                  business days in the current calendar year.
              ``(2) Qualified employee health insurance expenses.--
                      ``(A) In general.--The term `qualified employee 
                  health insurance expenses' means any amount paid by an 
                  employer for health insurance coverage (as defined in 
                  section 9832(b)(1)) to the extent such amount is 
                  attributable to coverage provided to any employee while 
                  such employee is a qualified employee.
                      ``(B) Exception for amounts paid under salary 
                  reduction arrangements.--No amount paid or incurred for 
                  health insurance coverage pursuant to a salary 
                  reduction arrangement shall be taken into account under 
                  subparagraph (A).
              ``(3) Qualified employee.--
                      ``(A) In general.--The term `qualified employee' 
                  means, with respect to any period, an employee of an 
                  employer if--
                              ``(i) the annual amount of hours in the 
                          employ of such employer by such employee is at 
                          least 400 hours,
                              ``(ii) the total amount of wages paid or 
                          incurred by such employer to such employee at 
                          an annual rate during the taxable year is at 
                          least $5,000, and
                              ``(iii) such employee is not eligible for--
                                      ``(I) any benefits under title 
                                  XVIII, XIX, or XXI of the Social 
                                  Security Act, or
                                      ``(II) any other publicly-sponsored 
                                  health insurance program.
                      ``(B) Treatment of certain employees.--For purposes 
                  of subparagraph (A), the term `employee'--
                              ``(i) shall not include an employee within 
                          the meaning of section 401(c)(1), and
                              ``(ii) shall include a leased employee 
                          within the meaning of section 414(n).
                      ``(C) Wages.--The term `wages' has the meaning 
                  given such term by section 3121(a) (determined without 
                  regard to any dollar limitation contained in such 
                  section).
      ``(d) Certain Rules Made Applicable.--For purposes of this section, 
  rules similar to the rules of section 52 shall apply.
      ``(e) Coordination With Deduction for Health Insurance Costs of 
  Self-Employed Individuals.--In the case of a taxpayer who is eligible 
  to deduct any amount under section 162(l) for the taxable year, this 
  section shall apply only if the taxpayer elects not to claim any amount 
  as a deduction under such section for such year.''.
      (b) Conforming Amendments.--
              (1) Paragraph (2) of section 1324(b) of title 31, United 
          States Code, is amended by inserting before the period ``, or 
          from section 36 of such Code''.
              (2) The table of sections for subpart C of part IV of 
          subchapter A of chapter 1 of the Internal Revenue Code of 1986 
          is amended by striking the last item and inserting the 
          following new items:
  
                                ``Sec. 36. Small business employee health 
                                          insurance expenses.
                                ``Sec. 37. Overpayments of tax.''.
      (e) Effective Date.--The amendments made by this section shall 
  apply to amounts paid or incurred in taxable years beginning after 
  December 31, 2004.
target: Healthy Employees, Healthy Small Business Act of 2004 - Amends the Internal Revenue Code to allow certain small business employers a refundable tax credit for a portion of their employee health insurance costs.
feat_title: A bill to amend the Internal Revenue Code of 1986 to provide a refundable tax credit for small business health insurance costs, and for other purposes.