Small nonprofit health care tax credit — 9-7 update

The healthcare act passed in spring 2010 provides a tax credit to small businesses and nonprofit organizations to assist with the cost of providing health care to employees.  The tax credit is available to NPOs with less than 25 full time equivalents that pay over half of the health insurance costs and have less than $50,000 average compensation per person.  For those nonprofit employers who qualify, the credit is 25% of healthcare costs and is offset against payroll taxes.  There is a phase-out calculation when full time equivalents are over 10 and average compensation is over $25,000. As you would expect, there are detailed rules and requirements. 

 The IRS has a fact sheet available.  They also have a one minute YouTube video. (A YouTube video?  From the IRS?  Yes, a YouTube video from the tax people.) 

Remember this is a brief overview.  Check out the IRS information and consult with your tax advisor before you do anything!

Update on 9-7-10 – The IRS announced today that the method of receiving the credit for NPOs will be for those organizations to file a soon-to-be modified 990-T. That is the form used to report unrelated business income and to pay taxes on the UBI.  The formwill be modified for the tax credit.  Watch for more details in the future.

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