Monday, December 6, 2010

Health Care Reform and the Small Sustainable Business

There has been much discussion this year about “pee-paca,” formally known as the Patient Protection and Affordable Care Act of 2010 (“PPACA”), and, perhaps depending on where which way you lean politically, informally known as “health care reform” and “Obamacare.”  Regardless of your political views, providing employees with health insurance squares nicely with the sustainable business values of promoting social welfare, equality, and opportunity.

The PPACA includes an important incentive in the form of a tax credit for small employers who provide health insurance for their employees.  This credit is important to the small green business.  The credit is claimed on the businesses federal tax return, and it reduces general tax due.  Employers with no more than the equivalent of 25 full-time employees earning average wages of no more than $50,000 per year are eligible.

Here is how the tax credit works.  For the years 2010 through 2013, the credit is up to 35% of the employer’s contribution to health insurance premiums.  For 2014 through 2016, the credit can be as high as 50% of the employer’s contribution to health insurance premiums.  Since the tax credit is designed to encourage small businesses to provide health insurance, the smaller your business, the bigger the credit.

The last year has seen a proliferation of green businesses in Arkansas.  Many of these businesses are operating with a “seize the day” mentality and without much strategic or long-term planning – which means they are missing significant opportunities presented by tax incentives and credits. 

The PPACA small business tax credit is one of those opportunities.  The credit can impact the way a business grows, the size and compensation of a workforce, and the overall profitability of the business.  As the year comes to an end, green businesses need to be looking ahead not only to 2011, but strategically planning for the next five and ten years.  The PPACA small business tax credit can – and probably should – be an important consideration in these plans.  Take note!

(Department of Disclaimers: This sustainablawg posting is neither tax nor legal advice and is no substitute for the counsel of a qualified CPA or an experienced tax lawyer.)

(Department of Now-That-You-Mention-It:  I am privileged to practice law with several experienced tax lawyers.  I encourage anyone interested in discussing the PPACA small business tax credit, sustainable business planning, or the sustainasphere in general to give me a call at (501) 372-0800.)

(Department of Shameless Self-Promotion: See above!)

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