PPACA Tax Credits Are for NFPs, Too
Under the Patient Protection and Affordable Care Act (PPACA), commonly known as “Obamacare,” your not-for-profit may qualify for a tax credit to cover a portion of employee health insurance costs. Sometimes lost in the myriad details of the PPACA is the fact that ObamaCare includes tax credits not only for small businesses, but for not-for-profits as well.
Under the PPACA, your not-for-profit may qualify for a tax credit to cover a portion of employee health insurance costs simply by meeting the following criteria:
- Number of employees – You employ 25 or fewer full-time equivalent (FTE) employees.
- Average wages – Average annual wages for those employees is no more than $50,000 per FTE.
- Insurance premiums – You pay at least 50% of each employee’s insurance premium.
Qualifying not-for-profits can receive a tax credit of up to 25% of premium expenses for 2010-2013, and up to 35% of premium expenses beginning in 2014.
The credit begins to phase out at 10 employees and wages of $25,000.
To apply for the credit, you’ll need to fill out IRS Form 8941 and include the amount on line 44f of Form 990-T. Note that Form 990-T has traditionally been used by tax-exempt organizations to report and pay the tax on unrelated business income. However, it was recently revised to enable eligible tax-exempt organizations to claim the small business health care credit.