Part of the health care reform bill passed last year gives a tax break to small nonprofits that provide health insurance to their employees.
“But how can this be?” you may ask. “Nonprofits don’t pay taxes, do they?”
Well, that’s a complicated question in its own right (we have a whole page about it here), but in this case, an organization that qualifies can keep part of the Medicare taxes and income tax-withholding money it normally would transmit to the Treasury and use it to offset part of the cost of employees’ health insurance. Note: the employees still get full credit toward social security and next year’s tax bill thanks to the way this program has been designed.
The maximum credit is available to organizations with fewer than 10 employees and average wages under $25,000; orgs with more than 25 employees or average wages over $50,000 are not eligible at all.
As you might expect, it’s a little complicated. Figuring out whether an organization qualifies requires knowing a good deal about its finances and payroll. Knowing which forms to use and how to fill them out requires understanding the details of this program works. Luckily, there are a couple of resources that will help puzzled Executive Directors or Human Resources professionals:
- First, an eligibility chart from the National Women’s Law Center. It runs through the law in a way that will let most organizations figure out whether these benefits apply to them or not pretty quickly. Check out a more detailed .pdf version here.
- Second, a free webinar hosted by the Internal Revenue Service on February 2nd at 2:00pm EST. The webinar is for both for-profit and nonprofit employers and will include attorneys, HR professionals and others in the audience, so it may be a little technical (to say the least!).
Any organization that looks like it may qualify for the tax credit based on the National Women’s Law Center’s chart may want to have someone attend the IRS webinar to get a first-hand presentation of the details. More information and a link to the webpage for registration is on the IRS website here.
For organizations that qualify—and their employees—this feature of the health care reform bill can be an immediate benefit.