89R8839 BEF-F
By: Kolkhorst S.B. No. 1949
A BILL TO BE ENTITLED
AN ACT
relating to a refund of sales and use taxes or a credit against the
franchise tax for certain small employers who contribute to an
individual coverage health reimbursement arrangement.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Subchapter I, Chapter 151, Tax Code, is amended
by adding Section 151.4295 to read as follows:
Sec. 151.4295. TAX REFUND FOR SMALL EMPLOYERS WHO
CONTRIBUTE TO INDIVIDUAL COVERAGE HEALTH REIMBURSEMENT
ARRANGEMENT. (a) In this section:
(1) "Individual coverage health reimbursement
arrangement" means a health reimbursement arrangement or other
account-based group health plan that satisfies the conditions of 45
C.F.R. Section 146.123 to be integrated with individual health
insurance coverage or with Medicare, as applicable.
(2) "Small employer" means a person who employed an
average of at least one employee but not more than 50 employees on
business days during the preceding calendar year. The term includes
a governmental entity subject to Article 3.51-1, 3.51-4, or 3.51-5,
Insurance Code, to Subchapter C, Chapter 1364, Insurance Code, to
Chapter 1578, Insurance Code, or to Chapter 177, Local Government
Code, that otherwise meets the requirements of this subdivision.
For purposes of this definition, a partnership is the employer of a
partner.
(b) Except as provided by Subsection (d), a person is
eligible for a refund in an amount determined under Subsection (c)
of the taxes the person paid under this chapter during a calendar
year if the person:
(1) is a small employer;
(2) adopts an individual coverage health
reimbursement arrangement, in lieu of a traditional employer
provided health insurance plan, for the person's employees for the
calendar year; and
(3) contributes to the individual coverage health
reimbursement arrangement an amount per covered individual for the
calendar year that is at least equal to:
(A) if the person previously contributed to an
employer provided health insurance plan, the annual amount per
covered individual the person contributed to the employer provided
health insurance plan for the last year the person contributed to
the plan; or
(B) if the person did not previously contribute
to an employer provided health insurance plan, the least annual
amount per covered individual the person would be required to
contribute to obtain any available employer provided health
insurance plan for the same calendar year.
(c) The amount of the refund for a calendar year is equal to
the lesser of:
(1) the product of $400 and the average number of
covered individuals for whom the person contributes to an
individual coverage health reimbursement arrangement during the
calendar year; and
(2) the total amount of the taxes the person paid under
this chapter during the calendar year.
(d) A person is not eligible for a refund under this section
for a calendar year if the person will, as a taxable entity as
defined by Section 171.0002 or as a member of a combined group that
is a taxable entity, claim a credit under Subchapter N, Chapter 171,
on a franchise tax report covering any part of that year.
(e) To receive a refund under this section, a person must
apply to the comptroller in the manner prescribed by the
comptroller and include with the application any information
requested by the comptroller to determine whether the person is
eligible for the refund or the amount of the refund.
SECTION 2. Chapter 171, Tax Code, is amended by adding
Subchapter N to read as follows:
SUBCHAPTER N. TAX CREDIT FOR SMALL EMPLOYERS WHO CONTRIBUTE TO
INDIVIDUAL COVERAGE HEALTH REIMBURSEMENT ARRANGEMENT
Sec. 171.701. DEFINITIONS. In this subchapter, "individual
coverage health reimbursement arrangement" and "small employer"
have the meanings assigned by Section 151.4295.
Sec. 171.702. ENTITLEMENT TO CREDIT. A taxable entity is
entitled to a credit in the amount and under the conditions provided
by this subchapter against the tax imposed under this chapter.
Sec. 171.703. QUALIFICATION. A taxable entity qualifies
for a credit under this subchapter if the taxable entity:
(1) is a small employer;
(2) adopts an individual coverage health
reimbursement arrangement, in lieu of a traditional employer
provided health insurance plan, for the taxable entity's employees
for the entire period on which the report is based; and
(3) contributes to the individual coverage health
reimbursement arrangement an annual amount per covered individual
that is at least equal to:
(A) if the taxable entity previously contributed
to an employer provided health insurance plan, the annual amount
per covered individual the taxable entity contributed to the
employer provided health insurance plan for the last year the
taxable entity contributed to the plan; or
(B) if the taxable entity did not previously
contribute to an employer provided health insurance plan, the least
annual amount per covered individual the taxable entity would be
required to contribute to obtain any available employer provided
health insurance plan during the period on which the report is
based.
Sec. 171.704. INELIGIBILITY FOR CREDIT FOR CERTAIN PERIODS.
A taxable entity is not eligible for a credit on a report if the
taxable entity, or a member of the combined group if the taxable
entity is a combined group, received, for taxes paid under Chapter
151 during the period on which the report is based, a refund under
Section 151.4295.
Sec. 171.705. AMOUNT; LIMITATIONS. (a) The amount of the
credit for a report that is based on a period of one year is equal to
the product of $400 and the average number of covered individuals
for whom the taxable entity contributes to an individual coverage
health reimbursement arrangement during the period on which the
report is based.
(b) The amount of the credit for a report that is based on a
period other than one year is equal to a pro rata share of the amount
provided by Subsection (a) that reflects the duration of the period
on which the report is based.
(c) The total credit claimed for a report may not exceed the
amount of franchise tax due for the report after all other
applicable tax credits.
Sec. 171.706. APPLICATION FOR CREDIT. A taxable entity
must apply for a credit under this subchapter on or with the tax
report for the period for which the credit is claimed and include
with the application any information requested by the comptroller
to determine whether the taxable entity is eligible for the credit
or the amount of the credit.
SECTION 3. (a) Section 151.4295, Tax Code, as added by this
Act, applies only in connection with contributions to an individual
coverage health reimbursement arrangement made on or after January
1, 2026.
(b) A person may not file a claim for a refund under Section
151.4295, Tax Code, as added by this Act, before January 1, 2027.
SECTION 4. Subchapter N, Chapter 171, Tax Code, as added by
this Act, applies only to a report originally due on or after
January 1, 2027, and only in connection with contributions to an
individual coverage health reimbursement arrangement made on or
after January 1, 2026.
SECTION 5. This Act takes effect January 1, 2026.