K.S.A. 40-2246 allows an income tax credit to those employers that make contributions to a health savings account of an eligible covered employee after 12/31/2004. The credit is $70 per month per eligible covered employee for the first 12 months of participation, $50 per month per eligible covered employee for the next 12 months of participation and $35 per month per eligible covered employee for the next 12 months of participation.
Any small employer (defined by K.S.A. 40-2209d) having between 2 and 50 employees may establish a health benefit plan for the purpose of providing a plan as described under K.S.A. 40-2240 covering such employer’s eligible employees and such employees’ family members. For plans established prior to 1/1/2005, a certificate issued by the Commissioner of Insurance entitling a “small employer” to claim the tax credit authorized by K.S.A. 40-2246 must have been obtained.
For tax year 2013, and all tax years thereafter, credits shall be available to only corporations subject to the Kansas corporate income tax (i.e., C corporations). Credits are not available to individuals, partnerships, S corporations, limited liability companies, and other pass-through entities.
An eligible employee is one who is employed for an average of at least 30 hours per week and elects to participate in one of the benefit plans provided under this act, and includes individuals who are sole proprietors, business partners, and limited partners who own the business. Eligible employee does not include individuals: 1) engaged as independent contractors; 2) whose periods of employment are on an intermittent or irregular basis; or, 3) who have been employed by the employer for fewer than 90 days.
A health savings account means a trust created or organized in the United States as a health savings account exclusively for the purpose of paying the qualified medical expenses of the account beneficiary, but only if the written governing instrument creating the trust meets the requirements specified by the Medicare, prescription drug, improvement and modernization act of 2003, Pub. L. No. 108-173, 117 Stat. 2067.
As a condition to participate as a member of any small employer health benefit plan, an employer shall have not contributed within the preceding two years to any health insurance premium or health savings account on behalf of an employee who is to be covered by the employer’s contribution other than a contribution by an employer to a health insurance premium or health savings account within the preceding two years solely for the benefit of the employer or the employer’s dependents.
If the credit exceeds the current year’s tax liability, the unused portion shall be refunded to the taxpayer.
Addition Modification. The employer is required to reduce any expense deduction that is included in federal taxable income for the tax year by the dollar amount of the credit.