Many small employers do not offer health insurance. The Small Employer Health Insurance Tax Credit was established to help eligible small employers--businesses or tax-exempt entities--provide health insurance for employees. The base of the credit is premiums paid or the average premium for an employer's state if premiums paid were higher. In 2010, for small businesses, the credit was 35 percent of the base unless the business had more than 10 FTE employees or paid average annual wages over $25,000. GAO was asked to examine (1) the extent to which the credit is claimed and any factors that limit claims, including how they can be addressed; (2) how fully IRS is ensuring that the credit is correctly claimed; and (3) what data are needed to evaluate the effects of the credit. GAO compared IRS data on credit claims with estimates of eligible employers, interviewed various credit stakeholders and IRS officials as well as academicians on evaluation, compared IRS credit compliance documents with the rules and practices used for prior tax provisions and IRS strategic objectives, and reviewed literature and data.

"Many small employers do not offerhealth insurance. The Small EmployerHealth Insurance Tax Credit wasestablished to help eligible smallemployers-businesses or tax-exemptentities-provide health insurance foremployees. The base of the credit ispremiums paid or the averagepremium for an employer's state ifpremiums paid were higher. In 2010,for small businesses, the credit was 35percent of the base unless thebusiness had more than 10 FTEemployees or paid average annualwages over $25,000.GAO was asked to examine (1) theextent to which the credit is claimedand any factors that limit claims,including how they can be addressed;(2) how fully IRS is ensuring that thecredit is correctly claimed; and (3) whatdata are needed to evaluate the effectsof the credit.GAO compared IRS data on creditclaims with estimates of eligibleemployers, interviewed various creditstakeholders and IRS officials as wellas academicians on evaluation,compared IRS credit compliancedocuments with the rules and practicesused for prior tax provisions and IRSstrategic objectives, and reviewedliterature and data."

SMALL EMPLOYER HEALTH TAX CREDIT: Factors Contributing to Low Use and Complexity

SMALL EMPLOYER HEALTH TAX CREDIT: Limited Use Continues Due to Multiple Reasons

To describe the extent to which the credit is being claimed, we reviewed IRS data on the claims for tax year 2010. To identify any factors that may limit credit claims and to assess how they could be addressed, we interviewed IRS officials as well as groups representing employers, tax preparers, and insurance brokers, and worked with them to assemble discussion groups on the credit. To assess how these factors could be addressed, we analyzed our interview results as well as relevant documents.