HB 2550 — An Act amending the act of March 4, 1971 (P.L.6, No.2), known as the Tax Reform Code of 1971, providing for Small Business Health Care Premiums Contribution Tax Credit.

PRINTER'S NO.   3403

                     THE GENERAL ASSEMBLY OF PENNSYLVANIA



                         HOUSE BILL
                         No. 2550
                                                 Session of
                                                   2026

     INTRODUCED BY MAZZOCCO, VENKAT, SAMUELSON, McNEILL, CEPEDA-
        FREYTIZ, HARKINS, DEASY, BENHAM, INGLIS, WAXMAN, POWELL,
        RIVERA, BOROWSKI, TIBURCIO AND HOWARD, MAY 13, 2026

     REFERRED TO COMMITTEE ON FINANCE, MAY 13, 2026


                                     AN ACT
 1   Amending the act of March 4, 1971 (P.L.6, No.2), entitled "An
 2      act relating to tax reform and State taxation by codifying
 3      and enumerating certain subjects of taxation and imposing
 4      taxes thereon; providing procedures for the payment,
 5      collection, administration and enforcement thereof; providing
 6      for tax credits in certain cases; conferring powers and
 7      imposing duties upon the Department of Revenue, certain
 8      employers, fiduciaries, individuals, persons, corporations
 9      and other entities; prescribing crimes, offenses and
10      penalties," providing for Small Business Health Care Premiums
11      Contribution Tax Credit.
12      The General Assembly of the Commonwealth of Pennsylvania
13   hereby enacts as follows:
14      Section 1.     The act of March 4, 1971 (P.L.6, No.2), known as
15   the Tax Reform Code of 1971, is amended by adding an article to
16   read:
17                               ARTICLE XIX-L
18                    SMALL BUSINESS HEALTH CARE PREMIUMS
19                          CONTRIBUTION TAX CREDIT
20   Section 1901-L.    Scope of article.
21      This article establishes the Small Business Health Care
22   Premiums Contribution Tax Credit.
 1   Section 1902-L.    Definitions.
 2      The following words and phrases when used in this article
 3   shall have the meanings given to them in this section unless the
 4   context clearly indicates otherwise:
 5      "Aggregate contribution."      The total of the first $1,000 of
 6   the contribution payment per employee during the taxable year.
 7   The term shall not include any contribution payments toward an
 8   individual coverage health reimbursement arrangement that do not
 9   meet the affordability requirements as calculated by the
10   Exchange Authority.
11      "Contribution."    A payment made by a qualified taxpayer to
12   either of the following used by an employee to pay for eligible
13   health insurance costs:
14          (1)    An individual coverage health reimbursement
15      arrangement.
16          (2)    A qualified small employer health reimbursement
17      arrangement.
18      "Department."    The Department of Revenue of the Commonwealth.
19      "Eligible health insurance costs."      Premiums incurred by an
20   employee who purchases a qualified health plan through the
21   Exchange Authority.
22      "Employee."    An individual employed by a qualified taxpayer.
23      "Exchange Authority."    The Pennsylvania Health Insurance
24   Exchange Authority established under 40 Pa.C.S. § 9302(a)
25   (relating to the Pennsylvania Health Insurance Exchange
26   Authority).
27      "Health insurance provider."       The term shall have the same
28   meaning as "health insurance issuer" under 42 U.S.C. § 300gg-
29   91(b)(2) (relating to definitions).
30      "Health reimbursement arrangement."      A tax-advantaged

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 1   arrangement that reimburses individuals for eligible health
 2   insurance costs.
 3      "Individual coverage health reimbursement arrangement."     A
 4   type of health reimbursement arrangement funded by an employer
 5   that may be used to reimburse employees for certain health-
 6   related costs subject to a maximum fixed-dollar amount for a
 7   period of time.
 8      "Pass-through entity."    Any of the following:
 9          (1)     A partnership as defined in section 301(n.0).
10          (2)     A Pennsylvania S corporation as defined in section
11      301(n.1).
12          (3)     An unincorporated entity subject to section 307.21.
13      "Qualified health plan."    A health plan as defined in section
14   1301(a) of the Affordable Care Act (Public Law 111-148, 42
15   U.S.C. § 18021(a)) that provides health care coverage that has
16   been certified by the Insurance Department as having met the
17   criteria specified in 40 Pa.C.S. Chs. 91 (relating to
18   preliminary provisions) and 93 (relating to State-based
19   exchange).
20      "Qualified small employer health reimbursement arrangement."
21   A type of health reimbursement arrangement for small business,
22   as the term is defined in 26 U.S.C. § 9831(d)(2) (relating to
23   general exceptions).
24      "Qualified tax liability."    The tax due under Article III,
25   excluding any tax withheld by an employer from an employee.
26      "Qualified taxpayer."    An individual, partnership,
27   association, corporation, governmental body or unit or agency or
28   other entity that:
29          (1)     is subject to the tax imposed under Article III;
30          (2)     is required under the Internal Revenue Code of 1986

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 1      (Public Law 99-514, 26 U.S.C. § 1 et seq.) to withhold
 2      Federal income tax from wages paid to an employee; and
 3            (3)   has 50 or fewer employees.
 4      "Small business health care premiums contribution tax
 5   credit."    The tax credit available to a qualified taxpayer under
 6   section 1903-L(a).
 7   Section 1903-L.     Small business health care premiums
 8                  contribution tax credit.
 9      (a)     Credit.--A qualified taxpayer may claim the small
10   business health care premiums contribution tax credit for a
11   contribution made during the taxable year and may apply the tax
12   credit against the qualified taxpayer's qualified tax liability.
13      (b)     Application.--A qualified taxpayer applying to claim a
14   small business health care premiums contribution tax credit must
15   complete and submit to the department a small business health
16   care premiums contribution tax credit application on a form and
17   in a manner as determined by the department. The form shall
18   require the qualified taxpayer to provide the following:
19            (1)   The names, addresses and Social Security numbers of
20      all employees to which the qualified taxpayer made a
21      contribution during the taxable year.
22            (2)   The names, addresses and employer identification
23      numbers of the health insurance providers that provided
24      health insurance services to each participating employee.
25            (3)   The amount contributed to each employee's health
26      reimbursement arrangement.
27            (4)   The aggregate contribution.
28      (c)     Amount of tax credit.--The amount of the tax credit
29   under subsection (a) shall be equal to 100% of the aggregate
30   contribution.

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 1   Section 1904-L.   Carryover, carryback, refund and assignment of
 2               credit.
 3      (a)   Carryover, carryback and refund.--A qualified taxpayer
 4   is not entitled to carry forward, carry back or obtain a refund
 5   of all or a portion of an unused tax credit granted to the
 6   qualified taxpayer under this article.
 7      (b)   Sale or assignment of tax credit.--A qualified taxpayer
 8   may not sell or assign a tax credit granted to the qualified
 9   taxpayer under this article.
10   Section 1905-L.   Pass-through entity.
11      (a)   Election.--The qualified taxpayer may elect in writing,
12   according to procedures established by the department, to
13   transfer all or a portion of the credit to shareholders, members
14   or partners in proportion to the share of the qualified
15   taxpayer's distributive income to which the shareholders,
16   members or partners are entitled or in any other manner
17   designated by the qualified taxpayer in accordance with its
18   governance documents and without regard to how distributive
19   income, losses or credits are allocated for other tax purposes.
20      (b)   Limitation.--The same unused tax credit under subsection
21   (a) may not be claimed by both the pass-through entity and a
22   shareholder, member or partner of the pass-through entity.
23      (c)   Time.--A shareholder, member or partner of a pass-
24   through entity under subsection (a) may only use a tax credit
25   during a taxable year for which use of the credit is authorized.
26   The shareholder, member or partner of the pass-through entity
27   may not carry forward, carry back, obtain a refund of or sell or
28   assign the tax credit.
29   Section 1906-L.   Exclusion from classes of income.
30      The first $5,000 in contributions made under this article to

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 1   an employee's eligible health insurance costs during the taxable
 2   year may not be included in any of the classes of income
 3   enumerated under section 303.
 4   Section 1907-L.    Nondiscrimination in contributions.
 5      (a)   Employees.--An employee who has incurred eligible health
 6   insurance costs shall have equal opportunity to receive a
 7   contribution from the employer.
 8      (b)   Duty of employers.--If an employer chooses to make
 9   contributions for the purposes of claiming the tax credit, the
10   employer shall make equal contributions during the tax year to
11   any employee that has eligible health insurance costs.
12   Section 1908-L.    Tax compliance.
13      The provisions of Article XVII-A.1 apply to the application
14   of this article.
15   Section 1909-L.    Applicability.
16      The provisions of this article shall apply to taxable years
17   beginning after December 31, 2026.
18      Section 2.     This act shall take effect in 60 days.




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