HB 565 — An Act amending the act of March 4, 1971 (P.L.6, No.2), known as the Tax Reform Code of 1971, providing for employer health insurance contribution tax credit; and promulgating regulations.

PRINTER'S NO.   569

                     THE GENERAL ASSEMBLY OF PENNSYLVANIA



                         HOUSE BILL
                         No. 565
                                                 Session of
                                                   2025

     INTRODUCED BY OLSOMMER, PICKETT, KENYATTA, ROWE AND ZIMMERMAN,
        FEBRUARY 12, 2025

     REFERRED TO COMMITTEE ON FINANCE, FEBRUARY 12, 2025


                                       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 employer health insurance
11      contribution tax credit; and promulgating regulations.
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           EMPLOYER HEALTH INSURANCE CONTRIBUTION TAX CREDIT
19   Section 1901-L.    Scope of article.
20      This article establishes the Employer Health Insurance
21   Contribution Tax Credit.
22   Section 1902-L.    Definitions.
 1      The following words and phrases when used in this article
 2   shall have the meanings given to them in this section unless the
 3   context clearly indicates otherwise:
 4      "Aggregate contribution."    The aggregate contribution that a
 5   qualified taxpayer makes to all employees during the taxable
 6   year for which the qualified taxpayer seeks the employer health
 7   insurance contribution tax credit established under this
 8   article, provided that only the first $500 in contributions per
 9   employee shall count toward the aggregate contribution.
10      "Contribution."    A payment made to a health insurance
11   provider by an employer to subsidize an employee's eligible
12   health insurance premiums.
13      "Department."   The Department of Revenue of the Commonwealth.
14      "Eligible health insurance costs."    Costs incurred by an
15   employee for premiums of a health insurance provider that are
16   incurred to enable the employee to be gainfully employed by a
17   qualified taxpayer.
18      "Employee."   An individual employed by a qualified taxpayer.
19   The term does not include:
20           (1)   An officer of an entity subject to tax under Article
21      IV, VIII, XV or XX.
22           (2)   An officer of an insurance company subject to tax
23      under Article IX.
24      "Health insurance provider."    The term shall have the same
25   meaning as "insurer" under section 201-A of the act of May 17,
26   1921 (P.L.789, No.285), known as The Insurance Department Act of
27   1921.
28      "Pass-through entity."    Any of the following:
29           (1)   A partnership as defined in section 301(n.0).
30           (2)   A Pennsylvania S corporation as defined in section

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 1      301(n.1).
 2            (3)   An unincorporated entity subject to section 307.21.
 3      "Qualified tax liability."     Any of the taxes due under
 4   Article III, IV, VII, VIII, IX, XI, XV or XX or a tax under
 5   Article XVI of the act of May 17, 1921 (P.L.682, No.284), known
 6   as The Insurance Company Law of 1921. The term does not include
 7   any tax withheld by an employer from an employee under Article
 8   III.
 9      "Qualified taxpayer."     An individual, partnership,
10   association, corporation, governmental body or unit or agency or
11   other entity that:
12            (1)   is subject to a tax imposed under Article III, IV,
13      VII, VIII, IX, XI, XV or XX; and
14            (2)   is required under the Internal Revenue Code of 1986
15      (Public Law 99-514, 26 U.S.C. § 1 et seq.) to withhold
16      Federal income tax from wages paid to an employee.
17   Section 1903-L.     Employer health insurance contribution tax
18                  credit.
19      (a)   Credit.--A qualified taxpayer may claim the employer
20   health insurance contribution tax credit for a contribution made
21   during the taxable year toward an employee's eligible health
22   insurance premium costs and may apply the tax credit against its
23   qualified tax liability.
24      (b)   Application.--A qualified taxpayer applying to claim an
25   employer health insurance contribution tax credit must complete
26   and submit to the department a health insurance contribution tax
27   credit application on a form and in a manner as determined by
28   the department. The form shall require the qualified taxpayer to
29   provide the following:
30            (1)   The names, addresses and Social Security numbers of

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 1      all employees to which the qualified taxpayer made a
 2      contribution during the taxable year.
 3            (2)   The names, addresses and employer identification
 4      numbers of the health insurance providers that provided
 5      health insurance services to each participating employee.
 6            (3)   The amount contributed to each participating
 7      employee.
 8            (4)   The aggregate contribution.
 9      (c)     Amount of tax credit.--The tax credit amount shall be as
10   follows:
11            (1)   If the contribution was made to less than 50
12      employees, the amount of the tax credit under subsection (a)
13      shall be equal to 100% of the aggregate contribution made to
14      employees during the tax year.
15            (2)   If the contribution was made to 50 or more employees
16      but less than 100 employees, the amount of the tax credit
17      under subsection (a) shall be equal to 75% of the aggregate
18      contribution made to employees during the tax year.
19            (3)   If the contribution was made to more than 100
20      employees, the amount of the tax credit under subsection (a)
21      shall be equal to 50% of the aggregate contribution made to
22      employees during the tax year.
23   Section 1904-L.     Carryover, carryback, refund and assignment of
24                  credit.
25      (a)     Carryover, carryback and refund.--A qualified taxpayer
26   is not entitled to carry forward, carry back or obtain a refund
27   of all or a portion of an unused tax credit granted to the
28   qualified taxpayer under this article.
29      (b)     Sale or assignment of tax credit.--A qualified taxpayer
30   may not sell or assign a tax credit granted to the qualified

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 1   taxpayer under this article.
 2   Section 1905-L.   Pass-through entity.
 3      (a)   Election.--If the qualified taxpayer is a pass-through
 4   entity, the qualified taxpayer may elect in writing, according
 5   to procedures established by the department, to transfer all or
 6   a portion of the credit to shareholders, members or partners in
 7   proportion to the share of the qualified taxpayer's distributive
 8   income to which the shareholders, members or partners are
 9   entitled or in any other manner designated by the qualified
10   taxpayer in accordance with its governance documents and without
11   regard to how distributive income, losses or credits are
12   allocated for other tax purposes.
13      (b)   Limitation.--The same unused tax credit under subsection
14   (a) may not be claimed by both the pass-through entity and a
15   shareholder, member or partner of the pass-through entity.
16      (c)   Time.--A shareholder, member or partner of a pass-
17   through entity under subsection (a) may only use a tax credit
18   during a taxable year for which use of the credit is authorized.
19   The shareholder, member or partner of the pass-through entity
20   may not carry forward, carry back, obtain a refund of or sell or
21   assign the tax credit.
22   Section 1906-L.   Exclusion from classes of income.
23      The first $5,000 in contributions made under this article to
24   an employee's eligible health insurance costs during the taxable
25   year may not be included in any of the classes of income
26   enumerated under section 303.
27   Section 1907-L.   Nondiscrimination in contributions.
28      (a)   Employees.--An employee who has incurred eligible health
29   insurance costs shall have equal opportunity to receive a
30   contribution from the employer.

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 1      (b)     Duty of employers.--If an employer chooses to make
 2   contributions to a health insurance provider for the purposes of
 3   claiming the tax credit, the employer shall make equal
 4   contributions during the tax year to any employee that has
 5   eligible health insurance costs.
 6   Section 1908-L.    Regulations.
 7      (a)     Promulgation.--The department shall promulgate
 8   regulations to implement the provisions of this article.
 9      (b)     Guidelines.--The department shall develop written
10   guidelines for the implementation of this article. The
11   guidelines shall be in effect until the department promulgates
12   regulations for the implementation of the provisions of this
13   article.
14   Section 1909-L.    Tax compliance.
15      The provisions of Article XVII-A.1 apply to the application
16   of this article.
17   Section 1910-L.    Applicability.
18      The provisions of this article shall apply to taxable years
19   beginning after December 31, 2025.
20      Section 2.     This act shall take effect in 60 days.




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