Health Care Legislation Offers Tax Credit to Ministries

BREA, California—For all the controversy surrounding recent health care legislation, certain ministries will find tucked inside the massive bill a financial benefit that may be worth considering. The Patient Protection and Affordable Care Act makes tax exempt organizations that offer health insurance and meet certain criteria eligible for a credit on their 2010 tax returns.

The intent of the credit is to “encourage small employers to offer health insurance coverage for the first time or maintain coverage they already have,” according to an Internal Revenue Service (IRS) news release. A page on the IRS website provides details about the “Small Business Health Care Tax Credit,” which also applies to small tax-exempt organizations. Qualifying criteria are as follows:

  • Providing health care coverage. A qualifying employer must cover at least 50 percent of the cost of health care coverage for some of its workers based on the single rate.

  • Firm size. A qualifying employer must have less than the equivalent of 25 full-time workers (for example, an employer with fewer than 50 half-time workers may be eligible).

  • Average annual wage. A qualifying employer must pay average annual wages below $50,000.

The maximum possible credit for ministries is 25 percent of health insurance premiums paid in 2010. The smaller the employer, the higher the potential credit. Small businesses can claim the credit as part of their general business credit. As for how qualifying ministries will receive the credit, Dan Busby, president of the Evangelical Council for Financial Accountability (ECFA), explains: "Nonprofits receive their tax credit as a credit against payroll taxes. If the credit exceeds the amount of payroll taxes of the nonprofit organization during the calendar year, then the credit amount is limited to the amount of the payroll taxes."

The IRS website has links to various documents to help you determine whether the tax credit applies to your organization, including a video, “Questions and Answers,” and a document that walks you through three “simple steps” to find out if your ministry qualifies. And the ECFA has published an article on their website (www.ecfa.org) that talks about the impact of the legislation and a supplement to it that was passed in late March.

For more information about this tax credit, go to www.IRS.gov and click on the link titled “Health Care Tax Credit.” For more resources to help you better manage your ministry’s finances, visit Evangelical Christian Credit Union’s website at www.eccu.org.