The Indiana House Bill 1004 aims to aid small businesses in lessening their tax load by providing employer tax credits for HRAs in 2024. Businesses that meet the criteria can be given credit towards their Indiana State tax responsibility by providing Health Reimbursement Arrangements (HRAs) specifically for Individual Coverage Health Reimbursement Arrangements (ICHRA) or Qualified Small Employer Health Reimbursement Arrangements(QSEHRA).

Representative Craig Snow introduced the HRA credit under House Bill 1003, citing the inability of over half a million small businesses in Indiana to provide health insurance for their employees. House Bill 1003 was later combined with Indiana House Bill 1004, with the aim of reducing healthcare expenses for both employers and their workers.

In this article, we will discuss the Indiana House Bill 1004 HRA Tax Credit for small businesses, which covers eligibility conditions, the tax credit amount, regulations, reporting obligations, and other pertinent information.

Who is eligible to participate in the Indiana HRA Tax Credit program?

This program is available to entities that have any state tax liability and have adopted an HRA in lieu of Traditional Group Health. This credit is offered to taxpayers who meet certain requirements, including corporations, LLCs, partnerships, and other entities after (adjusted gross income tax, financial institutions tax, insurance premiums tax, or nonprofit agricultural health coverage tax).  To qualify for the tax credit, the employer’s contribution towards the HRA must meet certain IRS standards and have less than 50 full-time workers.

HRA Credits in Indiana House Bill 1004

The tax credit for HRAs in Indiana allows employers to claim up to $400 per employee in the first year and $200 per covered employee in the second year. For example, a business with 49 employees could potentially receive up to $19,600 in tax credits for the first year and $9,800 in the second year. It is important to note that there are parameters in place to prevent the total approved credits from exceeding $10,000,000 in any state fiscal year.

Employer Regulations and Reporting Obligations in Indiana House Bill 1004

Indiana House Bill 1004 includes specific provisions and guidelines to ensure the effective implementation of the tax credit for HRAs. Key points include:

  • The credit received by the taxpayer cannot exceed the qualified taxpayer’s state tax liability.
  • If the credit amount exceeds the taxpayer’s tax liability for a given year, any excess credit can be carried over to future taxable years, but it must be used within ten years of the initial credit date.
  • A qualified taxpayer cannot request a carryback or refund of any unused credit.
  • Qualified taxpayers must follow reporting requirements that mandate reporting to the Department of Insurance every three years. They must indicate whether they continued with the HRA or switched back to traditional health insurance. If they choose to continue the HRA the following year, they should specify the benefit amount in their report.
  • Qualified taxpayers must claim the credits on their state tax return as instructed by the department.

When Does the HRA Tax Credit Begin?

Starting on January 1, 2024, the HRA tax credit outlined in Indiana House Bill 1004 will be put into effect. Small businesses can begin preparing for the transition and capitalize on the advantages that come with HRAs.

Indiana is taking a progressive approach by implementing legislation that supports small businesses in providing affordable healthcare options to their employees, while also reducing their tax burden. This initiative is anticipated to have a positive impact on both small businesses and their employees, promoting a healthier and more prosperous business environment in the state.

Learn More

In 2019, Flyte HCM launched ICHRA.com to educate employers on the advantages of implementing an ICHRA Plan for their employees. As industry leaders, we provide information, compliance insights, and administrative services for the benefit of employers and brokers across the country who utilize the ICHRA. To learn more, contact us.