Senators Propose Nonprofit Eligibility for Health-Insurance Tax Credits

Several Senate Finance Committee members have proposed that nonprofit groups be eligible for tax credits designed to help small businesses offer health insurance to their employees in legislation to overhaul the health-care system.

A bill unveiled last week by the committee’s chairman, Democrat Max Baucus of Montana, offers federal tax credits to small businesses, but it would benefit only employers that pay income tax — a category that excludes most nonprofit groups.

As one of several hundred amendments that senators have offered to Senator Baucus’s text, Democratic Sens. Maria Cantwell, of Washington; John Kerry, of Massachusetts; Blanche Lincoln, of Arkansas; and Charles Schumer, of New York, along with Republican Sen. Olympia Snowe, of Maine, proposed that “nonprofit entities that meet the eligibility requirements of the small business credit would be eligible to receive the credit.”

The senators, who gave no further details, said they would indicate how to pay for the nonprofit credit when they offer the formal amendment.

The leading health-care bill in the House of Representatives also offers tax credits to small businesses. However, another Senate bill, drafted by the Health, Education, Labor, and Pensions Committee, would instead offer subsidies to both nonprofit and for-profit small employers.

Independent Sector, a coalition of charities and foundations, has proposed that the tax credit be applied to the amount that employers send to the government to cover income taxes withheld for their employees — an approach that would cover nonprofit groups. (Employees would still get full credit for the full amount withheld from their paychecks.)

The Senate Finance Committee meets on Tuesday to discuss Mr. Baucus’s text.

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