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A BILL TO BE ENTITLED
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AN ACT
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relating to a refund of sales and use taxes or a credit against the |
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franchise tax for certain small employers who contribute to an |
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individual coverage health reimbursement arrangement. |
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BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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SECTION 1. Subchapter I, Chapter 151, Tax Code, is amended |
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by adding Section 151.4295 to read as follows: |
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Sec. 151.4295. TAX REFUND FOR SMALL EMPLOYERS WHO |
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CONTRIBUTE TO INDIVIDUAL COVERAGE HEALTH REIMBURSEMENT |
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ARRANGEMENT. (a) In this section: |
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(1) "Individual coverage health reimbursement |
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arrangement" means a health reimbursement arrangement or other |
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account-based group health plan that satisfies the conditions of 45 |
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C.F.R. Section 146.123 to be integrated with individual health |
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insurance coverage or with Medicare, as applicable. |
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(2) "Small employer" means a person who employed an |
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average of at least one employee but not more than 50 employees on |
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business days during the preceding calendar year. The term includes |
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a governmental entity subject to Article 3.51-1, 3.51-4, or 3.51-5, |
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Insurance Code, to Subchapter C, Chapter 1364, Insurance Code, to |
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Chapter 1578, Insurance Code, or to Chapter 177, Local Government |
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Code, that otherwise meets the requirements of this subdivision. |
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For purposes of this definition, a partnership is the employer of a |
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partner. |
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(b) Except as provided by Subsection (d), a person is |
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eligible for a refund in an amount determined under Subsection (c) |
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of the taxes the person paid under this chapter during a calendar |
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year if the person: |
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(1) is a small employer; |
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(2) adopts an individual coverage health |
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reimbursement arrangement, in lieu of a traditional employer |
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provided health insurance plan, for the person's employees for the |
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calendar year; and |
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(3) contributes to the individual coverage health |
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reimbursement arrangement an amount per covered individual for the |
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calendar year that is at least equal to: |
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(A) if the person previously contributed to an |
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employer provided health insurance plan, the annual amount per |
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covered individual the person contributed to the employer provided |
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health insurance plan for the last year the person contributed to |
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the plan; or |
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(B) if the person did not previously contribute |
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to an employer provided health insurance plan, the least annual |
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amount per covered individual the person would be required to |
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contribute to obtain any available employer provided health |
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insurance plan for the same calendar year. |
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(c) The amount of the refund for a calendar year is equal to |
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the lesser of: |
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(1) the product of $400 and the average number of |
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covered individuals for whom the person contributes to an |
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individual coverage health reimbursement arrangement during the |
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calendar year; and |
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(2) the total amount of the taxes the person paid under |
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this chapter during the calendar year. |
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(d) A person is not eligible for a refund under this section |
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for a calendar year if the person will, as a taxable entity as |
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defined by Section 171.0002 or as a member of a combined group that |
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is a taxable entity, claim a credit under Subchapter N, Chapter 171, |
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on a franchise tax report covering any part of that year. |
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(e) To receive a refund under this section, a person must |
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apply to the comptroller in the manner prescribed by the |
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comptroller and include with the application any information |
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requested by the comptroller to determine whether the person is |
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eligible for the refund or the amount of the refund. |
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SECTION 2. Chapter 171, Tax Code, is amended by adding |
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Subchapter N to read as follows: |
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SUBCHAPTER N. TAX CREDIT FOR SMALL EMPLOYERS WHO CONTRIBUTE TO |
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INDIVIDUAL COVERAGE HEALTH REIMBURSEMENT ARRANGEMENT |
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Sec. 171.701. DEFINITIONS. In this subchapter, "individual |
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coverage health reimbursement arrangement" and "small employer" |
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have the meanings assigned by Section 151.4295. |
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Sec. 171.702. ENTITLEMENT TO CREDIT. A taxable entity is |
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entitled to a credit in the amount and under the conditions provided |
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by this subchapter against the tax imposed under this chapter. |
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Sec. 171.703. QUALIFICATION. A taxable entity qualifies |
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for a credit under this subchapter if the taxable entity: |
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(1) is a small employer; |
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(2) adopts an individual coverage health |
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reimbursement arrangement, in lieu of a traditional employer |
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provided health insurance plan, for the taxable entity's employees |
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for the entire period on which the report is based; and |
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(3) contributes to the individual coverage health |
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reimbursement arrangement an annual amount per covered individual |
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that is at least equal to: |
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(A) if the taxable entity previously contributed |
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to an employer provided health insurance plan, the annual amount |
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per covered individual the taxable entity contributed to the |
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employer provided health insurance plan for the last year the |
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taxable entity contributed to the plan; or |
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(B) if the taxable entity did not previously |
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contribute to an employer provided health insurance plan, the least |
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annual amount per covered individual the taxable entity would be |
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required to contribute to obtain any available employer provided |
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health insurance plan during the period on which the report is |
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based. |
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Sec. 171.704. INELIGIBILITY FOR CREDIT FOR CERTAIN PERIODS. |
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A taxable entity is not eligible for a credit on a report if the |
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taxable entity, or a member of the combined group if the taxable |
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entity is a combined group, received, for taxes paid under Chapter |
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151 during the period on which the report is based, a refund under |
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Section 151.4295. |
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Sec. 171.705. AMOUNT; LIMITATIONS. (a) The amount of the |
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credit for a report that is based on a period of one year is equal to |
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the product of $400 and the average number of covered individuals |
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for whom the taxable entity contributes to an individual coverage |
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health reimbursement arrangement during the period on which the |
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report is based. |
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(b) The amount of the credit for a report that is based on a |
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period other than one year is equal to a pro rata share of the amount |
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provided by Subsection (a) that reflects the duration of the period |
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on which the report is based. |
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(c) The total credit claimed for a report may not exceed the |
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amount of franchise tax due for the report after all other |
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applicable tax credits. |
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Sec. 171.706. APPLICATION FOR CREDIT. A taxable entity |
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must apply for a credit under this subchapter on or with the tax |
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report for the period for which the credit is claimed and include |
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with the application any information requested by the comptroller |
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to determine whether the taxable entity is eligible for the credit |
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or the amount of the credit. |
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SECTION 3. (a) Section 151.4295, Tax Code, as added by this |
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Act, applies only in connection with contributions to an individual |
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coverage health reimbursement arrangement made on or after January |
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1, 2026. |
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(b) A person may not file a claim for a refund under Section |
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151.4295, Tax Code, as added by this Act, before January 1, 2027. |
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SECTION 4. Subchapter N, Chapter 171, Tax Code, as added by |
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this Act, applies only to a report originally due on or after |
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January 1, 2027, and only in connection with contributions to an |
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individual coverage health reimbursement arrangement made on or |
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after January 1, 2026. |
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SECTION 5. This Act takes effect January 1, 2026. |