89R8839 BEF-F     By: Kolkhorst S.B. No. 1949       A BILL TO BE ENTITLED   AN ACT   relating to a refund of sales and use taxes or a credit against the   franchise tax for certain small employers who contribute to an   individual coverage health reimbursement arrangement.          BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:          SECTION 1.  Subchapter I, Chapter 151, Tax Code, is amended   by adding Section 151.4295 to read as follows:          Sec. 151.4295.  TAX REFUND FOR SMALL EMPLOYERS WHO   CONTRIBUTE TO INDIVIDUAL COVERAGE HEALTH REIMBURSEMENT   ARRANGEMENT. (a)  In this section:                (1)  "Individual coverage health reimbursement   arrangement" means a health reimbursement arrangement or other   account-based group health plan that satisfies the conditions of 45   C.F.R. Section 146.123 to be integrated with individual health   insurance coverage or with Medicare, as applicable.                (2)  "Small employer" means a person who employed an   average of at least one employee but not more than 50 employees on   business days during the preceding calendar year. The term includes   a governmental entity subject to Article 3.51-1, 3.51-4, or 3.51-5,   Insurance Code, to Subchapter C, Chapter 1364, Insurance Code, to   Chapter 1578, Insurance Code, or to Chapter 177, Local Government   Code, that otherwise meets the requirements of this subdivision.     For purposes of this definition, a partnership is the employer of a   partner.          (b)  Except as provided by Subsection (d), a person is   eligible for a refund in an amount determined under Subsection (c)   of the taxes the person paid under this chapter during a calendar   year if the person:                (1)  is a small employer;                (2)  adopts an individual coverage health   reimbursement arrangement, in lieu of a traditional employer   provided health insurance plan, for the person's employees for the   calendar year; and                (3)  contributes to the individual coverage health   reimbursement arrangement an amount per covered individual for the   calendar year that is at least equal to:                      (A)  if the person previously contributed to an   employer provided health insurance plan, the annual amount per   covered individual the person contributed to the employer provided   health insurance plan for the last year the person contributed to   the plan; or                      (B)  if the person did not previously contribute   to an employer provided health insurance plan, the least annual   amount per covered individual the person would be required to   contribute to obtain any available employer provided health   insurance plan for the same calendar year.          (c)  The amount of the refund for a calendar year is equal to   the lesser of:                (1)  the product of $400 and the average number of   covered individuals for whom the person contributes to an   individual coverage health reimbursement arrangement during the   calendar year; and                (2)  the total amount of the taxes the person paid under   this chapter during the calendar year.          (d)  A person is not eligible for a refund under this section   for a calendar year if the person will, as a taxable entity as   defined by Section 171.0002 or as a member of a combined group that   is a taxable entity, claim a credit under Subchapter N, Chapter 171,   on a franchise tax report covering any part of that year.          (e)  To receive a refund under this section, a person must   apply to the comptroller in the manner prescribed by the   comptroller and include with the application any information   requested by the comptroller to determine whether the person is   eligible for the refund or the amount of the refund.          SECTION 2.  Chapter 171, Tax Code, is amended by adding   Subchapter N to read as follows:   SUBCHAPTER N. TAX CREDIT FOR SMALL EMPLOYERS WHO CONTRIBUTE TO   INDIVIDUAL COVERAGE HEALTH REIMBURSEMENT ARRANGEMENT          Sec. 171.701.  DEFINITIONS. In this subchapter, "individual   coverage health reimbursement arrangement" and "small employer"   have the meanings assigned by Section 151.4295.          Sec. 171.702.  ENTITLEMENT TO CREDIT. A taxable entity is   entitled to a credit in the amount and under the conditions provided   by this subchapter against the tax imposed under this chapter.          Sec. 171.703.  QUALIFICATION. A taxable entity qualifies   for a credit under this subchapter if the taxable entity:                (1)  is a small employer;                (2)  adopts an individual coverage health   reimbursement arrangement, in lieu of a traditional employer   provided health insurance plan, for the taxable entity's employees   for the entire period on which the report is based; and                (3)  contributes to the individual coverage health   reimbursement arrangement an annual amount per covered individual   that is at least equal to:                      (A)  if the taxable entity previously contributed   to an employer provided health insurance plan, the annual amount   per covered individual the taxable entity contributed to the   employer provided health insurance plan for the last year the   taxable entity contributed to the plan; or                      (B)  if the taxable entity did not previously   contribute to an employer provided health insurance plan, the least   annual amount per covered individual the taxable entity would be   required to contribute to obtain any available employer provided   health insurance plan during the period on which the report is   based.          Sec. 171.704.  INELIGIBILITY FOR CREDIT FOR CERTAIN PERIODS.   A taxable entity is not eligible for a credit on a report if the   taxable entity, or a member of the combined group if the taxable   entity is a combined group, received, for taxes paid under Chapter   151 during the period on which the report is based, a refund under   Section 151.4295.          Sec. 171.705.  AMOUNT; LIMITATIONS. (a) The amount of the   credit for a report that is based on a period of one year is equal to   the product of $400 and the average number of covered individuals   for whom the taxable entity contributes to an individual coverage   health reimbursement arrangement during the period on which the   report is based.          (b)  The amount of the credit for a report that is based on a   period other than one year is equal to a pro rata share of the amount   provided by Subsection (a) that reflects the duration of the period   on which the report is based.          (c)  The total credit claimed for a report may not exceed the   amount of franchise tax due for the report after all other   applicable tax credits.          Sec. 171.706.  APPLICATION FOR CREDIT. A taxable entity   must apply for a credit under this subchapter on or with the tax   report for the period for which the credit is claimed and include   with the application any information requested by the comptroller   to determine whether the taxable entity is eligible for the credit   or the amount of the credit.          SECTION 3.  (a) Section 151.4295, Tax Code, as added by this   Act, applies only in connection with contributions to an individual   coverage health reimbursement arrangement made on or after January   1, 2026.          (b)  A person may not file a claim for a refund under Section   151.4295, Tax Code, as added by this Act, before January 1, 2027.          SECTION 4.  Subchapter N, Chapter 171, Tax Code, as added by   this Act, applies only to a report originally due on or after   January 1, 2027, and only in connection with contributions to an   individual coverage health reimbursement arrangement made on or   after January 1, 2026.          SECTION 5.  This Act takes effect January 1, 2026.