State of Kansas.
FROM: Kathleen Sebelius, Commissioner of Insurance
DATE: March 17, 2000
The purpose of this bulletin is to advise all companies authorized to transact Accident and Health Insurance in the State of Kansas of the passage of House Bill 2090 this past legislative session. House Bill 2090 amends K.S.A. 40-2239, 40-2240,40-2242, 40-2246 and K.S.A. 1998 Supp. 40-2241. The bill also repeals the existing sections in addition to repealing K.S.A. 40-2244 and 40-2245. The new law took effect on July 1, 1999. Small businesses obtaining a certificate to the refundable credits may begin claiming the refundable tax credits January 1, 2000.
This law allows qualifying small businesses to take advantage of refundable tax credits for providing health insurance to eligible employees. The refundable credits last for five years. For the first two years, the refundable credit is worth $35 per covered eligible employees or 50% of the total premiums paid by the business on behalf of its covered eligible employees, whichever is less. In the third year, the refundable tax credit is equal to 75% of $35 per covered eligible employee per month or 75% of 50% of the total premiums paid by the business on behalf of its covered eligible employees.
To qualify for the refundable tax credits, the small business must have between two (2) and fifty (50) employees that are employed for an average of thirty (30) hours per week. The small business must have also not have contributed to a health insurance premium on behalf of an employee in the last two years. The two year period runs backward from the date of application to the Kansas Insurance Department to utilize the refundable tax credits. The refundable tax credit may not be claimed for family members of employees that are covered under the employer’s health insurance plan.
A small business that wants to take advantage of the refundable credits must first make application to the Kansas Insurance Department. An application can be obtained by contacting Craig VanAalst at (785) 296-3765. Upon receipt of an application, the Commissioner will either approve or disapprove the application within 10 days. If an application is approved, the Commissioner will issue a Certificate to the applicant. The applicant may begin making premium payments for eligible employees on the date that the Commissioner issues the Certificate (unless the Certificate is issued prior to January 1, 2000).
In order to maximize use of the refundable tax credits small businesses should begin making premium payments for eligible employees at the beginning of their tax year.
When the small business files its tax return, the return must be accompanied by Kansas Department of Revenue Form K-57 and a Verification form obtained through the Kansas Insurance Department. The Verification form must be signed by the insurance agent with which the small business has obtained its health insurance. The agent must verify the number of months coverage was provided by the employer to the employees and the number of employees covered. Coverage must be provided for over one-half the days in a month for the employer to be able to utilize the refundable tax credits. The refundable tax credits may not be claimed for a month where coverage was not provided to the employee for less than half the days in a month.
The tax credit is used to offset corporate income tax due if the small business is a “C” corporation. If the “C” corporation does not owe any income tax, the refundable tax credit will be refunded to the corporation. If the small business is an “S” corporation or a partnership, shareholders or partners may utilize the credits against income tax due on their personal income tax returns in proportion to their ownership share. If the credit exceeds the taxes imposed for the taxable year, that portion of the credit, which exceeds those taxes, will be refunded.
If you have any questions or comments regarding the information contained herein, please direct them to Craig VanAalst (785-296-3765) or Rebecca Sanders (785-296-6664), at the Kansas Insurance Department, 420 S.W. Ninth Street, Topeka, Kansas, 66612.
Commissioner of Insurance