An Act to amend 71.05 (6) (a) 15., 71.21 (4) (a), 71.26 (2) (a) 4., 71.34 (1k) (g) and 71.45 (2) (a) 10.; to create 71.07 (4y), 71.10 (4) (em), 71.28 (4y), 71.30 (3) (am), 71.47 (4y) and 71.49 (1) (am) of the statutes; Relating to: tax credit for small businesses offering individual coverage health reimbursement arrangements. (FE)
SB896 creates a new Wisconsin income and franchise tax credit for small businesses that offer individual coverage health reimbursement arrangements, or individual coverage HRAs, to employees. The credit is worth $400 per covered employee, and it applies only to taxable years beginning after December 31, 2025. To qualify, a business must employ at least one and no more than 50 employees during the taxable year and must contribute at least $400 per covered employee to the HRA during that year.
The bill defines an individual coverage HRA by reference to federal regulations and requires the arrangement to meet federal conditions, including that covered employees be enrolled in individual health insurance coverage or Medicare and be allowed to opt out. The credit is structured to apply across Wisconsin’s major business tax types: individual income tax, corporate income/franchise tax, tax-option corporations, partnerships, limited liability companies, and insurance-related taxes, with conforming changes to the statutes that govern how such credits are claimed, passed through, and added back to income where applicable.
SB896 would add new credit provisions to Wisconsin’s tax code in multiple chapters, creating parallel credits for pass-through entities, corporations, and insurers while also amending existing add-back and administration statutes to account for the new credit. In practical terms, it would reduce state tax liability for eligible small employers that finance individual coverage HRAs, while leaving the credit capped at the amount of tax otherwise due. The bill would also tie state eligibility to federal HRA rules, so the state credit would operate only where the employer benefit already satisfies federal health coverage requirements.
The bill appears generally supportive of small-business health benefit expansion, with its design suggesting an incentive-based approach rather than a regulatory mandate. The available record shows no committee transcript debate or recorded votes, so there is no documented opposition or amendment activity in the provided materials. Its final status indicates it failed to pass pursuant to Senate Joint Resolution 1, despite being introduced with multiple legislative cosponsors.
The main policy issue embedded in the bill is whether the state should subsidize employer-provided health coverage through a targeted tax credit, particularly for firms with 50 or fewer employees. Potential points of contention include the fiscal cost to the state, whether the $400-per-employee credit is sufficient to influence employer behavior, and whether the benefit should be limited to businesses that already contribute at least $400 per covered employee. Another possible issue is the bill’s reliance on federal HRA rules, which may make the credit more complex for employers to claim and administer.