WorldWide Drilling Resource

50 SEPTEMBER 2015 Drilling Into Money Not Boring by Mark E. Battersby As the ACA Stands After SCOTUS The U.S. Supreme Court (SCOTUS) in King v. Burwell , ruled the tax subsidies for health insurance provided by the federal government, in the form of the Affordable Care Act (ACA), to citizens in the 34 states that have not established the health insurance marketplaces or exchanges were legal. This means some 6 million people, including the nearly 3.5 million people in small business plans and small business owners, self-employed professionals, and early retirees who de- pend on subsidized health care costs, will continue to receive them. The subsidies, available to anyone who earns 100-400% of the poverty level will, for many, continue to reduce the cost of insurance. Unfortunately, escalating insurance costs have already begun impacting drilling professionals and others who do not qualify for subsidies. It’s safe to say the smaller the businesses, the better the tax breaks. After all, the ACA provides small drilling operations with affordable insurance options, cost assistance, and increased buying power via the Small Business Health Options Program (SHOP). Small drilling businesses, those with fewer than 25 FTEs (full-time equivalents), paying average annual wages below $50,000, qualify for tax credits to help pay employee healthcare premiums. Employers with 10 or fewer full-time employees, paying annual average wages of $25,000 or less, qualify for the maximum credit of 50%. The amount employers do pay is tax deductible and can be carried forward or backward. Retroactive to January 1, 2014, and through at least 2015, 2% shareholders in a drilling business operating as an S Corporation can receive reimbursement for their individual health insurance premiums. Even better, the S Corporation will not be subject to the excise tax penalty if it correctly includes the health insurance premiums on the 2% shareholders’ W-2. The 2% shareholder must report the income as wages, but will be allowed to take a self-employed health insurance deduction. Last year, many small employers were shocked to learn employee payment plans, plans under which they reimbursed employees for the cost of obtaining indi- vidual health insurance, violated the ACA rules, and they risked a $100-per-day-per- affected-employee excise tax if they con- tinued using the arrangements. Congress is now considering legislation to make the Internal Revenue Service reconsider this penalty. According to a report from the Urban Institute, a Washington D.C.-based think tank, small businesses are among those most vulnerable to today’s steep health- care cost increases. Skyrocketing health- care costs are all-the-more reason to seek professional assistance in dealing with the complex, confusing, and ever-changing ACA. Mark Mark E. Battersby may be contacted via e-mail to michele@ worldwidedrillingresource.com WorldWide Drilling Resource ®