Small Business Health Care Tax Credit Filing Deadline is May 15

In December, 2010, the Internal Revenue Service (IRS) released guidance on how employers may be eligible to claim the small-business health care tax credit starting with the 2010 tax year. The health care tax credit was created as part of the 2010 Affordable Care Act. Since the tax credit was introduced, only a few credit unions have taken advantage of the program.

But one Northwest credit union that leveraged the tax credit, received a check from the IRS for almost $7,000 for the 2011 tax year.

As Debie Keesee, CEO of Spokane Media Federal Credit Union stated, “Credit unions only have to do a few parts of the 990T and fill out Form 8941. Neither form is complex and only takes a little time.  We received $1,100 back from the IRS for less than 45 minutes of time to fill out the forms.  Everyone would consider that well worth the time investment.”

The tax credit is available only to smaller credit unions, and credit unions must meet certain requirements to qualify. First, the credit union must pay premiums for employee health insurance coverage under a qualified plan. Second, the credit union must have fewer than 25 full-time equivalent (FTE) employees for the tax year. And third, the credit union must pay an average wage of less than $52,000 per FTE.

The current maximum credit of 35 percent of insurance premiums paid will go to credit unions with 10 or fewer FTE and average annual wages of $25,000 or less. The calculation for the tax credit phases out as the credit union’s FTE count and average salaries increase.

Both state and federal credit unions may receive the refundable tax credit, which could mean the IRS sends the credit union a check in the mail. To file a claim for the credit, credit unions must complete the IRS Form 8941 and fill out the revised Form 990-T.

“Based on staff size, over 100 Northwest credit unions may qualify for this tax credit,” said Northwest Credit Union Association (NWCUA) Director of Compliance Services David Curtis. “And receiving a tax credit could go a long way when you have limited resources.”

Executives exploring whether their credit union may be eligible should seek detailed information from their accountants or tax advisors. To learn more about this credit, check out the Small Business Health Care Tax Credit: Detailed Analysis that is available in the Tax Issues Channel of InfoSight.  The InfoSight page contains some background on the credit, an easy formula to determine if your credit union is eligible, and links to the various IRS forms.

In addition, more information is available from the IRS regarding the Small Business Health Care Tax Credit for Small Employers.

Compliance Question of the Week

What is the BSA Travel Rule?

The Bank Secrecy Act has a provision that requires financial institutions to include certain information on transmittal orders for funds transfer of $3,000 or more.  This is commonly referred to as the “Travel Rule.”

For each payment order in the amount of $3,000 or more that a financial institution accepts as an originator’s financial institution, the institution must obtain and retain the following records:

  • Name and address of the originator.
  • Amount of the payment order.
  • Date of the payment order.
  • Any payment instructions.
  • Identity of the beneficiary’s institution.
  • As many of the following items as are received with the payment order:
    • Name and address of the beneficiary.
    • Account number of the beneficiary.
    • Any other specific identifier of the beneficiary.

From a practical standpoint, credit unions will obtain most of this information when a funds transfer is initiated by one of its members. When the credit union accepts a funds transfer for one its members (as the beneficiary institution), it must retain a record of the payment order.

The definition of funds transfers under this rule specifically excludes electronic fund transfers under the EFTA (Reg E), as well as any other funds transfers that are made through an automated clearing house, automated teller machine, or a point-of-sale system.

Related Links:

Legal Briefs

National Credit Union Administration (NCUA)

The NCUA released a statement highlighting the importance of education during National Financial Literacy Month. The NCUA’s statement includes information on various education resources that are available to consumers.

The NCUA issued Letter to Credit Unions 17-CU-02 which provides guidance regarding the updated list of compliance risk indicators that are part of the NCUA’s Risk-Focused Examination Program.

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Consumer Financial Protection Bureau (CFPB)

The CFPB’s Monthly Snapshot details credit card complaints and consumer complaints from Massachusetts.

CFPB Director Cordray delivered prepared remarks at the National Community Reinvestment Coalition Conference. Cordray’s remarks focused on various issues consumers face regarding access to credit and how the CFPB can help.

CFPB Director Cordray delivered prepared remarks at the Chamber of Commerce 11th Annual Capital Market Summit. Cordray’s remarks focused on the improvements made to the mortgage market as well as the CFPB’s regulatory implementation approach.

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Federal Trade Commission (FTC)

The FTC announced the release of its 2016 Annual Highlights, which includes highlights on enforcement actions, policy issues, and statistics.

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Office of the Comptroller of the Currency (OCC)

OCC Comptroller Curry delivered remarks to the National Community Reinvestment Coalition regarding the OCC’s work to promote a banking system capable of meeting the needs of consumers and communities throughout the nation.

The OCC issued Alert 2017-4 alerting the industry to fictitious emails being sent to consumers regarding funds under control of the OCC. The OCC alerts reminds the industry and consumers that the OCC does not transfer funds for, or on behalf of, individuals, business enterprises, or governmental entities.

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Federal Housing Finance Agency (FHFA)

The FHFA announced that mortgage rates increased during February 2017.

The FHFA released a progress report that summarizes the 2016 activities of Fannie Mae and Freddie Mac.

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Office of Foreign Assets Control (OFAC)

OFAC has updated the SDN list as of March 31, 2017. The last update prior to this was March 30, 2017.

Questions? Contact the Compliance Hotline: 1.800.546.4465, compliance@nwcua.org.

Posted in Compliance News.