Congress-Passed Omnibus Trade Act Of 2010 Includes Health Care Tax Credit And Large Corporate Estimated Tax Changes

On December 22, the House and Senate by unanimous consent approved H.R. 6517, the Omnibus Trade Act of 2010 (Trade Act), clearing the bill for the President's signature. The bill amends the Trade and Globalization Adjustment Assistance Act of 2009, and also makes changes to the refundable health coverage tax credit (HCTC) under Code Sec. 35 and to estimated taxes of large corporations in 2015.

HCTC changes. Under pre-Trade Act law, an “eligible individual” (e.g., an eligible trade adjustment allowance (TAA) recipient) could claim a refundable HCTC equal to 80% (65% for “coverage months” beginning after 2010) of the amount paid by the taxpayer for coverage of the taxpayer and qualifying family members (spouse and dependents) under qualified health insurance for eligible coverage months beginning in the tax year. For eligible coverage months beginning before Jan. 1, 2011, qualifying family members could continue claiming the HCTC for up to 24 months after the eligible individual enrolls in Medicare, divorces, or dies.

New law. The Trade Act keeps the HCTC percentage at 80% for eligible coverage months beginning before Feb. 13, 2011. (Code Sec. 35(a), as amended by Trade Act Sec. 111(a)) The Trade Act also provides that for eligible coverage months beginning before Feb. 13, 2011, qualifying family members may continue claiming the HCTC for up to 24 months after the eligible individual enrolls in Medicare, divorces, or dies. (Code Sec. 35(g)(9), as amended by Trade Act Sec. 115(a)) A number of conforming extensions are made, e.g., to Code Sec. 35(c)(2)(B), Code Sec. 35(e)(1)(K), Code Sec. 7527(e), and Code Sec. 9801(c)(2)(D).

Estimated tax change. For large corporations (those with assets of at least $1 billion determined as of the end of the previous tax year), Sec. 561(2) of the Hiring Incentives to Restore Employment Act (HIRE Act, P.L. 111-147) increases the percentage of any required installment of corporate estimated tax which is otherwise due in July, Aug., or Sept. of 2015. The Trade Act increases the percentage under Sec. 561(2) of the HIRE Act in effect on the enactment date by 4.5 percentage points. (Trade Act Sec. 302)