By DAVID BERTOLA
dbertola@bizjournals.com | 716-541-1621

While there are health-care tax credits provided under the Patient Protection and Affordable Care Act, experts say only the smallest of small businesses will benefit from them because they weren't designed for those that are successful or stable.

Ray Nowicki, CPA, is managing partner of Nowicki and Co. LLP CPAs in West Seneca. He said the tax credit would provide virtually no benefit to many of his approximately 400 clients.

Using New York's $7.25 minimum wage, he calculated a $15,080 annual salary.

"The poverty-level guidelines for a family of four is $22,050, so someone making $25,000 a year is making about $12 an hour," Nowicki said, citing small restaurants and farms as those he suspects would be eligible for it. "I am wondering how many companies are likely to benefit from this tax credit."

Russ Boisjoly, dean of the school of business at Fredonia State College, said there's a hole in the legislation that doesn't account for stable small businesses.

"The problem I see isn't that it doesn't work for small business," Boisjoly said. "Instead, let's open the tent a little wider to get more small businesses and disadvantaged small businesses into the pool."

He gave an example of a business owner with 10 to 15 employees and takes from it his or her entire income - $250,000 to $500,000.

"They don't get the tax credit. That argument is something the Republicans pressed the Democrats on to renew the Bush tax changes," he said.

Two-thirds to three-quarters of new jobs are created by these kinds of small businesses, he said: companies with multiple regional locations or startup, Internet-based companies that grow quickly.

"One day they have 20 people, then two months later they have 200 people," Boisjoly said. "Those are exactly the kinds of organizations that you want to have in the plan."

But that's not who the tax credits are intended for, said Jorge Silva-Puras, regional director, U.S. Small Business Administration.

"The smaller the business, the more benefit the bill will provide in terms of tax credits," he said. "Data showed that it is the smallest businesses, those with fewer than 10 (full-time) employees, that the full extent of the credit applies. That is the purpose or the main goal."

Larger, established companies such as Nowicki's, he added, already offer some kind of health coverage.

Another is Applied Sciences Group Inc. in Cheektowaga. President Paul Buckley expects few provisions of the act to directly affect his company. He said New York already required many of the oversight and safety-net provisions from insurers that had been built into the Patient Protection and Affordable Care Act.

He said Applied Sciences Group is either too large to take advantage of the subsidies or too small to be affected by any penalties.

"We'll continue to provide health insurance benefits to our 35-plus employees, so the act's future provisions regarding employer penalties and subsidies do not apply," Buckley said. "It is likely the act's direct impact on my company will be minimal."

Nowicki, meanwhile, said his firm has about 400 clients and he estimates less than 5 percent of them would benefit from the tax credit.

He also said there are costs involved to compute it. His firm recently added a worksheet for clients to test their likelihood of being eligible.

"They need to fill it out, then we need to review it, make sure the data is right, then do the computation for eligibility," he said, adding that he would have preferred to see more provisions for already-established small businesses like his and Buckley's.

"Nowicki and Co. does not qualify for the credit, despite the fact the we have fewer than 10 employees, because we offer good-paying jobs," he said.

Who qualifies?

The Patient Protection and Affordable Care Act was signed into law March 23, 2010, by President Obama and amended by the Health Care and Education Reconciliation Act of 2010. The goal was to make insurance more affordable and comprehensive.

Among the provisions of the Patient Protection and Affordable Care Act are tax credits. According to the Internal Revenue Service, the maximum credit (35 percent) is available to employers with no more than 10 full-time equivalent employees with annual full-time equivalent wages from the employer of less than $25,000.

There are several criteria for a small business to qualify for a tax credit of up to 35 percent of their health insurance costs for the 2010 tax year. Among criteria listed at irs.gov are:

• The employer must have 25 or fewer full-time equivalent employees.

• The average annual wages for the year must be less than $50,000 per full-time equivalent employee.

-David Bertola