A closer look at the Massachusetts Wellness Tax Credit

Your company wellness program may qualify for a new tax credit

By Rose Dello Russo, CPA, MST, with Elissa Hudspeth

Did you know that nearly half of all full-time employees in the US are considered overweight or obese? Numerous studies have shown that living a healthier lifestyle helps decrease the risk of developing chronic diseases, and allows those already living with chronic diseases to manage them better.

The Commonwealth of Massachusetts recently passed legislation that encourages employers to implement wellness programs by offering a wellness tax credit. Wellness programs are designed to improve and maintain employees' health and overall well-being by providing activities, support and encouragement within the workplace.

Beginning with the January 2013 tax year, businesses with 200 or fewer workers that provide healthcare benefits can qualify for the new tax credit. The credit may be used to offset up to 25% of the costs of creating a certified wellness program.

Before claiming the credit, a business must first be certified by the Department of Public Health and include the certificate with the income tax return. The certificate will include the dollar amount of the credit allotted to the taxpayer. Qualified businesses must reapply every year to maintain their DPH certification.

There are eight required components that a wellness program must demonstrate in order to receive DPH approval.

  1. An annual budget detailing expenditures – the budget can include program costs, incentive costs, and even the salaries of person(s) planning and managing initiative.
  2. A designated "Wellness Champion" – this is the person who will be responsible for implementing and managing the program.
  3. Awareness and education – to keep everyone informed about what wellness activities are available, how to participate, and the importance of living a healthy lifestyle.
  4. Health assessments -- providing employees with biometric screenings and/or health-risk assessments help in determining employee health status and individual progress.
  5. Collecting data about employee interests – topics such as tobacco use, blood pressure, weight control, exercise, diabetes, stress, substance abuse, workplace safety, and nutrition, for example.
  6. Ranking employee interests -- identifying the most important health issues and/or interests of employees can be accomplished through the use of focus groups or surveys.
  7. Building a responsive wellness program – the planned initiative should be based on health issues that are most important to employees. An effective program should address both employees' health behaviors and a healthy workplace environment.
  8. Participation – at least one third of employees must participate in at least one element of the wellness program. Of course, participation must be completely voluntary.

The maximum credit that can be claimed is $10,000. That means that up to $40,000 can be used towards a wellness program by employers. This credit is available to sole proprietors, professions, trades, businesses, and partnerships, and must be based in Massachusetts or have employees that conduct business in Massachusetts. Further, employers must be compliant with Massachusetts General Laws and with the Occupational Safety and Health Administration. The credit is set to expire on December 31, 2017.

Please note that this credit is non-refundable and non-transferable, but any amount of the credit that exceeds the tax for the taxable year may be carried forward for five years. It can also flow through an entity, such as a partnership, limited liability company, or s-corporation; however, the end user must be filing a Massachusetts tax return to enjoy the benefit of the credit.

The Massachusetts Department of Health provides some guidance related to the application process of the certificate. There is even a model guide that employers can use to develop their own wellness program. Resources for the wellness tax credit can be found at http://www.mass.gov/wellnesstaxcredit.

To learn more about the Massachusetts Wellness Tax Credit and how your company might qualify, feel free to contact us. We can help determine the approach that is right for your particular situation.

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Rose Dello Russo is a Tax Senior at Rucci Bardaro & Falzone. Elissa Hudspeth is a student at Suffolk University and is interning at RBF. Rose can be reached at 781-321-6065 or rosed@rbfpc.com.