10/11/2012 06:11 pm ET

Obamacare Small Business Tax Credit For Health Care: Companies Uninterested, Despite IRS Efforts

If the IRS wants to say the Small Business Health Care Tax Credit is a total fail, it has a funny way of saying it.

Last spring, the IRS went on a PR blitz to promote the tax credit, reaching out to employers with a YouTube video, Q&As, informational flyers and more. And in September, the IRS testified before Congress that the agency had taken every step possible to promote the Obamacare health care tax credit to small business employers.

But according to the conservative tax policy group Americans for Tax Reform, those actions are actually the agency's veiled way of passing the buck. In a recent op-ed in the conservative publication Heartlander, the tax group blasted the IRS' testimony, saying, "In Washington, D.C.-speak, that can be summed up rather succinctly: 'When this fails, don't blame us.'”

It's true that the tax credit has failed to attract many takers. It is estimated that between 1.4 million and 4 million small businesses are eligible, but last May the Government Accountability Office reported that only 170,300 firms actually claimed the credit in 2010, according to The New York Times.

Between 2010 and 2013, the credit allows eligible companies to collect a refund of 35 percent of health insurance expenses. After 2014, that tax credit jumps to 50 percent. The 50 percent credit can be used for any two consecutive years, The New York Times reported.

But all things considered, those tax savings won't add up to much for small businesses, according to a new report released this week from the policy think tank Urban Institute. The report showed that for small businesses with fewer than 100 employees, Obamacare rules save them a whopping 1.4 percent in employer costs when the regulations are fully implemented.

While any savings are savings, applying for the credit may be too much of a headache for small businesses to undertake for such a small gain. The GAO found in its report earlier this year that applying for the credit could take between six and eight hours of tax prep time.

So what's the lesson here? It's not that small business owners have mixed feelings about Obamacare (we knew that already).

The lesson of this story is that time is money. Small business' lackluster response suggests eight hours of work just isn't worth the meager cost savings. In the case of the Small Business Health Care Tax Credit, the GAO suggested that the credit was simply not a large enough incentive for small business owners to reach out for the tax relief.

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