Effect of Sequestration on Small Business Health Care Tax Credit


Pursuant to the requirements of the Balanced Budget and Emergency Deficit Control Act of 1985, as amended, refund payments issued to, and credit elect and refund offset transactions for certain small tax-exempt employers claiming the refundable portion of the Small Business Health Care Tax Credit under Internal Revenue Code Section 45R, are subject to sequestration. This means that refund payments and credit elect, and refund offset transactions processed on or after October 1, 2020 and on or before September 30, 2021 will be reduced for fiscal year 2021 at the 5.7 percent sequestration rate, irrespective of when the IRS received the original or amended tax return. The sequestration reduction rate will be applied unless and until a law is enacted that cancels or otherwise affects the sequester, at which time the sequestration reduction rate is subject to change.

Affected taxpayers will be notified through correspondence that a portion of their requested payment was sequestered and the amount.

Yearly Sequestration Rate Reduction

Fiscal Year (October 1 thru September 30) Sequestration Rate Reduction
2021 5.70%
2020 5.90%
2019 6.20%
2018 6.60%
2017 6.90%
2016 6.80%
2015 7.30%
2014 7.20%
2013 8.70%