State RegulationsCA specific✓ Verified · outline & fact-checked · Sep 2026Difficulty 3/5
A California small employer with 25 or fewer employees may claim the federal small business health care tax credit only if:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
To qualify for the federal small business health care tax credit, a California employer with 25 or fewer full-time-equivalent employees must purchase coverage through Covered California for Small Business (CCSB), the state's small business exchange. The employer must pay a substantial share of the premiums and the plan must be a QHP offered through the exchange. This CCSB requirement is a California-specific procedure examined under AH-III.B.3, which pairs small group guaranteed issue with the tax credit rules and QSEHRA/ICHRA alternatives.
Why the other options are wrong
- B) Self-funded plans do not qualify for the exchange-based small employer tax credit, which requires a QHP purchased through CCSB.
- C) The credit assumes the employer contributes meaningfully to premiums; employees paying everything disqualifies the employer.
- D) The credit is available only for coverage purchased through CCSB, not directly from any insurer.
Memory hook
To get the small business tax credit in California, buy through CCSB.