State RegulationsCA specific✓ Verified · outline & fact-checked · Sep 2026Difficulty 2/5
A California small employer with 25 or fewer employees may qualify for the federal small business health care tax credit only if it:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
The federal small business health care tax credit is available to employers with 25 or fewer full-time equivalent employees who pay average annual wages below the statutory threshold and who purchase coverage through a Small Business Health Options Program (SHOP) exchange. In California, the SHOP exchange is Covered California for Small Business (CCSB). A California employer must buy the qualified health plan through CCSB to receive the credit. Self-insuring, buying out-of-state association plans, or offering no coverage does not qualify for the credit.
Why the other options are wrong
- B) Self-insured employers do not purchase QHPs through the exchange, so they do not qualify for the exchange-based small business tax credit.
- C) An out-of-state association plan is not purchased through CCSB and does not satisfy the requirement to obtain coverage through the SHOP exchange.
- D) An employer that offers no coverage is not providing health insurance at all and cannot claim a health care coverage tax credit.
Memory hook
Small business credit flows through CCSB. No CCSB purchase, no credit.