UPDATE, March 16, 2020, 5:49 p.m. Tax Credits for Private Employers in Families First Coronavirus Response Act

CATEGORY: Special Bulletins
CLIENT TYPE: Nonprofit, Private Education
PUBLICATION: LCW Special Bulletin
DATE: Mar 16, 2020

On March 14, 2020, at 12:51 am, in response to the COVID-19 pandemic, and in an effort to reduce the impact of the virus on American families, the House of Representative passed H.R. 6201, titled the Families First Coronavirus Response Act (the Act).  The bill will now move to the Senate, where it will be debated and voted upon.  If the bill passes in the Senate, President Trump will likely sign the bill into law, as he released a statement on March 14, announcing his full support of the bill.   It would become effective become effective within 15 days of the Act’s passage.  We will presumably learn the effective date when it is passed.

If signed into law as currently written, the Act would, among other things, expand the provisions for of the Family Medical Leave Act.  You can read about the FMLA and Paid Sick Leave provisions here:  https://www.lcwlegal.com/news/house-passes-families-first-coronavirus-response-act-bill-moves-to-senate-for-vote.  The Act would additionally provide tax credits for private employers to assist with covering sick leave payments made to employees who take time off under the FMLA expansion provisions.

However, state and local governments are not eligible to receive the credits.  Accordingly, if the Act passes in its current form, public agencies will need to comply with the new Paid Sick Leave and paid FMLA Leave, but it is yet to be determined if there will be any relief to help public agencies pay for the expanded entitlements.

The bill provides for a refundable tax credits of wages paid for qualified paid sick or family leave wages paid by an employer for each calendar quarter. The tax credit is allowed against the employer portion of Social Security taxes.  The employees’ share is not affected by the Act.  The Act applies to wages paid with respect to the period beginning on a date selected by the Secretary of the Treasury, which will be within the 15 window between the Act being signed and the Act going into effect through December 31, 2020.  Employers may elect not to receive the tax credits.

Paid Sick Leave Credit

For Paid Sick Leave, employers are eligible for a credit up to $511 per day while the employee is receiving paid sick leave to care for themselves, or $200 per day if the sick leave is to care for a family member or child if their school is closed. The credits may be taken for up to 10 days of leave for any calendar quarter.

Emergency Family Leave Credit

The payroll credit for Emergency Family Leave is limited to wages of as much as $200 per day while the employee is taking FMLA leave, or an aggregate of $10,000 for any calendar quarter.  This credit would also be refundable if it exceeded the amount the employer owed in payroll tax.  Additionally, employers are not eligible to receive the credit if they are also receiving a credit for paid family and medical leave under Internal Revenue Code Section 45S.

The Act also directs the Treasury Department to issue regulations or guidance to ensure employers do not manipulate the credit, to minimize compliance and record-keeping burdens, to waive penalties for underpayments in anticipation of the credit, and to establish a process to recapture credits when there is an adjustment.