Tax Credits Remain in Place for Employers Who Provide COVID-19 Leave

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Spilman Thomas & Battle, PLLC

The Families First Coronavirus Relief Act ("FFCRA") that mandated two weeks of paid sick leave for COVID-19 reasons – and extended the FMLA by protecting leave relating to the need for child care because of COVID-19 – expired at the end of 2020. The stimulus package that was passed at the very end of 2020 extended the payroll tax subsidy for employers offering workers paid sick leave, but did not extend the mandate. While employers are no longer required to provide paid sick leave, or additional FMLA leave, for COVID-19 reasons (unless required to do so by state or local law), you can choose to do so and claim a federal tax credit for leave taken by March 31, 2021.

Importantly, while the tax credit is extended, this does NOT create a new “bucket” of leave; employees receive 80 hours of paid sick leave total. If an employee used all of those hours in 2020, employers cannot take a tax credit for additional leave provided to that employee in 2021. If an employee used only 50 hours of FFCRA leave, then the available tax credit is capped at the remaining 30 hours. 

Also, you do not get to pick and choose which types of leave you will provide and still take the tax credit. In other words, if you want to claim the tax credit, you have to offer leave for all six of the FFCRA reasons and not just where the employee is actually sick. You also are bound by the anti-retaliation provisions of the FFCRA for as long as you claim a tax credit.  

But before you think we are done with this issue, the new administration has proposed (see FACT SHEET) reinstating the FFCRA through September of this year in expanded form. The revised FFCRA would apply to pretty much all employers regardless of size, and would remove the partial exemption for very small (fewer than 50 employees) employers and the right to exclude healthcare workers and first responders. Employers with fewer than 500 employees would have access to the tax credit to help pay for the leave. The plan also would allow employees to take:

over 14 weeks of paid sick and family and medical leave to help parents with additional caregiving responsibilities when a child or loved one’s school or care center is closed; for people who have or are caring for people with COVID-19 symptoms, or who are quarantining due to exposure; and for people needing to take time to get the vaccine.

We make no predictions on whether this will pass Congress, or what form it will take if it does, but we will keep monitoring the status of the legislation.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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