Brief Summary of Tax Provisions in Families First Coronavirus Response Act (H.R. 6201)
Tax Credits for Paid Sick and Paid Family and Medical Leave
- The Act provides 100 percent refundable tax credits to employers with regard to two categories of paid sick and family leave (described below) that employers must grant to employees under the Act to address employment interruptions related to COVID-19.
- The tax credits will be administered by the IRS and be creditable against employer-side payroll tax liability, with any excess refunded to the employer.
- Refundable tax credits similar in scope and amount will be available to self-employed workers facing the same employment interruptions.
- Payments to employees will be taxable income to the employees and subject to employee-side payroll taxes, but not subject to the employer portion of payroll taxes.
- The provision applies for the period that begins on a date within 15 days of the date of enactment, prescribed by the Secretary of the Treasury (or his delegate), and that ends on December 31, 2020.
- The Act provides that Treasury make payments to U.S. territories (e.g., the U.S. Virgin Islands) for their costs of these credits.
Payroll Tax Credit for “Qualified Sick Leave Wages”
- Under the Act, certain employers are required to provide 80 hours (or 2 weeks) of fully paid leave to full-time employees (pro-rata rules apply to part-time employees) on top of any other existing paid leave program of the employer to cover employees not working for the following reasons:
(1) the employee is subject to a Federal, State, or local quarantine or isolation order related to coronavirus;
(2) the employee has been advised by health care provider to self-quarantine due to coronavirus;
(3) the employee is experiencing symptoms of coronavirus;
(4) the employee is caring for an individual who is subject to an order described in (1) or has been advised as described in (2);
(5) the employee is caring for their child because the school is closed or child care provider is unavailable due to coronavirus; or
(6) the employee is experiencing a similar condition specified by Secretary of HHS.
- Employers are required to pay employees their full wages, not to exceed $511 per day and $5,110 in the aggregate, for a use described in (1), (2), or (3) above.
- Employers are required to pay employees two-thirds of their wages, not to exceed $200 per day and $2,000 in the aggregate, for a use described in (4), (5), or (6) above.
- Employers are entitled to 100 percent refundable payroll tax credit on the wages required to be paid.
- The requirement to provide the paid leave applies to all public sector employers and those private sector employers with less than 500 employees. The tax credit eligibility applies to those private sector employers with less than 500 employees. Under existing law, separate entities are deemed to be parts of a single employer if they meet an “integrated employer” test.
- Secretary of Labor has authority to issue regulations to exempt small businesses with fewer than 50 employees if the above requirements would jeopardize the going concern of the business.
Payroll Credit for “Qualified Family Leave Wages”
- Employers are required to provide ten weeks of paid leave to employees at two-thirds of their wages, not to exceed $200 per day and $10,000 in the aggregate.
- This leave covers employees who are not working because the employee is caring for their child because the school is closed or childcare provider is unavailable due to a public health emergency.
- Employers receive a 100 percent refundable payroll tax credit for the wages required to be paid.
- The requirement to provide the paid leave applies to all employers with less than 500 employees. Federal, state, and local governments are not eligible for the Credit. Under existing law, separate entities are deemed to be parts of a single employer if they meet an “integrated employer” test.
- Secretary of Labor has authority to issue regulations to: (1) exclude certain health care providers and emergency responders from the definition of eligible employee; and (2) exempt small businesses with fewer than 50 employees if the above requirements would jeopardize the going concern of the business.
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