Latest Stimulus Extends Tax Credits For Leave

President Biden recently signed into law the American Rescue Plan Act of 2021 (Rescue Plan).  Of particular note to most employers across the country is Section 9641, which amends the Internal Revenue Code to address tax credits for paid sick leave and paid family leave previously provided under the Families First Coronavirus Response Act (FFCRA). 

The FFCRA provided up to 80 hours of emergency paid sick leave (EPSL) and up to twelve weeks of leave (10 weeks at partial pay) under the Family and Medical Leave Act (EFMLA).  The FFCRA expired on December 31, 2020.  In December, Congress permitted employers to still apply for tax credits for providing such leave after the expiration date, from January 1 – March 31, 2021.  Providing the EPSL and EFMLA leave after December 31, 2020 was, and still is optional for employers.  However, if an employer voluntarily chose to provide such benefits (assuming the amount of time available to an employee had not yet been used), the employer was permitted to apply for corresponding tax credits for providing such paid leave.

That extended date for tax credit purposes has now been prolonged again, to September 30, 2021.  If an employer chooses to continue to make such paid leave available after March 31, 2021, there are several things to note. 

Amount of Available Time Reset

The Rescue Plan now provides that the time allotment (80 hours for EPSL and 12 weeks for EFMLA) resets after March 31, 2021.  So, if an employer chooses to extend this benefit beyond March 31, employees who already took 80 hours of EPSL in 2020, for example, are eligible to take another 80 hours before September 30, 2021, if they have a qualifying reason.  In essence, the clock starts over on April 1, 2021.

New Qualifying Reasons Added

The Rescue Plan has added new qualifying reasons for EPSL: (a) the employee is obtaining a vaccine related to COVID–19; or (b) is recovering from any injury, disability, illness, or condition related to a vaccine.

Paid Leave Credit Increased

The total amount of credit for paid leave pursuant to the EFMLA increased from $10,000 to $12,000 for all of 2021.  The $200 per day cap still stands after March 31, but the total aggregate amount of available credit is based on all quarters of 2021.

Nondiscrimination Provision Added

The Rescue Plan also has added a nondiscrimination provision, which prohibits an employer from discriminating in favor of highly compensated, full-time or long-tenured employees. To be eligible for the tax credits, an employer must treat all employees uniformly.

Employers must decide whether to continue or restart providing EPSL and EFMLA benefits to employees after March 31, 2021.  If so, a review of all forms, policies and records is advised.  If an employer decides to opt-in, best practice suggests doing it for all categories of leave – both EPSL and EFMLA.

If you have questions about the Rescue Plan and how it affects your company and employees, please contact a member of Nyemaster’s labor and employment department.