New COVID Stimulus Bill Extends FFCRA Tax Credits, but Not the FFCRA Mandate
December 22, 2020
By: Thomas M. Cunningham
On Monday, December 21, 2020, Congress passed, and as of this writing, the President is expected to sign, the Consolidated Appropriations Act – 2021, otherwise known as the COVID stimulus bill. Upon the President’s signature, the future status of the Families First Coronavirus Response Act (FFCRA) will be clarified.
Simply stated, the new bill provides that FFCRA leave is no longer mandated after December 31, 2020, but if previously covered employers voluntarily provide FFCRA leave benefits through March 31, 2021, they are eligible to take the tax credit for the wages paid for the leave. The stimulus bill does not make any changes for public employers; the FFCRA ends for the public sector as scheduled on December 31, 2020.
Conflicting reports had been circulating for approximately two weeks about the fate of the FFCRA, which provides 80 hours of paid emergency sick leave (EPSL) and paid expanded Family & Medical Leave Act (FMLA) leave for certain COVID-related circumstances. The new stimulus bill does not extend the FFCRA mandate beyond its December 31 sunset date. However, the bill allows employers who were covered by the FFCRA mandate to voluntarily continue to offer EPSL and paid expanded FMLA leave as if the FFCRA had been extended through March 31, 2021. For those employers who do so, they may take the tax credit for wages paid through that date. You may remember, prior to the election, the proposed stimulus bill was the HEROES Act, passed in the House, which extended the FFCRA until December 31, 2021, made it applicable to all employers regardless of number of employees, and increased the amount of the paid benefits. Those provisions were jettisoned in the post-election congressional negotiations.
An issue identified under the new bill is whether an employer can take a tax credit for a second round of FFCRA leave benefits beginning January 1, 2021. Our best current reading of the statute is that the response likely depends on whether the benefit for which the credit is sought is EPSL or paid expanded FMLA leave:
- If an employee used 80 hours of EPSL by the end of 2020, the employee likely would not be eligible for another 80 hours of EPSL on January 1, 2021, and the credit would not be available for additional EPSL provided in 2021.
- On the other hand, if the 12-month FMLA period for the employee resets (or has reset) under the employer’s regular FMLA policy since taking expanded FMLA leave in 2020, an employee likely would be eligible for paid expanded FMLA leave again, and the employer would be eligible for the credit. We will watch to see if the IRS issues updated regulations or updates its Q & A website page to address this question.
Nyemaster Goode’s Labor & Employment practice group and Tax Department are available to answer questions about the FFCRA and the corresponding tax credits. We will continue to monitor developments in this area.