On March 18, 2020, President Trump signed into law the Families First Coronavirus Response Act (“FFCRA”), the second massive federal legislation aimed at providing support for Americans amidst the Coronavirus pandemic. As part of this legislation, Eligible Employers were designated to provide paid sick and paid family leave to Eligible Employees under certain conditions. More on the FFCRA and those conditions can be found here.
Eligible Employers, entitled to these tax credits, are businesses and tax-exempt organizations with fewer than 500 employees that are required to provide paid sick leave and paid family leave under the FFCRA. Unfortunately, these same tax benefits are not available to governmental employers, such as School Districts and Municipalities, even though the FFCRA requires these employers to provide the same paid sick leave and paid family leave.
In addition to the numerous benefits to employees, the FFCRA also provides small and midsize employers refundable tax credits that reimburse them, dollar-for-dollar, for the cost of providing paid sick and family leave wages to their employees for leave related to COVID-19. Under the paid sick leave portion of the FFCRA, Eligible Employers will receive a tax credit equal to the required paid sick leave and the eligible employer’s share of Medicare tax imposed on those wages and its allocable cost of maintaining health insurance coverage for the employee during the sick leave period. The Eligible Employer is not subject to the employer portion of social security tax imposed on those wages. Under the Expanded FMLA portion of the FFCRA, the eligible employer is entitled to a fully refundable tax credit equal to the required paid family and medical leave and the Eligible Employer’s share of Medicare tax imposed on those wages and its cost of maintaining health insurance coverage for the employee during the family leave period. The Eligible Employer is not subject to the employer portion of social security tax imposed on those wages. It is important to note that if Eligible Employers provide more pay than is required under the FFCRA, they are not entitled to tax credits over and beyond what is required under law. For example, if the FFCRA provides that a qualified leave only entitles the Eligible Employee to $200 per day, and the Eligible Employer pays $400 per day, the tax credit will only be for $200 per day.