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No FFCRA Tax Credit for Local Government Entities

Today, April 1, 2020, the federal Families First Coronavirus Response Act (FFCRA) becomes effective. Among other things, the FFCRA provides paid sick leave benefits and family benefits to certain employees for qualifying reasons. You can read more about the benefits here and here.

In return, most employers who pay qualifying sick or family leave benefits are able to retain a portion of the payroll taxes equal to the amount of sick or family leave that the employer paid, rather than deposit the tax to the IRS. However, this tax credit is not applicable to local government entities or school districts.

School districts and local government employers must comply with the provisions of the FFCRA; however, they are specifically exempted from the tax credit provision of the law. This mandate creates a new unfunded liability for local government employers. It is not clear why the legislature excluded local government from the tax credit, but as this new area of the law evolves, we are hopeful that our local government clients will be somehow made whole.

For example, President Trump has approved a portion of Governor Wolf’s request for a Major Disaster Declaration that addresses funding for state, county, municipal governments, and eligible non-profits. The funding is intended to reimburse these entities for up to 75% of eligible expenses related to the response to the COVID-19 pandemic. These eligible expenses include paying overtime and materials/equipment purchases. Potential applicants are expected to be contacted in the coming weeks by the Pennsylvania Emergency Management Agency.

If you have questions about administering the FFCRA or other COVID-19 concerns for your school district or local government, please do not hesitate to contact an attorney from our Employment or Government practice areas.

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