Tax Credits for Emergency Paid Sick Leave

Posted by BAS - 29 April, 2021

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The American Rescue Plan Act of 2021 (“ARP”) provides a tax credit for private employers with fewer than 500 employee who decide to provide emergency paid sick and/or family leave for reasons set forth in prior coronavirus relieve laws.

The Families First Coronavirus Response Act (FFCRA), the Emergency Paid Sick Leave Act (EPSLA and the Emergency Family Medical Leave Expansion Act (EFMLEA) required employers to offer paid leave for employee absences due to specified reasons related to COVID-19. The mandatory paid leave was recouped through an employer credit against quarterly taxes. Employers were required to offer the paid leave, when mandated by statute.

While employers are no longer legally required to offer the leave, they may decide to keep doing so and recoup the payment through a tax credit. Tax credits apply to qualifying leave taken 4.1.2021 through September 30, 2021. The new tax credit provisions say that employers who voluntarily offer this leave to employees should act “as if” the FFCRA still applied and should not act in a discriminatory manner when allowing leave.

Employees may use paid sick or family leave (EPSL) for one of six reasons:

  1. Employee must comply with a federal, state, or local quarantine or isolation order related to COVID-19.
  2. Employee has been advised by a health care provider to self-quarantine due to concerns related to COVID-19.
  3. Employee is seeking a medical diagnosis for experiencing coronavirus symptoms, or
    • Employee is seeking or waiting for results of a diagnostic test for, or a medical diagnosis of, COVID-19 and was either exposed to COVID-19 or the employer requested such test or diagnosis; or
    • Employee is obtaining COVID-19 immunization or recovering from any injury, disability, illness, or condition related to such immunization.
  4. Employee is caring for an individual who is subject to a federal, state, or local quarantine or isolation order related to COVID-19 or has been advised by a health care provider to self-quarantine due to concerns related to COVID-19.
  5. Employee is caring for a child if school or place of care closed, or childcare provider is unavailable, due to coronavirus precautions.
  6. Employee is experiencing other conditions similar to COVID-19, as identified by the secretary of health and human services (to date no such similar condition has been identified).

Starting April 1, 2021, the entire 12-week period of EFMLEA is paid without a two week pay-waiting period. Therefore, the limit or pay employees can receive increases from $10,000 to $12,000. The actual pay rate (two-thirds an employee’s regular rate) and daily pay cap ($200) for EFMLEA remains unchanged. 

Employers that voluntarily allow employees to take EPSL should provide full time employees up to 80 hours of leave to use from April 1, 2021 through September 30, 2021 and a proportionate amount for non-full-time employees.

Employers should review their employee demographic and consider if they want to continue to offer paid EPSL and EFMLEA to their workforce.

Topics: Health Care Reform (ACA), Covid, coronavirus resources, HR & Benefits News


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