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House passes bi-partisan bill to address coronavirus (COVID-19), includes tax credit provisions

House passes bi-partisan bill to address coronavirus

The U.S. House of Representatives early this morning passed H.R. 6201, the “‘Families First Coronavirus Response Act”— a bill that includes tax credits for certain employers and self-employed individuals for emergency paid leave. The bill was approved by a vote of 363-40.

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The Senate is expected to consider the House bill early next week, and the president has indicated he would sign such legislation.

The Joint Committee on Taxation (JCT) has not yet released a table with estimated revenue costs of the bill.

This report based on text of a bill posted on the House Appropriations committee website [PDF 266 KB] as of 5:00 PM EST on March 14, 2020 (i.e., with a date stamp of 11:45 PM on March 13, 2020). 

Overview

The bill includes a variety of provisions relating to the coronavirus (COVID-19), including provisions relating to supplemental appropriations, unemployment insurance, and COVID-19 testing, and other health provisions.

The bill also includes the Emergency Family and Medical Leave Expansion Act and the Emergency Paid Sick Leave Act. These two programs would be effective no later than 15 days after the date of enactment of the legislation.

  • Expanded family and medical leave expansion provisions

The Emergency Family and Medical Leave Expansion Act would amend the Family and Medical Leave Act of 1993 (FMLA) to create a new category of benefits from the date of enactment until December 31, 2020.  These benefits generally would apply in the case of a qualifying need related to the COVID-19 public-health emergency. 

Very generally, qualified leave under the legislation would include leave required by an employee: (1) to comply with certain coronavirus-related recommendations or orders by public health officials or health care providers; or (2) to provide care required to allow a family member to do so.  A qualified leave also would include care for a child where school or childcare is unavailable due to a public health emergency (as declared by federal, state, or local authority).  After an initial 14-day leave period (which may be unpaid), a qualifying employee generally would be entitled to 10 weeks of paid leave at two-thirds of the employee’s regular rate of pay for the number of hours the employee would otherwise be scheduled, or would normally be scheduled, to work.

For purposes of applying the new category of leave, the bill would modify the FMLA’s employer threshold by using a “fewer than 500 employees” standard. The Secretary of Labor would have authority to provide exclusions for certain health care providers and emergency responders and to exempt small businesses with fewer than 50 employees in certain cases

  • Emergency paid sick leave provisions

Effective not later than 15 days after enactment and through December 31, 2020, the bill generally would require certain employers to provide to employees up to 80 hours (or the equivalent for part-time employees) of paid sick time for: 

  • Self-isolation due to coronavirus diagnosis
  • Obtaining a medical diagnosis or care for employees experiencing the symptoms of coronavirus
  • Complying with certain coronavirus-related recommendations or orders by public officials or health-care providers
  • Caring for family members for the above reasons, or
  • Caring for a child if schools or other childcare is unavailable for reasons related to the coronavirus

This sick leave would be in addition to any regularly-provided annual sick leave, and there would be no length of employment requirement for an employee to qualify.

Payment for sick leave related to care of a family member (including a child) generally would be at two-thirds of the employee’s regular rate of pay.

The Emergency Paid Sick Leave Act provisions would apply to “covered employers” as well as certain other entities that are engaged in commerce (including government) or an industry or activity affecting commerce.  For this purpose, the bill defines a “covered employer” as including a person engaged in commerce or in an industry or activity affecting commerce that: (1) in the case of a private entity or individual, employs fewer than 500 employees; and (2) in the case of a public agency or other entity, employs one or more employees.

Tax credits

In connection with the temporary FMLA and emergency paid sick leave provisions, Division G of the bill includes several tax credits.

  • Payroll tax credit for required paid sick leave

Effective for wages paid with respect to a period that begins on a date selected by the Treasury Department (within 15 days of enactment) and that ends December 31, 2020, the bill generally would provide an employer payroll tax credit equal to 100% of the qualified sick leave wages paid by the employer under the Emergency Paid Sick Leave Act, subject to certain limitations.  The credit would be against the OASDI taxes (Old Age, Survivors, and Disability taxes—more commonly known as the employer portion of Social Security taxes) imposed by section 3111(a). 

The tax credit generally would be available for wages of up to $511 for each day an individual is paid qualified sick leave. However, the credit would only be available for $200 per day in cases in which the paid sick time relates to care for family members (including children).  In addition, the total number of days taken into account each calendar quarter could not exceed 10 days and would be reduced by the number of days so taken into account in preceding calendar quarters.

The amount of the credit for any calendar quarter could not exceed the tax imposed under section 3111 for such quarter.  However, the bill includes refundability provisions for credits that exceed tax liability.

The bill would provide that, for purposes of Chapter 1 of the Code, gross income of employers generally would be increased by the amount of the new credit.  Further, no credit would be allowed for wages for which a credit is allowed under Code section 45S (relating to the family and medical leave credit).  These rules are under the heading “Denial of Double Benefit.”

The credit would not apply to the government of the United States, any state, any subdivision of a state, or any agencies or instrumentalities of the foregoing.  Employers also could elect not to apply the new provision for any calendar quarter.

The bill also includes special rules for payments to possessions of the United States.

  • Credit for sick leave for certain self-employed individuals

The bill similarly would allow an eligible self-employed individual a credit against the tax imposed by subtitle A of the Code (relating to income taxes) with respect to qualified sick leave equivalent amounts.  To qualify, an individual generally must regularly carry on a trade or business within the meaning of Code section 1402 and must have met the criteria to receive paid leave pursuant to the Emergency Paid Sick Leave Act as if the individual were an employee of an employer.

Rules, limitations, and documentation requirements for self-employed individuals are in section 7002 of the House bill.

  • Payroll tax credit for required paid family leave

Effective for wages paid with respect to a period that begins on a date selected by Treasury within 15 days of enactment and that ends December 31, 2020, the bill would provide an employer payroll tax credit for each calendar quarter generally equal to 100% of the qualified family leave wages paid by the employer to comply with the Emergency Family and Medical Leave Expansion Act with respect to such quarter.  The credit would be against the employer portion of OASDI taxes imposed by Code section 3111(a). 

The amount of wages taken into account for the credit for each individual could not exceed $200 for any day for which the individual is paid qualifying family leave wages.  In aggregate, a maximum of $10,000 in wages per employee for all calendar quarters would be eligible for the credit.

The amount of the credit for any calendar quarter could not exceed the tax imposed under section 3111 for such quarter.  However, the bill includes refundability provisions for credits that exceed tax liability.

This credit would be subject to similar “denial of double benefit” rules as the credit for sick leave.

The credit would not apply to the government of the United States, any state, any subdivision of a state, or any agencies or instrumentalities of the foregoing.  Employers also could elect not to apply the new provision for any calendar quarter.

  • Credit for family leave for certain self-employed individuals

The bill would allow an eligible self-employed individual a credit against the tax imposed by subtitle A of the Code (relating to income taxes) with respect to qualified family leave equivalent amounts. To qualify, an individual must regularly carry on a trade or business within the meaning of Code section 1402 and must have met the criteria to be entitled to receive paid leave pursuant to the Emergency Family and Medical Leave Expansion Act as if the individual were an employee of an employer.

Rules, limitations, and documentation requirements for self-employed individuals are in section 7004 of the House bill.

  • Wages under section 3111

The bill provides that any wages required to be paid by reason of the Emergency Paid Sick Leave Act and the Emergency Family and Medical Leave Expansion Act would not be considered wages for purposes of Code section 3111(a).  

Other coronavirus-related developments

Yesterday, the president declared the coronavirus to be a national emergency.  Read a release from the White House.

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