The Families First Coronavirus Response Act (H.R. 6201), enacted on Wednesday, March 18, 2020, provides a comprehensive financial aid package as the coronavirus outbreak worsens in the United States.
The legislation impacts businesses and families across the country and includes extensive relief for businesses with fewer than 500 employees. The legislation guarantees the following:
- Free coronavirus testing
- Paid sick, family and medical leave
- Enhanced unemployment insurance
- Expanded food security initiatives
- Increased Federal Medicaid funding
While the new law contains many significant emergency provisions, there are several sections that apply exclusively to companies with fewer than 500 employees. For qualifying employers, these are the highlights that could have the biggest impact on your business, your employees and your tax plans:
Emergency Paid Sick Leave
- Requires qualifying employers to provide two weeks of paid sick leave to employees affected by coronavirus (for a number of hours determined by an employee’s full- or part-time status)
- Emergency sick leave is limited to:
- $511 per day/$5,110 in the aggregate for employees that are in quarantine or seeking a diagnosis for coronavirus;
- $200 per day/$2,000 in the aggregate to care for a quarantined family member or to provide childcare.
Emergency Family and Medical Leave Expansion Act
- Provides employees the right to take up to 12 weeks of job-protected leave if the employee or a family member is in quarantine or if a child’s school or place of care is closed due to the coronavirus;
- Requires employers to provide no less than 2/3rd of the employee’s usual pay up to $200 per day, $10,000 in total;
- Can apply after employees take the provided two weeks of emergency paid sick leave.
Tax Credits for Paid Sick and Paid Family and Medical Leave
- Payroll Credit for Required Paid Sick Leave: a refundable tax credit for 100 percent of qualified paid sick leave wages paid by an employer, allowed against the employer portion of Social Security Taxes.
- Credit for Sick Leave for Self-Employed Individuals: a refundable tax credit for 100 percent of qualified sick leave wages for self-employed individuals in quarantine for coronavirus, or for 67 percent of qualified wages when caring for a quarantined family member or child whose school or place of care was closed due to coronavirus. This credit is allowed against income taxes.
- Payroll Credit for Required Paid Family Leave: a refundable tax credit for 100 percent of qualified family leave wages paid by an employer, allowed against the employer portion of Social Security Taxes.
- Credit for Family Leave for Self-Employed Individuals: a refundable tax credit equal to 100 percent of qualified family leave wages for self-employed individuals.
Each of these tax credits has complex qualifications, guidelines and reporting requirements that could change rapidly and dramatically as the coronavirus outbreak continues to develop. Aprio’s experts are closely monitoring all new regulations from the IRS and are prepared to help businesses navigate the impacts and ensure proper compliance. Some of the biggest outstanding questions for the time being include:
- Will businesses affiliated with a Professional Employer Organization (PEO) be ineligible to claim the related tax credits? While the Internal Revenue Code states that the company, not the PEO, is the eligible party for several specific tax credits, it is ultimately up to the Secretary of the Treasury to apply this rule to other credits. Aprio is hopeful that the Treasury will extend this rule to the emergency credits in this new legislation, but we are waiting on official guidance.
- Will the refunds in this new legislation take precedent over the Research and Development refundable credit? Like the proposed emergency tax credits, the R&D credit uses the employer’s matching social security tax as an offset. While the R&D credit refund cannot exceed the employer’s matching credit, the credits in the emergency legislation can. It will be up to the IRS to determine whether the refunds will be pro rata or whether the emergency credits will take precedent.
For now, our recommendation is to maintain detailed documentation of the time spent by employees for virus testing, medical care, school closures, and relevant information of affected family members, while also protecting the privacy of your employees. Aprio suggests that employers develop an internal mechanism via intranet, separate email, or a time-keeping system to track the time employees are absent for reasons related to coronavirus, including:
- A coronavirus diagnosis.
- Recommended or required self-quarantine.
- Care for a quarantined or ill family member.
- Care for a child who is ill or whose school or place of care is closed due to coronavirus.