The Federal government continues to prod the economy by passing the “Families First Coronavirus Response Act” (the “Act”). Parts of the Act provide for emergency family and medical leave benefits, emergency paid sick leave benefits, and employer and self-employed tax credits and exclusion from employer FICA tax concerning the payment of those benefits.
Employer tax credits
The Act provides tax credits to employers to cover wages paid to employees while they are taking time off under the bill’s sick leave and family leave programs.
Employees sick leave program
○ A requirement that employers with 500 or fewer employees and government employers provide Emergency Paid Sick Leave to employees due to any of the following reasons:
- To quarantine because the employee is diagnosed with Coronavirus;
- To seek a diagnosis or preventive care for Coronavirus;
- To comply with a recommendation or order by a public official with jurisdiction or healthcare provider on the basis that the physical presence of the employee would jeopardize the health of others due to exposure of the employee to Coronavirus or exhibition of symptoms by the employee.
Family leave program
○ To care for a family member for such purposes or to care for a child whose school has closed, or a childcare provider is unavailable, due to the Coronavirus.
The sick leave credit for each employee would be equal to their wages, limited to $511 per day while the employee is receiving paid sick leave to care for themselves, or $200 if the sick leave is to care for a family member or child whose school is closed. An additional limit applies to the number of days per employee: the excess of 10 days over the aggregate number of days taken into account for all preceding calendar quarters.
The family leave credit for each employee is limited to $200 per day with a maximum of $10,000.
The credits are refundable to the extent they exceed the employer’s payroll tax.
Employers don’t receive the credit if they’re also receiving the credit for paid family and medical leave in Code Sec. 45S.
The Act also provides for similar refundable credits against the self-employment tax. It covers 100% of a self-employed individual’s sick-leave equivalent amount, or 67% of the individual’s sick-leave equivalent amount if they are taking care of a sick family member or taking care of a child following the child’s school closing. The sick-leave equivalent amount is the lesser of average daily self-employment income, or $511/day to care for the self-employed individual, or $200/day to care for a sick family member or child following a school closing.
Self-employed individuals could receive a family leaves credit for as many as 50 days multiplied by the lesser of $200 or their average self-employment income.
Employer FICA exclusion
Under the Act, sick leave and family and medical leave paid under the Act will not be considered wages under Code Sec. 3111(a) (employer tax – old age, survivors and disability insurance portion of FICA; 6.2%).