On March 18, President Trump signed the Families First Coronavirus Response Act (“FFCRA”). The FFCRA has three components: (1) the Emergency Family and Medical Leave Expansion Act (“Expanded Family Leave”); (2) the Emergency Paid Sick Leave Act (“Emergency Sick Pay”); and (3) tax credits to employers to cover wages paid to employees while they are taking time off under the EPSLA and EMFLEA. The FFCRA, including its tax credit provisions, goes into effect today. This blog summarizes the tax credit provisions of FFCRA. For a summary of the employment law provisions of Expanded Family Leave and Emergency Sick Pay, see our blog here.
The tax credits under FFCRA have three overall rules.
First, with respect to the tax credit for each employee, the following limitations apply. Under Emergency Sick Pay, subject to an additional limit based on sick days taken into account for all preceding calendar quarters, the credit is equal to the lesser of: (1) the amount of the employee’s leave pay; or (2) either (a) $511 per day while the employee is receiving paid sick leave to care for the employee’s own self, or (b) $200 if the sick leave is to care for a family member or child whose school is closed. Under Expanded Family Leave, the credit is the amount of the employee’s leave pay limited to $200 per day with a maximum of $10,000.
Second, the amount of the Emergency Sick Pay and Expanded Family Leave credits are increased by the portion of the employer’s “qualified health plan expenses” that are properly allocable to qualified sick leave wages or qualified family and medical leave wages.
Third, the credits allowed to employers for wages paid under Emergency Sick Pay and Expanded Family Leave are increased by the amount of the 1.45% hospital insurance portion of FICA on wages for which credit is allowed under FFCRA.
Other important rules under FFCRA include:
- The tax credits are refundable to the extent they exceed the employer’s payroll tax.
- FFCRA applies only to wages paid with respect to the period beginning on April 1, 2020 and ending on December 31, 2020.
- Wages paid under the EPSLA and EFMLEA are not considered wages for FICA purposes.
In the coming days, we will provide guidance on the intersection between the tax credit provisions of the FFCRA and the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).