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Extension of Emergency Paid Sick Leave and Emergency Paid Family and Medical Leave and Other Changes

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Rödl & Partner Tax Matters Volume 2021-6, published May 4, 2021


In March 2020, the President signed into law the Families First Coronavirus Response Act (FFCRA). Among other things, it established mandatory paid sick leave (known as the Emergency Paid Sick Leave Act) and temporarily expanded the existing federal Family and Medical Leave Act of 1993.  These measures expired at the end of 2020.

The enactment of the Consolidated Appropriations Act of 2021 (CAA) extended the Emergency Paid Sick Leave credits made available under the FFCRA through the first quarter of 2021; however, the credits were for sick leave provided by employers on a voluntary rather than mandatory basis. The CAA also did not "reset" the maximum leave amounts established by the FFCRA, but rather provided an extension of time over which such leave could be granted and credits could be claimed for such time taken by employees.

The new American Rescue Plan Act of 2021, enacted in March 2021, renews further the possibility for employers to voluntarily extend the Emergency Paid Sick Leave and Emergency Family Medical Leave through September 30, 2021. As before, only employers with fewer than 500 employees qualify. While most of the provisions remained the same, a few additional provisions were added.


Voluntary Emergency Paid Sick Leave

If employers want to take advantage of the dollar-for-dollar tax credit of up to $511 per day per employee, they must offer up to 10 new days to each employee that can be used between April 1st and September 30th for this purpose. If employees have unused days from prior legislation (i.e., the FFCRA / CAA), these can be added voluntarily by the employer as well.

If an employee is taking paid sick leave at two-thirds pay, the credit is limited to $200 per day per employee. Certain pension plan contributions and qualified health plan expenses allocated to these wages can also be eligible for the credit.


Emergency Paid Family and Medical Leave

The Emergency Paid Family and Medical Leave remains at the original 12 weeks without the requirement of offering a new bank of time for use. If the first two of the weeks are paid, employers can now receive a tax credit (previously only Emergency Paid Sick Leave was paid for the first two weeks). Additionally, the maximum credit was increased from $10,000 to $12,000 per employee. Certain pension plan contributions and qualified health plan expenses allocated to these wages can also be eligible for the credit.

 

Additional Qualifying reasons

In addition to the above changes, new qualifying criteria were added to encourage employees to get vaccinated. Emergency Paid Sick Leave and Emergency Family Medical Leave can now be taken for time the employee spends to get vaccinated, as well as for recovery time from side effects related to a vaccination for COVID-19. Moreover, if an employee is awaiting results of a COVID-19 test due to an exposure to COVID-19, or if an employer-requested a COVID-19 test, paid sick leave can be granted.

E
mployers can choose if they want to establish both Emergency Paid Sick Leave and Emergency Family Medical Leave or only one of them; participation is on a voluntary basis.

 

Credit limitations

In general, a credit is allowed against applicable employer payroll taxes equal to 100 percent of the qualified sick leave wages paid by such employer for the respective calendar quarter (up to the $511 per day). The credit for qualified family or medical leave wages paid by an employer is up to $200 per day. The credit is limited to the employer payroll taxes for such calendar quarter that were paid on wages paid to all employees. If such credits exceeded the employer payroll tax liability in a given quarter, an advanced refund was permitted to be claimed as an offset to required tax deposits of the employer.

If an employer received funds from a PPP loan, a grant under section 324 of the Economic Aid to Hard-Hit Small Businesses, Non-Profits, and Venues Act, or a restaurant revitalization grant, wages paid using these funds are not eligible for the tax credit. Further guidance is expected to clarify whether wages paid using PPP loans that will not be forgiven would qualify.

 

If you have any questions, please contact your Rödl & Partner representative.

This publication contains general information and is not intended to be comprehensive or to provide legal, tax or other professional advice or services. This publication is not a substitute for such professional advice or services, and it should not be acted on or relied upon or used as a basis for any decision or action that may affect you or your business. Consult your advisor.

We have made reasonable efforts to ensure the accuracy of the information contained in this publication, however this cannot be guaranteed. Neither Rödl Langford de Kock LP nor any of its subsidiaries nor any affiliate thereof or other related entity shall have any liability to any person or entity which relies on the information contained in this publication, including incidental or consequential damages arising from errors or omissions. Any such reliance is solely at user's risk.

Any tax and/or accounting advice contained herein is based on our understanding of the facts, assumptions we have been asked to make, and on the tax laws and/or accounting principles in effect as of the date of this advice. No assurance is given that the conclusions would be the same if the facts or assumptions change, or are not as we understand them, or that the tax laws and/or accounting principles will not change subsequent to the issuance of these conclusions. In addition, we do not undertake any continuing obligation to advise on future changes in the tax laws and/or accounting principles, or of the impact on the conclusions herein.

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