On March 16, 2020, the House passed an updated version of H.R. 6201, the “Families First Coronavirus Response Act” which originally passed on March 14, 2020, to provide emergency supplemental appropriations and support Americans during the COVID-19 pandemic (the “Act”).
The Act provides for:
- Emergency family and medical leave benefits
- Emergency paid sick leave benefits
- Employer and self-employed tax credits and exclusion from employer FICA tax with respect to the payment of those benefits
On March 19, Gunster’s Labor and Employment Law practice published a summary of the labor and employment provisions of the new law, which can be accessed here. This advisory summarizes the tax aspects of the Families First Coronavirus Response Act.
Tax Credits
The Act grants tax credits to employers to cover wages paid to employees taking time off under the applicable sick leave and family leave programs. The sick leave credit is equal to the employee’s wages (capped at $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. There is an additional limitation 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 is capped at $200 per day per employee, with a maximum of $10,000. The credits are also refundable to the extent such credits exceed the employer’s payroll tax. Employers receiving the Code Section 45S family and medical leave credit are not eligible for this credit.
Self-Employed Credits
The Act also grants similar refundable credits against the self-employment tax, covering 100% of a self-employed individual’s sick leave equivalent amount, or 67% of the individual’s sick leave equivalent amount if caring for a sick family member, or a child during school closures. The sick leave equivalent amount is capped at the lesser of average daily self-employment income or $511 per day if caring for the self-employed individual (or $200 per day if caring for a sick family member, or a child during school closures). The Act also grants a family leave credit for up to 50 days (capped at the lesser of $200 or 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 Section 3111(a), creating an exclusion for employers from the 6.2% portion of FICA covering old age, survivors and disability insurance. Additionally, the Act grants an employer credit for the 1.45% portion of FICA covering hospital insurance with respect to sick leave and family and medical leave.
If you have any questions, please contact Gunster's Tax Law practice.
