The Families First Coronavirus Response Act, the second coronavirus emergency aid package, was signed into law by President Trump on the evening of March 18, 2020. Only a small part of the legislation contains tax provisions; while the rest of the bill primarily focuses on funding for increased COVID-19 testing, providing free testing for everyone, and continuing student lunch programs for schools that are closed. The bill extends paid sick leave to employees, enhances unemployment benefits, and provides free COVID-19 testing for those without insurance. The provisions are temporary and generally expire December 31, 2020.
The bill requires all employers, including small employers not otherwise covered by the Family and Medical Leave Act and ones with less than 500 employees, to provide paid sick leave to employees who are unable to work due to quarantining or isolation or are experiencing symptoms of COVID-19, who are caring for a family member who is in quarantine or isolation, or who must stay home to care for a child if the school or place of care is closed.
To compensate employers, the bill provides a tax credit. Generally, this credit is a refundable credit to be used against the employer’s share of payroll taxes. For paid sick leave, the tax credit is limited to 10 days of wages for an employee. The rate of the credit varies based on the reason the employee cannot work.
Emergency Paid Sick Leave
Workers taking leave for themselves will be paid at least their normal wage, and employers will receive up to a $511 credit per paid day and a maximum of $5,110 total Paid Sick Leave. Emergency Sick Leave paid in this category is for employees because they are:
- Subject to a federal, state or local quarantine or isolation order related to COVID-19
- Advised by a health care provider to self-quarantine due to COVID-19 concerns
- Experiencing COVID-19 symptoms and seeking medical diagnosis
Workers taking time off to care for family members must be paid at two-thirds of their normal rate, and employers will receive up to a $200 credit per day with a maximum of $2,000 total Paid Sick Leave. Emergency Sick Leave paid in this category are for employees who cannot work because they are:
- Caring for an individual (not limited to a family member) subject to a federal, state or local quarantine or isolation order or advised by a heath care provider to self-quarantine due to COVID-19 concerns
- Caring for the employee’s child if the child’s school or place of care is closed or the child’s care provider is unavailable due to public health emergency
- Experiencing any other substantially similar conditions specified by the Secretary of Health and Human Services in consultation with the Secretary of the Treasury and the Secretary of Labor.
Emergency Family & Medical Leave
Additionally, under this provision, an eligible employee may take up to 12 weeks of job-protected leave to allow the employee, who is unable to work or telework, to care for the employee’s child (under 18 years of age) if the child’s school or place of care is closed or the childcare provider is unavailable due to a public health emergency. The first 10 days of leave can be unpaid, or the worker can opt to use vacation or otherwise available paid leave for those days. For subsequent days of leave, employers must pay wages equal to at least two-thirds of their normal pay rate. The paid leave is capped at $200 per day and $10,000 in the aggregate.
Wages required to be paid under the emergency sick leave provisions will not be subject to the 6.2% social security payroll tax typically paid by employers on employee’s wages.