Biden’s American Rescue Plan Act Expands Employer Payroll Tax Credits for COVID-19 Leave

By Rick Norman

The American Rescue Plan Act of 2021, signed by President Biden on March 11, 2021, extended and expanded the availability of tax credits for employers who voluntarily offer to their employees Family First Coronavirus Response Act (FFCRA) paid sick leave and paid family leave.

Last Spring’s FFCRA required most employers with fewer than 500 employees to provide up to 80 hours of COVID-related Emergency Paid Sick Leave (EPSL) and up to 10 weeks of COVID-related Expanded Family Medical Leave (EFMLA). However, the FFCRA also allowed a dollar-for-dollar tax credit to employers who provided such leave.

Under the new American Rescue Plan Act, private employers with fewer than 500 employees may voluntarily extend FFCRA paid leave through September 30, 2021 and still receive a tax credit. However, the voluntary extension changes the rules for EPSL and EFMLA.

With regard to EPSL, three new reasons for leave have been added to the original six:

  • an employee is seeking or awaiting COVID-19 test results or diagnosis if the employee has been exposed to COVID-19 or the employer requests a test or diagnosis;
  • an employee is obtaining a COVID-19 vaccine; and
  • an employee is recovering from an adverse health consequence of COVID-19 immunization.

The original six reasons, which still apply, are that the employee:

  • is quarantined by government order;
  • was advised by a health care professional to self-quarantine due to concerns related to COVID-19;
  • is experiencing COVID-19 symptoms and is seeking a medical diagnosis;
  • is experiencing similar conditions specified by the Secretary of Health and Human Services;
  • is caring for someone subject to quarantine by governmental order or order of a healthcare professional; and
  • is caring for a son or daughter because of a school or childcare facility closure.

Additionally, employees are eligible for a new 10-day bank of EPSL leave starting April 1, 2021.

With regard to EFMLA, the FFCRA required most employers to provide EFMLA if an employee was unable to work or telework due to caring for a child under 18 years of age necessitated by the closure of a school or childcare facility due to a public health emergency. The American Rescue Plan Act expands the reasons for providing EFMLA to include the original child care reason for leave, as well as the six original EPSL reasons and the three new EPSL reasons for leave.

Further, paid leave begins immediately and the maximum paid leave is increased to up to $200 per day for EFMLA and $511 per day for EPSL or an increase from $10,000 to $12,000 aggregately.

Self-employed individuals are also entitled to a credit against income taxes for the amounts they would have been paid for EPSL leave if they had been employed by an eligible, third-party employer. Both the EPSL and EFMLA include new anti-discrimination rules, which, if violated, result in a loss of tax credit. Employers may not discriminate in favor of full-time or highly compensated employees or on the basis of tenure.

Questions remain under the American Rescue Plan Act, such as it is unclear:

  • if employers choosing to extend EPSL leave must provide the 10-day reset in order to receive the tax credit; and
  • whether an employer may extend EPSL but not EFMLA or vice versa.

We anticipate further guidance from the U.S. Department of Labor and the Internal Revenue Service, and we will keep you posted. Visit the Taylor Porter Coronavirus – Legal News and Business Resources website for legislation, news, and developments pertaining to COVID-19.

About Rick Norman: Rick Norman leads the Firm’s Lake Charles Taylor Porter Office. He has represented southwest Louisiana business and industry clients for 35 years, practicing in commercial litigation, insurance, labor and employment, construction, health care, and transactions. Rick is the author of two legal treatises on business law used by both practitioners and in law schools: Louisiana Employment and Louisiana Corporations. Rick is the president of the Louisiana State Law Institute, an arm of the Louisiana legislature that studies and drafts legislation. He also serves on Law Institute committees rewriting the Louisiana Wage Payment Act and the Louisiana Limited Liability Companies Law.