As the Coronavirus pandemic continues to unfold, Congress has continued to act to mitigate the economic consequences. During the past several weeks, there have important legislative developments related to the pandemic that have either already been enacted or are currently in negotiation. Recent federal legislation includes (i) the Coronavirus Preparedness and Response Supplemental Appropriations Act (signed into law on March 6); ii) the Families First Coronavirus Response Act (signed into law on March 18); and iii) the Coronavirus Aid, Relief and Economic Security Act (S. 3548) (pending Senate bill). In addition to these emergency Congressional measures, there have been other federal government announcements including IRS Notice 2020-18 that provides an extension to file and pay taxes until July 15, 2020.
The Coronavirus Preparedness and Response Supplemental Appropriations Act (“CPRSA”)
The CPRSA provides emergency supplemental appropriations of $8.3 billion to the federal government to combat the Coronavirus pandemic. The monies will provide $7.8 billion in discretionary appropriations and $500 million in mandatory health related spending. The CPRSA does not contain any specific tax-related provisions.
The Families First Coronavirus Response Act (“FFCRA”)
Effective April 2, 2020, FFCRA temporarily expands the existing Family Medical Leave Act of 1993 and provides new emergency sick leave. The new law provides relief to both employees and employers. Employees are now entitled to mandated emergency paid sick-leave or expanded family medical leave entitlements. Likewise, employers will receive a tax credit for any qualified compensation paid to affected employees. For those covered by group health plans, the FFCRA also provides free Coronavirus testing and requires any related treatments to be provided on a non-cost-sharing basis (meaning without deductibles, copayments, coinsurance, or preauthorization). The following are the relevant emergency family medical leave and emergency paid sick leave provisions contained in the FFCRA:
Emergency Family Medical Leave Expansion
FFCRA temporarily amends the Family and Medical Leave Act to provide protected leave for employees because of “a qualifying need related to a public health emergency”. The law applies to employers with 500 or less employees and for employees who have worked for such employer for at least 30 days. Employers with less than 50 employees may be exempt from compliance if the imposition of the new law would “jeopardize the viability of the business as a going concern”.
FFCRA requires employers to provide up to 12 weeks of leave to employees if they are unable to work (either in person or remotely) as a result of the need to care for a child under the age of 18 because the child’s school and child care center is closed, or the regular caregiver of the child is unavailable because of the pandemic. The first 10 days of leave are unpaid unless the affected employee elects to use one of their leave accruals. Employers are prohibited from requiring the substitution of paid leave during these first 10 days. On the 11th day, the employer is required to pay two-thirds of the eligible employee’s regular rate of hours the employee normally would have worked, and the rate may not exceed $200 a day per employee and a maximum of $10,000 per employee. Rates for part-time employees are based on an average number of hours for the six months prior to taking leave. Employees who opt to take emergency family medical leave will be restored upon return to the same position at the end of the leave period. Please note that state laws may also mandate additional employee protections. For example, New York recently enacted legislation guaranteeing job protection for all employees for the duration of the state’s quarantine order.
An employer payroll tax credit is available for eligible wages paid during a period that begins on April 2 and ends on Dec. 31, 2020. The tax credit is against payroll taxes imposed on the employer for each calendar quarter equal to 100% of the qualified family leave wages paid by the employer. The credit is also increased by the portion of the employer’s qualified health care expenses that are allocable to qualified family leave wages. Eligible self-employed individuals are allowed an income tax credit for any taxable year for a qualified sick leave equivalent amount.
Emergency Paid Sick Leave
FFCRA contains a new law requiring employers to offer 80 hours of emergency paid sick leave if any of the following requirements are satisfied: (1) the employee is subject to a federal, state or local quarantine or isolation order related to COVID-19; (2) the employee has been advised by a health care provider to self-quarantine due to COVID-19 concerns; (3) the employee is experiencing COVID-19 symptoms and seeking medical diagnosis; (4) the employee is caring for an individual (not limited to family members) subject to quarantine or isolation; (5) the employee is caring for the employee’s child if the school or child care is unavailable due to a public health emergency; or (6) the employee is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services.
For sick leave set forth in items (1), (2) or (3) above, emergency paid sick leave is capped at $511 a day per employee or $5,110 in the aggregate. Sick leave related to items (4), (5), and (6) is capped at $200 per day per employee or $2,000 in the aggregate.
Similar to expanded family leave, an employer payroll tax credit is available for qualified sick leave wages paid during a period that begins on April 2 and ends on Dec. 31, 2020. Employers are entitled credit against payroll taxes imposed on the employer for each calendar quarter equal to 100% of the qualified sick leave wages paid by the employer. The credit is increased by the portion of the employer’s qualified health care expenses that are allocable to sick leave wages. Eligible self-employed individuals are allowed an income tax credit for any taxable year for a qualified sick leave equivalent amount.
The Coronavirus Aid, Relief, and Economic Security Act
The Coronavirus Aid, Relief, and Economic Security Act (S. 3548) was introduced on March 19, 2020 and is in the process of being negotiated in Congress. As of the date of this writing, it is unclear whether the bill has enough bipartisan support to pass. In addition to providing cash payments to eligible recipients, S. 3548 provides relief to the airline industry and technical changes to the 2017 Tax Cuts and Jobs Act as they may relate to the health emergency. Some of the relevant tax proposals contained in the bill include the expanded availability of past net operating losses, removing certain interest deduction limitations, and allowing for an expedited write-off period for qualified improvements. We are expecting additional changes or new legislative proposals altogether as the legislative process continues. Marks Paneth will be providing additional information and insight on all developing legislative or executive actions.
If you have any questions, please feel free to contact a tax advisor at Marks Paneth LLP. You may also visit our Pandemic Resource Center for additional updates and guidance on the coronavirus (COVID-19).
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