Finally get that promotion? Get exclusive content, tips and tools to help you excel.
Shawn Premer shows how doing the right thing for employees leads to positive business results.
Is your employee handbook keeping up with the changing world of work? With SHRM's Employee Handbook Builder get peace of mind that your handbook is up-to-date.
Build competencies, establish credibility and advance your career—while earning PDCs—at SHRM Seminars in 12 cities across the U.S. this spring.
#SHRM18 will expand your perspective – on your organization, on your career, and on the way you approach HR. Join us in Chicago June 17-20, 2018
Consider putting logistics in place to track who is eligible and to calculate the potential credit
Members may download one copy of our sample forms and templates for your personal use within your organization. Please note that all such forms and policies should be reviewed by your legal counsel for compliance with applicable law, and should be modified to suit your organization’s culture, industry, and practices. Neither members nor non-members may reproduce such samples in any other way (e.g., to republish in a book or use for a commercial purpose) without SHRM’s permission. To request permission for specific items, click on the “reuse permissions” button on the page where you find the item.
Update: IRS Issues FAQs on Paid Leave Credit
On April 9, 2018, the IRS posted
a set of frequently asked questions (FAQs) and answers regarding the new employer credit for paid family and medical leave, created by the 2017 Tax Cuts and Jobs.
The FAQs clarify, for example, that an employer must reduce its deduction for wages paid by the amount of any tax credit for paid FMLA leave. Also, any wages taken into account in determining any other general business credit may not be used in determining this credit.
tax act signed into law at the end of December 2017 created a federal tax credit for employers that provide paid family and medical leave to their employees, beginning in 2018 and—at least as of now—ending at the finish of 2019. Despite the credit's modest lifespan, employers have shown interest in taking advantage of it for eligible paid time off (PTO) while it's available, in the hope that future legislation will make the program permanent.
As of the second week of January, the IRS and the Treasury Department had yet to post official guidance regarding the credit, such as frequently asked questions and answers, nor had they issued proposed or interim tax regulations. The lack of guidance leaves eligible employers and their advisors relying on the tax bill's language if they choose to move forward, with the expectation of claiming the credit when paying business taxes for 2018.
As stated in the tax act's Section 13403, Employer Credit for Paid Family and Medical Leave:
"The tax provision incorporates the definitions used in the FMLA but does not tie the tax credit to covered employers as defined by the FMLA," explained Julie Pugh, a Cincinnati-based labor and employment attorney with the law firm Graydon.
"The catch here is that the employer is required to have a written policy that provides at least two weeks of paid leave for family and medical leave at not less than 50 percent of wages for full-time, and a prorated amount for part-time, employees," she pointed out. "The two weeks of paid leave cannot be provided as vacation, personal, medical or sick leave."
To be considered for the tax credit, "the paid family and medical leave has to be a separate provision in the employer's policies. Your company's current PTO policy will not likely qualify for the tax credit," Pugh said.
[SHRM members-only guide:
How to Develop and Administer Paid Leave Programs]
What to Do Now
"Now is a good time for employers to ensure they have the proper policies in place to benefit from this new credit [for] leave taken in 2018 and 2019," said Tiana R. Seymore, an associate at law firm Fox Rothschild in San Francisco.
"It will take a while to get the logistics in place for tracking who is eligible and for employers to calculate the potential tax credit," said Kim Buckey, vice president of client services at Birmingham, Ala.-based DirectPath, an employee engagement, health care transparency and compliance company.
"While we expect additional regulations explaining and interpreting this provision to be published, think about how your company can take advantage of this provision in the future by reconsidering and redrafting paid-time-off provisions," Pugh advised.
Employers taking advantage of the paid-leave credit "will need to review their current leave policies and ensure that they meet the required guidelines for the program," said Bobbi Kloss, HR leader at Benefit Advisors Network, a Cleveland-based consortium of health and welfare benefits brokers.
Employers should also review state and local leave legislation to ensure that there are no conflicts with the leave-credit program. "The credit does not apply with respect to paid leave that is mandated under state or local law," noted Monique Warren, a principal in the White Plains, N.Y., law office of Jackson Lewis.
"Employers that provide paid family and medical leave for employees who aren't covered under the Family and Medical Leave Act also must include a nonretaliation provision in the policy," meaning that employees won't be penalized for taking paid leave, Warren added.
Related SHRM Articles:
How to Calculate the Paid Family Leave Tax Credit,
SHRM Online Benefits, February 2018
Family Caregiving Trendsetters Share Their Tips,
SHRM Online Benefits, January 2018
SHRM-Backed Workflex Bill Introduced in House,
SHRM Online Employment Law, November 2017
Was this article useful? SHRM offers thousands of tools, templates and other exclusive member benefits, including compliance updates, sample policies, HR expert advice, education discounts, a growing online member community and much more.
Join/Renew Now and let SHRM help you work smarter.
You have successfully saved this page as a bookmark.
Please confirm that you want to proceed with deleting bookmark.
You have successfully removed bookmark.
Please log in as a SHRM member before saving bookmarks.
Please sign in as a SHRM member before saving bookmarks.
Please purchase a SHRM membership before saving bookmarks.
An error has occurred
Recommended for you
SHRM Annual Conference & Exposition
SHRM’s HR Vendor Directory contains over 3,200 companies