To Enable More Vaccinations, Treasury Expands Paid-Leave Tax Credit

Credit now available for providing leave to employees helping others get vaccinated

Stephen Miller, CEBS By Stephen Miller, CEBS August 17, 2021
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To Enable More Vaccinations, Treasury Expands Paid-Leave Tax Credit

Employers can now claim tax credits based on the wages of employees who take time off to help family or household members, or others who look to the employee for caregiving help, to get vaccinated for COVID-19.

An Often-Amended Credit

In April, the Treasury Department and the IRS announced eligible employers could receive paid-leave tax credits under the American Rescue Plan Act (ARPA) for providing leave for each employee receiving the vaccine and for any time needed to recover from the vaccine, through Sept. 30, 2021.

Eligible employers generally have fewer than 500 employees. Those that voluntarily decide to offer emergency paid sick or family leave were able to claim tax credits equal to the wages paid for providing paid time off.

They also may claim tax credits for certain other wage-related expenses (such as health plan expenses and certain collectively bargained benefits).

The credit was created under the Families First Coronavirus Response Act and amended and extended by the COVID-19-related Tax Relief Act of 2020 (from Dec. 31, 2020, to March 31, 2021), and then further extended under the ARPA through Sept. 30. An analysis by law firm Hush Blackwell noted that "according to the IRS, the tax credit for paid-family-leave wages 'is equal to the family-leave wages paid for up to 12 weeks, limited to $200 per day and $12,000 in the aggregate, at 2/3rd of the employee's regular rate of pay.' For the purpose of claiming the tax credits, qualified family-leave wages and qualified sick-leave wages cannot be claimed for the same hours."

New Guidance

On July 29, the Treasury Department and the IRS posted the new guidance on the paid-leave tax in updated FAQs on the IRS website. The new guidance "gives employers further opportunity to support the health and safety of their employees' families and communities without placing an undue burden on their business during the pandemic," according to a Treasury Department announcement.

The updates clarify that eligible employers can claim the tax credits for providing leave to employees:

  • To accompany a family or household member or certain other individuals (see below) to obtain immunization relating to COVID-19.
  • To care for a family or household member or certain other individuals recovering from the immunization.

The FAQs also include information on how eligible employers may claim the paid sick and family leave credits, including how to file for and compute the applicable credit amounts and how to receive advance payments for and refunds of the credits.

An 'Expectation of Care'

According to Michael Trabold, director of compliance at Paychex, an HR and payroll services firm, "Treasury made it clear that the rationale behind this change was to prompt more people to get vaccinated or urge family members to be vaccinated, especially considering the rapid proliferation of the delta variant, and provide employers with another opportunity 'to support the health and safety of their employees' families and communities without placing an undue burden on their business during the pandemic.' "

The guidance provides some clarity on what relationship an employee must have with the person they are assisting or caring for, Trabold noted, namely:

  • An immediate family member.
  • Someone who regularly resides in the employee's home.
  • A similar person with whom the employee has a relationship that creates an expectation that the employee would care for the person.

The fundamentals of the credit remain the same," Trabold explained:

  • Eligible employers can claim tax credits equal to the wages paid for providing paid time off to employees under the program.
  • Employees can receive two-thirds of their regular rate of pay for 10 days.

"Employers in localities with their own emergency paid-sick-leave laws should be cognizant of how they may align with the federal rule," Trabold advised.

[Want to learn more about compensation and benefits? Join us at the SHRM Annual Conference & Expo 2021, taking place Sept. 9-12 in Las Vegas and virtually.]


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