Federal Law Alert – COVID Relief Bill: Tax Credits for Paid Leave Extended to March 31, 2021

A new $900 billion coronavirus relief bill has become law. It answers the question of whether federal emergency paid sick leave (EPSL) and emergency family and medical leave (EFML) will be extended.

The answer is yes, but it’s an option, not a requirement. Here’s what employers need to know:

• Offering EPSL and EFML after December 31, 2020 will become optional for employers.
• An employee will no longer be entitled by law to take EPSL or EFML even if they have a qualifying reason.
• Employers who choose to offer these paid leaves can still receive a tax credit if they follow the current EPSL and EFML rules, including job protection.
• The extension of the tax credit will be available for leaves taken through March 31, 2021.
• Employees will not get new hours to use—the unused portion of their original allotment that remains on January 1, 2021 is how much they will be able to use through March 31. For instance, if an employee who was entitled to 80 hours of EPSL between April 1, 2020 and December 31, 2020 used 40 of those hours in 2020, they’d have 40 hours left to use between January 1, 2021 and March 31, 2021.
• There is a possible exception when an employee’s EFML bank could reset if employers use the calendar year or another fixed EFML tracking period that starts before March 31, 2021 and the Department of Labor (DOL) fails to readopt the regulations they wrote related to EFML. The Internal Revenue Service (IRS), DOL, or both are expected to provide guidance that will soon clear up whether certain employers will need to offer additional hours.

The new law also extends or revives several other types of economic assistance from previous coronavirus-related legislation, some of which are listed below. These aspects of the law are outside the scope of our services, so we are unable to answer follow-up questions. Some of the notable provisions include:

• Individual payments of $600 for people with incomes at or below $75,000 and $600 per dependent child with payments phased out for higher incomes;
• A $300 weekly supplemental unemployment benefit through March 14, 2021;
• Extension of Pandemic Unemployment Assistance (for gig workers and the self-employed) and Pandemic Emergency Unemployment Compensation (for those who run out of state unemployment insurance benefits) through March 14, 2021; and
• Reopening and refunding of the Paycheck Protection Program (see your financial or tax advisor for additional information).