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Families First Coronavirus Response Act - Available Tax Credits for Employers

This Alert is brought to you by AHLA’s Tax and Finance Practice Group.
  • March 20, 2020
  • Michael N. Fine , Wyatt Tarrant & Combs LLP

Late afternoon on March 18, Congress sent a $100 billion stimulus package to President Donald Trump's desk that, among other things, provides paid sick leave and childcare leave for certain types of employees. In an attempt to defray the significant costs required to be provided by employers, the Act created the following tax credits:

  • A refundable tax credit for employers equal to 100% of qualified family leave wages required to be paid by the employer for each calendar quarter. The tax credit is allowed against the tax imposed by section 3111(a) (the employer portion of Social Security taxes). The amount of qualified family leave wages taken into account for each employee is capped at $200 per day and $10,000 for all calendar quarters. If the credit exceeds the employer’s total liability under section 3111(a) for all employees for any calendar quarter, the excess credit is refundable to the employer.
  • A refundable tax credit for employers equal to 100 percent of qualified paid sick leave wages paid by an employer for each calendar quarter. The tax credit is allowed against the tax imposed by section 3111(a) of the Internal Revenue Code (the employer portion of Social Security taxes).
  • For both of the above credits, an employer will be required to increase their gross income for the taxable year by the amount of the credit received.
Additionally, relief was given for self-employed individuals or those who are a part of the gig-economy allowing for them to claim a credit against their income taxes related to sick or family leave. The credit covers 100% of self-employed individuals’ daily self-employment income or 67% if an individual is taking care of a child whose school is closed. The per-day amount is limited to the lesser of an individual’s average daily self-employment income, or $511 per day if caring for themselves or $200 if caring for a minor child. The number of eligible days is limited to 10 if related to sick leave and 50 if related to family leave. Subsequent guidance from the Treasury will be issued to help self-employed individuals understand what documentation will need to be provided in order to claim the credit.