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Mar 2020
16
March 16, 2020

HR 6201 to Create Tax Credits to Help Employers Amid COVID-19 Crisis

On Friday night, the House of Representatives passed a bill with tax-credit provisions aimed at containing the widening economic effects of COVID-19 (“HR 6201”) and lessening the potential burden on employees and employers. The President has already indicated his support for the bill. If passed by the Senate, HR 6201 will create several significant tax credits designed to alleviate the impact to those employers that will be required to provide fully paid leave to certain employees that are absent from work due to COVID-19.

The several tax credits provided are:
 
  • Sec. 7001. Payroll Credit For Required Paid Sick Leave.
  • Sec. 7002. Credit For Sick Leave For Certain Self-Employed Individuals.
  • Sec. 7003. Payroll Credit For Required Paid Family Leave.
  • Sec. 7004. Credit For Family Leave For Certain Self-Employed Individuals.
  • Sec. 7005. Special Rule Related To Tax On Employers.

Generally, the tax credits will permit a credit against mandatory paid sick leave. HR 6201 specifically references the tax imposed by Section 3111(a) of the Internal Revenue Code of 1986 (the “Code”) and indicates that mandated sick leave pay will not include the usual 6.2% employer-paid tax. The credit is calculated for each calendar quarter in an amount equal to 100% of the qualified sick leave wages paid by an employer with respect to a calendar quarter (subject to a limitation). In short, an employer is normally required to pay a 6.2% tax for Old Age, Survivors and Disability Insurance on wages paid to employees. Employers required to pay employees that are: (1) quarantined; (2) caring for a family member affected by COVID-19; or (3) caring for a child under the age of 18 whose school was closed due to COVID-19, will receive a credit for paying wages attributable to employees out on “qualified sick leave wages.” A similar credit provision exists for self-employed individuals.

If the employer qualifies for the tax credit, there is a limitation imposed upon a daily rate of $511 for most payments made under the Emergency Paid Sick Leave Act. Emergency Paid Sick Leave is being implemented by HR 6201 and payments are in addition to any other paid leave the employee is entitled to. For Michigan employers, that means it is in addition to leave time under the Paid Medical Leave Act.

Finally, among other things, HR 6201 will provide other guidance for employers to offset paid FMLA leave and paid sick leave. It would also prohibit all group health plans, health-insurance issuers and individual health insurance plans from imposing any cost sharing requirements related to COVID-19. This would include deductibles, copayments and coinsurance.

If you have any questions or concerns related to this very recent legislation, please contact Sean Cook, William LentineJeffrey Segal or your Warner attorney

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