Congress Extends Tax Credits for Voluntary COVID-Related Sick Leave and Emergency Family Leave

By: Bryan R. Cokeley, Susan Llewellyn Deniker

Published: March 19, 2021

On March 11, 2021, the American Rescue Plan Act (“ARPA”) took effect. While most of the media attention was on the stimulus payments to individuals and the overall cost of the act, this legislation also extended the tax credits available to small businesses that voluntarily offer paid sick leave and emergency family leave to employees facing difficulties caused by the coronavirus pandemic. Besides extending the availability of tax credits, ARPA also expanded the situations under which employees are eligible for both types of leave to include situations related to receiving a COVID-19 vaccine or diagnosis.

Requirements of the Families First Coronavirus Response Act (“FFCRA”)

Last spring, in response to the coronavirus pandemic, Congress enacted the FFCRA, which mandated that private employers with less than 500 employees provide:

The requirement that covered employers provide these benefits expired on December 31, 2020. Under legislation enacted at the end of 2020, however, Congress provided that employers that voluntarily offered these benefits could continue to receive tax credits for the costs of providing the additional leave through March 31, 2021. ARPA expanded the tax credit availability through September 30, 2021 while also making some minor, but significant, changes to the leave benefits. Again, it is important to remember that providing the paid sick and expanded family and medical leave remains voluntary.

Changes to Paid Sick Leave and Expanded Family and Medical Leave Under ARPA

Besides extending the eligibility period for tax credits to cover voluntary paid employee leave, ARPA also made a number of other changes to the paid sick leave and expanded family and medical leave benefits.

The Bottom Line

ARPA extends the availability of employer tax credits for paid sick leave and emergency family and medical leave provisions of the FFCRA through September 30, 2021, while also making a few changes to the rules governing the leaves. Providing employees with paid sick leave or paid emergency family and medical leave remains voluntary, however.

In addition, we can expect further guidance from the Department of Labor as to how these new provisions will be implemented. If you have any questions about voluntarily offering paid sick or family and medical leave to your employees to help cope with the coronavirus pandemic, feel free to contact one of the authors below, and we will provide you with the most up-to-date information specifically applicable to your unique circumstances.

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