S. 400: Paid Family and Medical Leave Tax Credit Extension and Enhancement Act

The Paid Family and Medical Leave Tax Credit Extension and Enhancement Act aims to amend the Internal Revenue Code to improve the existing tax credit for paid family and medical leave. Here’s a breakdown of the key provisions:

Enhancement of the Paid Family and Medical Leave Credit

The bill proposes changes to Section 45S of the Internal Revenue Code. Key updates include:

• Credit for Employers: Eligible employers can receive a tax credit based on a percentage of wages paid to employees who take family and medical leave. They also have the option to claim a credit for premiums paid on insurance policies that cover family and medical leave.
• Insurance Policy Credit: If employers opt for the insurance policy route, the applicable percentage used to calculate the credit will be determined regardless of whether employees actually took leave during the taxable year.

Changes to Wage Calculation

The bill makes adjustments to how the credit is calculated:

• It clarifies that the wages counted for the tax credit will be those provided by the employer. This change ensures clearer definitions and applications when calculating wage-related credits.
• Specific adjustments will also be made for how pay is calculated for part-time employees on an annualized basis.

Aggregation Rules for Employers

The legislation includes provisions that treat all companies under common control as a single employer for the purposes of the tax credits. However, there is an exception for employers who can demonstrate a substantial and legitimate business reason for not providing a written policy for family and medical leave.

Exclusions for Government Mandated Benefits

Any paid family and medical leave provided by state or local governments will impact how much credit an employer can claim. This includes:

• State or local government-provided leave will count towards the total leave provided by the employer.
• However, leave mandated by state or local laws will not be factored into the employer's credit claim.

Outreach and Education Efforts

The bill mandates outreach efforts by the Small Business Administration (SBA) and the Internal Revenue Service (IRS) to inform employers about the changes to the paid family and medical leave credit. This may include:

• Targeted communications and educational activities to help businesses understand and utilize the credit.
• Development of written paid family leave policies to assist employers in compliance with the new regulations.

Effective Date

The changes proposed in this bill would apply to taxable years commencing after the law is enacted.

Relevant Companies

None found