Tax Policy – House of Representatives Bill Would Expand Paid Sick, Family, and Medical Leave to Address the Coronavirus Crisis
Last Saturday, the U.S. House of Representatives passed a bill (reportedly pending some potential technical changes) to help aid those affected by the current coronavirus crisis. The bill, the Families First Coronavirus Response Act, would expand federal medical leave, create an emergency paid sick leave requirement, and provide tax credits against employer-side payroll taxes to help offset the cost of these two programs, among other provisions.
Pending some technical issues arising with the final House version, the bill will be sent to the Senate, where some senators have different policy ideas for responding to the public health emergency. Therefore, a final bill could look different than the current version of the House bill.
The 110-page long House bill has eight divisions, each detailing specific measures to provide relief to Americans affected by the public health emergency. Here are two critical divisions:
The Emergency Family and Medical Leave Expansion Act division: This expands the currently existing federal medical leave program, which provides up to 12 weeks of job-protected leave to workers, with no pay requirement. Under the new House bill, employers with fewer than 500 employees would be required to provide up to 12 weeks of job-protected medical leave, paying employees at least two-thirds of their regular pay. This expansion of the current federal medical and family leave program would be available for one year to workers affected by the public health emergency.
The Emergency Paid Sick Leave Act division: This would implement a new paid sick leave requirement, whereby employers would be required to provide 14 days of paid sick leave, at no less than two-thirds of an employee’s regular pay. Workers would qualify for paid sick leave if they must quarantine, take care of a sick family member, or if their child’s school or daycare has closed due to the public health emergency.
Measures like paid sick leave will help provide short-term stabilization for workers. However, this expansion of paid leave programs would come at a time when businesses are experiencing cash flow constraints as consumers stay home and businesses, such as restaurants and bars, are restricted in their operations.
To offset this increase in business costs, Division G of the bill would provide a quarterly tax credit to employers (and certain self-employed individuals) to offset the cost of paid sick leave and paid family leave. Specifically, employers would be eligible for a refundable tax credit of 100 percent of qualified sick leave wages paid and family leave wages paid against their employer-side payroll tax liability.
While important, a refundable tax credit may not be enough to overcome liquidity challenges of the current crisis for every business; for instance, a business required to pay sick leave may not have enough cash on hand at the time, even though it would get it back in the form of a credit later.
Notably, this would reduce the amount of taxes that businesses pay into Social Security, so the House bill authorizes general fund transfers into the Social Security Trust Fund to offset reduced revenue due to the tax credits.
The bill would also provide increased funding and make certain waivers for food security programs, including the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC), the Emergency Food Assistance Program, and the Senior Nutrition Program, as well as for states to provide meals to children who qualify for school lunch programs. It would provide for free coronavirus testing and strengthens unemployment insurance by providing additional federal funding to states.
The public health emergency is causing a significant economic shock, as workers and businesses are affected by the coronavirus. Providing paid sick leave and family leave can help workers who are affected, while tax credits can help offset the costs to businesses in a time of reduced liquidity.
While the House has passed its version of the bill, it must still be passed by the Senate and signed by the President before it becomes law. Given that at least some senators envision a different response, the likelihood of the House bill becoming law remains fluid.
We’ll continue to monitor any developments and provide updated analysis.