New Credit For Paid Family and Medical Leave: A new general business credit was introduced with the Tax Cuts and Jobs Act for employers who provide paid family and medical leave to their employees for 2018 and 2019. To take advantage of this credit, employers must have a separate provision in the employer’s policies; most PTO policies will not qualify as currently written. The credit will range from 12.5 percent to 25 percent of the cost of each hour of paid leave, depending on how much of a worker’s regular earnings the benefit replaces.
Family and medical leave is an employee’s leave for any of the following
* Birth, adoption, or fostering of a child, and to care for that child.
* Care for a spouse, child, or parent with a serious health condition.
* Employee’s serious health condition.
* Qualifying need arising when a spouse, child, or parent is on covered active duty (or has been notified of a call or order to covered active duty) in the Armed Forces.
* Care for a spouse, child, or parent who is a covered veteran or member of the Armed Forces.
Employer-provided leave paid as vacation leave, personal leave, or medical or sick leave isn’t eligible for the credit.
To claim the credit, an employer must have a written policy that satisfies all the following retirements
• The policy must cover all qualifying employees; that is, all employees who have been employed for a year or more and were paid not more than a specified amount during the preceding year, generally not more than $72,000 in 2017.
• The policy must provide at least two weeks of annual paid family and medical leave for each full-time qualifying employee and at least a proportionate amount of leave for each part-time qualifying employee.
• The policy must provide for payment of at least 50% of the qualifying employee’s wages while the employee is on leave.
• If an employer employs qualifying employees who are not covered by Title I of the FMLA, the employer’s written policy must include language providing “non-interference” protections, as described in Section A of Notice 2018-71. Thus, the written policy must incorporate the substantive rules that must be met for an employer to be eligible for the credit.
The IRS recently released 34 questions and answers to help employers navigate this new credit. They can be found at https://www.irs.gov/pub/irs-drop/n-18-71.pdf. If you have questions or think you are eligible for this credit, contact Brandon Dunigan at email@example.com before year-end to get your policies updated and to figure out how much the credit is worth.