Newly available federal guidance informs America’s small business employers about a beneficial tax incentive championed by U.S. Sen. Deb Fischer (R-NE) in the Tax Cuts and Jobs Act.
The U.S. Treasury Department and the Internal Revenue Service (IRS) on Sept. 24 released employer guidance on offering paid family and medical leave through the first-ever, nationwide policy.
“Now that this guidance is out, I encourage employers, especially small businesses, to take advantage of this opportunity to offer paid family leave,” Sen. Fischer said earlier this week. “The program provides working families more flexibility as they balance caring for their loved ones with work obligations.”
By extending this tax credit, said the senator, businesses have more time to set up paid family leave and “ensure this program is working for families.”
As part of the 2017 Tax Cuts and Jobs Act, eligible employers who provide paid family and medical leave to their employees during tax years 2018 and 2019 may qualify for a new business credit, according to the Treasury Department, which said retroactive credit also could be available to employers who establish or update a leave policy.
“Delivering relief to hardworking taxpayers and their families was a central goal of the Tax Cuts and Jobs Act,” Treasury Secretary Steven Mnuchin said in announcing release of the guidance. “By enhancing the benefits of this tax credit, we help empower working parents to pursue their careers while balancing their demands at home.”
Sen. Fischer called the voluntary program historic and pointed out in her statement that employers may offer up to 12 weeks of paid family leave, which could be used to care for a family member or to take maternity or paternity leave.
In exchange for offering the leave, employers receive as much as a 25 percent tax credit for the amount of wages replaced, according to the senator’s office, which noted that the policy is targeted to hourly employees who don’t have access to paid family leave.
Additionally, the new guidance clarifies how to calculate the credit, including the application of special rules and limitations, according to the Treasury Department, and stipulates that employees who earn more than $72,000 a year do not qualify to participate in the program.
A two-year tax credit is offered under current law, a timeframe that was intended to give Congress a chance to analyze the program’s effectiveness.
Because the guidance on using the tax credit wasn’t issued until this week, Sen. Fischer on Sept. 6 sponsored the Paid Family Leave Pilot Extension Act of 2018, S. 3412, along with original cosponsors U.S. Sens. Angus King (I-ME) and Dean Heller (R-NV).
S. 3412 would amend the Internal Revenue Code to extend through 2022 the tax credit for employers who provide employees with paid family and medical leave, according to the congressional record summary.
S. 3412 also would require the Government Accountability Office to: examine the effectiveness of the tax credit for paid family and medical leave; recommend how to promote access to the tax credit; and suggest alternative policies to increase access to paid family and medical leave, according to the summary.
The bill is under consideration by the U.S. Senate Finance Committee.