Last week upon final passage by Congress, President Joe Biden signed the American Rescue Plan Act (ARPA or Act) into law.[1] The $1.9 trillion economic stimulus bill provides a comprehensive package of available funds to qualifying individuals and businesses in the form of direct payments, industry-specific grants, and tax credits. Specifically, the Act provides an additional sick and family leave tax credit for employers originally made available under the Families First Coronavirus Response Act (FFCRA).[2]

Under the ARPA, employers may take an additional employment tax credit for 100 percent of wages paid as qualified sick leave wages to their employees if the leave was taken after March 31, 2021 and before Sept. 30, 2021.[3] The amount of the employer’s credit is limited to the value of 80 hours (10 days) worth of wages per employee for this time frame.[4] This credit is available even in addition to credit received for paid sick leave taken by employees prior to March 31, 2021 under the FFCRA.[5] Employers are not required to claim the credit and may elect to claim only part of the credit for the 2021 taxable year.[6]

Likewise, the ARPA provides additional tax credit opportunities for employers for 100 percent of wages paid as qualified family leave wages to their employees if the leave was taken after March 31, 2021 and before Sept. 30, 2021.[7] The amount of the credit is limited to: (1) $200 a day for which an individual employee receives qualified family leave wages; and (2) $12,000 for the entire year, per employee.[8]

Similar to the credit for sick leave, credit is available for up to an additional 10 weeks of paid family leave even if credit was received for paid family leave taken by employees prior to March 31, 2021 under the FFCRA.[9] Employers are not required to claim this credit either and may elect to claim only part of the credit for the 2021 taxable year.[10]

The ARPA updates the definition of sick leave and family leave under the Emergency Paid Sick Leave Act (within the FFCRA) to also include leave taken for the purposes of receiving a COVID-19 test, quarantining until results have been received, receiving a COVID-19 vaccine, and recovering from side effects of the vaccine.[11]

To be eligible for either tax credit, an employer must uniformly provide sick leave and family leave to all of its employees.[12] In providing such paid leave, an employer must not discriminate in favor of highly compensated employees, on the basis of full-time employment status, or on the basis of employment tenure.[13]

This alert only provides a broad overview of extended tax credit provisions found in the ARPA. However, this act and the prior legislation it amended provide additional financial resources and opportunities for individuals and employers.

For specific questions about the ARPA, FFCRA, employment matters during COVID-19, and other national and state COVID-19 legal developments, please contact your Dinsmore attorney.