H.R.1 as enacted into law extends the tax credit for employer-provided paid leave. Plus, the new law expands the tax credit by allowing employers to choose whether to take the deduction based on leave taken, or on the premiums paid for insurance that provides paid leave benefits.
The paid leave tax credit is equal to 12.5 percent of wages paid to employees who are on leave. Or, if the employer so chooses, the credit would apply to 12.5 percent of premiums paid for an insurance policy that offers benefits that exceed 50 percent of wages paid to employees when they are not on leave. The 12.5 percent credit rises by 0.25 percent, up to a maximum of 25 percent, for each percentage point by which the rate of paid leave payment exceeds 50 percent of wages normally paid. When calculating the credit, employers may count employees who otherwise qualify, who customarily work at least 20 hours per week and who have been employed for at least six months.
Prospects: Expect implementing regulations on this new law—particularly with respect to the expansion that applies to private insurance that covers paid leave.
NAIFA Staff Contact: Jayne Fitzgerald – Director – Government Relations, at jfitzgerald@naifa.org