The House-passed budget reconciliation bill includes a permanent extension of the tax credit available to employers offering qualified paid family and medical leave programs. It also modifies the tax credit to allow employers to claim the tax credit for the cost of private insurance that covers the cost of paid family and medical leave.

The paid leave tax credit would put the tax credit at 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 whether or not they are 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 payment exceeds 50 percent of wages normally paid. When calculating the credit, employees 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. In addition, the Small Business Administration (SBA) must conduct outreach on the paid family and medical leave credit to relevant parties through targeted communications, education, training, technical assistance, and the development of a paid family leave policy.

The proposal, if enacted, would take effect for tax years beginning after December 31, 2025.

Prospects: This proposal has a good chance for acceptance by the Senate and inclusion in the final bill, although revenue implications may cause problems as the big tax package comes together.

NAIFA Staff Contact: Jayne Fitzgerald – Director – Government Relations, at jfitzgerald@naifa.org