Two or three bills have been or soon will be passed into law in one week’s time to deal with economic fallout from the coronavirus. This brief focuses on HR 6201, which was signed into law on March 19, 2020. The other bills in the works will provide more support to small business in form of grants or low interest loans, and regulatory relief.
Parts of HR 6201 have been criticized for their negative impacts on small business. The bill requires businesses with fewer than 500 employees to provide paid sick leave and family medical leave, which will be reimbursed through tax credits and payroll tax exemptions. However, businesses with 49 or fewer employees are eligible to apply to the Department of Labor for a waiver. No telling how long that will take.
The requirement applies to any employee who is sickened by the virus, who is quarantined, or required to stay home to care for children forced to stay home from school. Companies are supposed to be reimbursed through tax credits and payroll tax holidays, which come long after the expense. The following descriptions are taken directly from a House of Representative description.
These provisions in the law remain in effect through December 2020.
Payroll Credit for “Qualified Sick Leave Wages”
[Division E – Emergency Paid Sick Leave Act]
(1) the employee is subject to a Federal, State, or local quarantine or isolation order related to coronavirus;
(2) the employee has been advised by health care provider to self-quarantine due to coronavirus;
(3) the employee is experiencing symptoms of coronavirus;
(4) the employee is caring for an individual who is subject to an order described in (1) or has been advised as described in (2);
(5) the employee is care for their child because the school is closed or child care provider is unavailable due to coronavirus; or
(6) the employee is experiencing a similar condition specified by Secretary of HHS.
Employers are required to pay employees their full wages, not to exceed $511 per day and $5,110 in the aggregate, for a use described in (1), (2), or (3)above.
Employers are required to pay employees two-thirds of their wages, not to exceed $200 per day and $2,000 in the aggregate, for a use described in (4), (5), or (6) above.
Employers will receive a 100 percent refundable payroll tax credit on the wages required to be paid.
The requirement to provide the paid leave applies to all public sector employers and those private sector employers with less than 500 employees.
The tax credit eligibility applies to those private sector employers with less than 500 employees.
Payroll Credit for “Qualified Family Leave Wages”
[Division C – Emergency Family and Medical Leave Expansion Act]
Employers are also generally be required to provide ten weeks of paid leave. Employers are required to pay employees two-thirds of their wages, not to exceed $200 per day and $10,000 in the aggregate.
(1) exclude certain health care providers and emergency responders from the definition of eligible employee; and
(2) exempt small businesses with fewer than 50 employees if the above requirements would jeopardize the going concern of the business.
[Division G – Tax Credits for Paid Sick and Paid Family and Medical Leave]
This division provides 100 percent refundable tax credits to employers with regard to two categories of paid sick and family leave (described below) that employers must grant to employees under the bill to address employment interruptions related to COVID-19.
The tax credits will be administered by the IRS and be creditable against employer-side payroll tax liability, with any excess refunded to the employer.
Refundable tax credits similar in scope and amount are available to self-employed workers facing the same employment interruptions.
Payments to employees are taxable income to the employees and subject to employee-side payroll taxes, but not subject to the employer portion of payroll taxes.
The provision sunsets on December 31, 2020