New Rules Related to Paid Family and Medical Leave Credit

Just recently, the IRS issued 34 questions and answers on new Sec. 45S, which was added by the Tax Cuts and Jobs Act to help provide a general business credit to employers who offer paid family and medical leave to employees.  

The credit is a percentage of the wages an employer pays to its employees while they are on paid family or medical leave. An employee may take family or medical leave for reasons specified by the Family and Medical Leave Act.

In order to claim the credit, employers are required to have a written policy related to their paid family and medical leave. Also, the policy must meet certain requirements, which include:

l  The policy has to cover all qualifying employees

l  Qualifying employees are defined as those who have been employed for a year or more and who were not paid more than a specific amount in the previous tax year

l  The policy has to provide at least two weeks of annual paid family and medical leave for each qualifying employee and proportionate amounts of leave for part-time qualifying employees

l  The policy must offer payment of at least 50% of a qualifying employee’s wages while the employee is on leave

l  If the employer has employees who are not covered by Title I of the Family and Medical Leave Act, the policy has to include language providing “non interference” protections.

It is also important to note that, in addition to meeting these criteria, any leave paid by a state or local government or that is legally required does not qualify for the credit. Aside from that provision, though, businesses are encouraged to meet all of the rules and guidelines that are required of them in order to become eligible for this worthwhile credit.