December 17, 2018 - Douglas Myser

Family medical leave credit rules. The IRS has issued 34 questions and answers on new Section 45S, which was added by the law known as the Tax Cuts and Jobs Act, P.L. 115-97, to provide a general business credit for employers who provide paid family and medical leave to their employees. The credit equals a percentage of the wages an employer pays employees while they are on paid family or medical leave. For purposes of the credit, the reasons an employee may take a family or medical leave are the same as those for which an employee may take a leave under Title One of the Family and Medical Leave Act of 1993.

Family medical leave credit rules. To claim the credit an employer must have a written policy that satisfies the following requirements. The policy must cover all qualifying employees that is, all employees who have been employed for a year or more and were paid not more than a specified amount during the preceding year, generally not more than $72,000 in 2017. The policy must provide at least two weeks of annual paid family and medical leave for each full time qualifying employee and at least a proportionate amount of leave for each part time qualifying employee Employers who fail to do this could end up with tax penalties and a tax debt, and find they need a Tax Resolution Company. The appropriate thing to do then would be to explore the options in the IRS Fresh Start Program.

The policy must provide for payment of at least 50% of the qualifying employee's wages while the employee is on leave. If an employer employs qualifying employees who are not covered by Title One of the FMLA, the employer's written policy must include language providing "non-interference" protections as described in Section A of Notice 2018-71. Thus, the written policy must incorporate the substantive IRS rules that must be met for an employer to be eligible for the credit. Any leave paid by a state or local government or required by state or local law is not taken into account for any purpose in determining the amount of paid family and medical leave provided by the employer, meaning those amounts do not qualify for the credit.