18 March 2021

American Rescue Plan – (EPSL and EFML Tax Credits)

On March 11, 2021, President Biden signed into law the American Rescue Plan Act of 2021 (the “ARPA”). Among the $1.9 trillion of appropriated funding, the ARPA extended both Emergency Paid Sick Leave (“EPSL”) tax credits and Emergency Family Medical Leave (“EFML”) tax credits to employers who voluntarily provide EPSL and EFML through September 30, 2021, so taxpayers can now claim EPSL and EFML tax credits in the second and third quarters of the 2021 calendar year.  Remember, this continues to be voluntary.  Employers do not have to provide the leaves described in the FFCRA.  But if they do, they can claim tax credits.

The ARPA also extended and updated a number of EPSL and EFML provisions beginning April 1, 2021. Most notably, the following:

  • Additional Qualifiers. The ARPA provides additional reasons leave would qualify for EPSL and EFML leave: (1) vaccine appointments, (2) complications due to receiving the vaccine, (3) seeking or awaiting the results of a COVID test or diagnosis after an employee has been either exposed to COVID or for an employer request for testing/diagnosis. Additionally, any reason for EPSL leave is now also a reason for leave under the EFML.
  • The ARPA expands access to the tax credits to public bodies.
  • Hour Reset for EPSL. The previous 80-hour per employee limit for EPSL will reset after March 31, 2021.
  • Additional limit on credit for EFML. The ARPA increases the limit on the tax credit for EFML to $12,000. Tax credits for EFML will now be available for any reason EPSL is available
  • Federal Employee Eligibility. Federal workers are now eligible for up to 15 weeks of paid leave for COVID-19-related absences for themselves and their families.
  • Extension of Statute of Limitations. The ARPA also extends the statute of limitations from three years to five years for both EPSL and EFML tax credits, providing the IRS with additional time to examine Forms 941 claiming the credits.
  • EFML and Pay. The first two weeks of the EFML can now be paid.

The IRS is expected to provide additional guidance and FAQs in the near future.  We are optimistic that the Department of Labor (DOL) will also issue guidance on the interplay between EFML and traditional FMLA.  Miller Johnson is actively monitoring IRS and DOL guidance and will provide additional client-alerts as necessary. Please reach out to Miller Johnson if you have any employee that may qualify for EPSL or EFML tax credits to ensure compliance with this fast-evolving regulatory landscape.