Small Employers May Receive A Tax Credit for Paid Vaccination Leave

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Today, the White House highlighted a benefit to small employers that was part of the American Rescue Plan Act enacted on March 11, 2021: a tax credit for providing employees with paid leave to obtain a COVID-19 vaccine.

As we discussed in our March 12, 2021 E-lert, ARPA expanded and extended the tax credits that small employers, meaning those with fewer than 500 employees, may opt to receive under the Families First Coronavirus Response Act (FFCRA) for voluntarily providing paid COVID-19-related leave through September 30, 2021. Among other things, ARPA allowed employers to provide a new two-week allotment of paid sick leave and receive a tax credit for the reasons originally set forth in the FFCRA, but also added new reasons, including to receive a vaccine and to recover from any adverse effects from a vaccine. The other reasons are: (1) self-isolation because of a COVID-19 diagnosis; (2) to obtain a medical diagnosis or care when experiencing COVID-19  symptoms; (3) because a health official or health care provider has recommended quarantine; (4) to care for a family member with COVID-19 or who is seeking diagnosis/care; (5) to care for a family member in quarantine; (6) when a child’s school or childcare provider is unavailable because of COVID-19; (7) to seek or wait for a medical diagnosis or test after exposure to COVID-19; and (8) to get a test or diagnosis at the employer’s request.

In our original E-lert, we opined that employers who sought to incentivize employees to become vaccinated by providing paid leave to get the vaccine could receive the tax credit under ARPA. The White House’s announcement today confirms that this is, in fact, the case.

We further note that, while the White House’s announcement focuses only on the two-week paid sick leave allotment, FFCRA also provided for up to 12 weeks of paid family and medical leave for COVID-related leave to care for a child due to the unavailability of a child care provider or the closure of a school/place of care. ARPA expanded the reasons for the paid FMLA to include all the reasons for sick leave. Thus, the paid FMLA would also be available for vaccination leave – although it would be paid and the tax credit received at 2/3 the employee’s rate up to $200 per day, rather than the full rate (to a max of $511 per day) for sick leave.

In conjunction with the White House’s announcement, the Internal Revenue Service released a fact sheet to provide guidance to employers on how to claim the tax credit for the extended/expanded FFCRA leave – including for vaccination leave – on their quarterly tax filings.

This is obviously a fast-moving and ever-changing situation, and we will continue to send out E-lerts on any significant developments. You may also wish to check our continually-updated FAQs frequently.