This week, President Biden marked the 200 millionth COVID-19 vaccine administered by calling on employers to provide paid time off to employees to get vaccinated. He also touted the federal government’s tax credit for certain employers that do so. The recently enacted American Rescue Plan Act (ARPA) extended the availability of tax credits to employers with fewer than 500 employees that provide paid leave to their workers for a variety of COVID-related reasons. ARPA also expanded the availability of tax credits for time spent obtaining a COVID vaccination.

The provision of paid leave, and availability of tax credits, is voluntary for employers because the requirement that employers offer paid leave benefits expired on December 31, 2020. The Internal Revenue Service published guidance for employers on how they may claim these tax credits, how they are calculated, and what supporting documentation is needed. Here is a link to the IRS’s recent guidance: https://www.irs.gov/newsroom/employer-tax-credits-for-employee-paid-leave-due-to-covid-19.

For the 2nd and 3rd quarters of 2021, businesses may take tax credits for wages up to 80 hours of paid sick leave in an amount equal to either:

(1) The employee’s regular wage, capped at $511/day, up to a total of $5,110 if the employee was sick or quarantining, awaiting the results of a COVID test, obtaining or recovering from a vaccine, or

(2) Two-thirds of the employee’s regular wage, capped at $200/day, up to a total of $2,000, if the employee was taking time to care for someone quarantining or to provide care due to COVID-19 school or childcare provider closures.

Business that pay employees for qualifying leave can take the tax credit against their share of certain payroll taxes. If the amount of the credit exceeds a business’s portion of its payroll taxes, then the excess is refunded and paid directly back to the business. Businesses can file quarterly for this credit through September 30, 2021. Businesses may also be eligible for additional credits for those employees that took sick leave earlier in the public health crisis.

As vaccinations become more widely available, employers now have another qualifying reason to provide employees paid leave while taking advantage of the tax credits offered under the ARPA. If you have any questions regarding the tax credits afforded to employers under the ARPA, please feel free to contact Kemp Smith’s Labor and Employment Department at 915-533-4424.