Employment & Tax Alert! Coronavirus Relief Bill Update for Employers
December 29, 2020
Hall Estill Employment & Tax Alert
The $900 billion coronavirus relief bill signed by President Trump on Sunday, December 27, 2020, includes several provisions that specifically impact employers. Most significant include (1) an extension of the tax credit provision of the Families First Coronavirus Response Act (FFCRA), (2) supplemental unemployment benefit payments and an extension of the maximum unemployment benefit period, and (3) an expansion of the Paycheck Protection Program (PPP).
Expansion of FFCRA Tax Credit
The FFCRA, passed in March 2020, mandates certain employers provide eligible employees with paid time off for leave related to coronavirus, and provides those employers with a tax credit for that paid leave. Specifically, the FFCRA includes the Emergency Paid Sick Leave Act (EPSLA), which provides employees a total of up to 2 weeks of additional paid time off for certain specified reasons, and the Emergency Family and Medical Leave Expansion Act (EFMLEA), which provides employees up to an additional 10 weeks for certain paid time off for leave typically related to child care or school closings. More specific information related to the FFCRA can be found in the previous Hall Estill Employment Law Alerts on March 19, 2020, March 25, 2020, and March 27, 2020.
The FFCRA became effective on April 2, 2020, and it expires Thursday, December 31, 2020. However, the latest relief bill allows employers to take advantage of the tax credit for “FFCRA like” leave until March 31, 2021. Thus, while the relief bill did not extend the mandates of the FFCRA past December 31, 2020, it does allow employers who voluntarily elect to continue to provide employees with such leave to take advantage of the tax benefits of doing so for another few months. The relief bill does not provide employees with additional leave, or any new leave, on January 1, 2021, but employers who elect to take advantage of the expanded tax credit for paid leave can carry over any unused FFCRA paid leave for employees. Employers will still not receive any tax credits for leave provided in excess of FFCRA’s statutory limits, or for employees who do not qualify for such leave, so employers should continue to maintain complete and accurate records to support FFCRA leave for employees. Employers should consider their current business conditions, workforce needs, and employee morale so that they are prepared to address employee leave situations that arise after December 31, 2020. In addition to evaluating their options, employers should also revise, update, and eliminate any FFCRA paid leave policies, as appropriate.
The relief bill also did not alter the anti-retaliation provisions of the FFCRA, so employers should continue to ensure they do not discharge, discipline, or otherwise retaliate against employees to take leave or otherwise exercise their rights under the FFCRA.
Expansion of Unemployment Compensation Benefits
The relief bill also extends federal emergency unemployment programs established in the March 2020 Coronavirus Aid Relief and Economic Security (CARES) Act. The $600 weekly supplement in the CARES Act expired in July 2020, but the new relief bill provides a $300 weekly supplement to eligible unemployed individuals through March 14, 2021. Similarly, the CARES Act provided a 13 week extension of the maximum benefit period, and the new relief bill provides an additional extension of 11 weeks, allowing employees a total of a 24 week extension of the maximum unemployment benefit period. Thus, employers should anticipate continued hiring challenges for the near future.
The PPP was expanded by the relief bill to allow eligible first-time qualified borrowers and eligible businesses that previously received a PPP loan to apply for a loan of up to $2 million. The relief bill expands the costs eligible for PPP loan forgiveness to include (1) payroll, (2) rent, (3) covered mortgage interest, and utilities, (4) covered worker protection and facility modification expenditures (including personal protective equipment) to comply with COVID-19 federal health and safety guidelines, (5) expenditures to suppliers that are essential at the time of purchase to the recipient’s current operations, and (6) covered operating costs such as software and cloud computing services and accounting needs. To be eligible for full loan forgiveness, PPP borrowers will have to spend no less than 60% of the funds on payroll over a covered period of either 8 or 24 weeks.
Further, the relief bill specifies that business expenses paid with forgiven PPP loans are tax-deductible. This is in direct contention with IRS guidance previously issued that such business expenses could not be deducted if the business had a reasonable expectation of reimbursement in the form of loan forgiveness.
We will continue to keep you updated as new developments occur. If you need any assistance or have any questions regarding other issues, please contact your Hall Estill Attorney directly.