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Bill Providing Small Business Tax Credits Signed Into Law

Posted on Mar. 19, 2020

The Senate overwhelmingly passed and President Trump signed a coronavirus package that would provide small businesses with a tax credit for paid sick leave.

The Senate passed the Families First Coronavirus Response Act (H.R. 6201) on March 18 on a 90-8 vote, two days after the House approved 90 pages of changes to the bill by unanimous consent.

The White House announced late in the day that Trump had signed the bill into law.

Despite the urgency to provide individuals and businesses relief from the economic effects of the coronavirus pandemic, some Republicans complained that the bill doesn’t go far enough and that it could hurt small businesses by demanding too much from them by mandating paid sick and family leave.

Senate Majority Leader Mitch McConnell, R-Ky., urged his colleagues to vote for the measure and to wait to address any complaints in a third stimulus package currently in the works. But his request fell on deaf ears with several senators.

Sen. Rand Paul, R-Ky., unsuccessfully tried to add a provision to make permanent a law requiring those claiming a child tax credit to have a Social Security number. His amendment was defeated 3 to 95.

Paul, who voted against the bill, told reporters that the economy will get better when the impact of the virus lessens and said the bill is an example of “Congress trying to look pertinent, as if it can do something, but I don’t think it will fix the problem.” 

Other amendments were also voted down, including one from Sen. Patty Murray, D-Wash., to expand paid sick leave and another from Sen. Ron Johnson, R-Wis., to replace paid sick leave with expanded unemployment insurance.

Johnson, who voted against the bill, argued that the mandate it placed on businesses would cause great economic harm. He also said he was concerned that the temporary nature of the mandate would become permanent. His amendment drew support from Republicans, but fell on a 50-48 vote, 10 votes short of the 60-vote threshold for passage.

What It Means for Businesses

For small and medium-size businesses that already provide paid sick leave, the legislation won’t change much, according to Garrett Watson of the Tax Foundation.

Employers will still be able to claim the new quarterly payroll tax credit intended to fund the paid sick leave if it is used for qualified purposes — that is, for employees who are unable to work or telework because of the coronavirus. 

The credit will cover 100 percent of the sick leave wages paid to employees who are under self-quarantine or getting tested for the coronavirus, with a maximum wage of $511 per day. For employees caring for a family member affected by the coronavirus, the credit covers up to $200 a day.

Greater challenges might arise for businesses that don’t already provide paid sick leave, said Watson. “That may create some liquidity problems for some businesses to potentially have to wait three months to get that credit back,” he said.

Those liquidity problems might be helped by the deferral of tax payments announced by Treasury and the IRS March 18, under which individuals owing federal income taxes of up to $1 million and corporate taxpayers with up to $10 million in federal income tax obligations can postpone payment until July 15. Treasury Secretary Steven Mnuchin previously predicted that the change could result in $300 billion in tax deferrals.

Mnuchin has also said that Treasury can use its regulatory authority to help concerned businesses cover the costs of the leave by allowing employers to access cash deposited with the IRS or by providing an advance to small businesses.

Businesses with more than 500 employees are exempt from the paid leave mandate. The bill is intended to facilitate more universal coverage of sick leave, and most large businesses already offer paid sick leave, according to a March 18 statement from Republicans on the House Ways and Means Committee.

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