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Treasury Greenlights Paid Leave Credit Expansion for Vaccines

Posted on July 30, 2021

Employers can now claim tax credits for giving employees time off to take not just themselves but their family members to get vaccinated, according to new guidance from the IRS and Treasury.

The announcement comes as COVID-19 cases have begun rising again across the country. The Biden administration touted the move by the IRS and Treasury as a way to increase vaccinations, which the White House says will reduce deaths and hospitalizations related to the pandemic.

“We’re still hearing that people are unable to get time off from their employer to get vaccinated. Well, this is unacceptable,” President Biden said in July 29 remarks. “I’m calling on all employees across the country to get paid time off to get the shot or to help a family member to do so.”

The guidance, in the form of freshly updated IRS FAQs, expands upon the temporary tax credits made available by a provision in the American Rescue Plan Act of 2021 (P.L. 117-2) that reimburses employers for the cost of providing paid sick or family leave for COVID-19-related reasons.

The new guidance clarifies that the credits can be applied to wages paid for leave taken to care for an employee’s immediate family member, like a child; a person who resides in the employee’s home; or any person for whom the employee has an expectation to provide care. The similar paid leave credit for self-employed individuals can also be applied in the same ways, according to the IRS.

ARPA’s paid leave provision itself was an expansion and extension of the employer paid sick and family leave credits first authorized in the Families First Coronavirus Response Act, which afforded employers with fewer than 500 employees a refundable payroll tax credit against their share of payroll taxes for providing employees with paid leave related to COVID-19.

ARPA extended the credits through September 1, 2021, and it allowed the credits to be applied to employees who take time off to get vaccinated or to recover from any side effects of the vaccination. The FAQs indicate that employers can receive the credits for up to 80 hours of an employee’s wages, capped at $511 per day and $5,110 overall per employee to care for their own needs, or $200 per day and $2,000 overall to care for the needs of others.

The new guidance provides businesses with certainty that the credits can be applied to employees helping someone get vaccinated or assisting with vaccine recovery, which hadn’t been clear before, according to Joe Kristan of Eide Bailly LLP. Whether it will move the needle on vaccination rates is less clear.

“It’s a big country, so I’m sure it will make the difference for somebody somewhere. But I suspect buying a Powerball ticket for everyone driving someone to a vaccination site or getting shots would work better, with less compliance cost,” Kristan said.

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