On March 31, 2020, the Internal Revenue Service (IRS) issued new guidance and FAQs for employers seeking COVID-19-related tax credits to offset the cost of providing paid leave under the federal Families First Coronavirus Response Act (FFCRA). The guidance, which includes 66 FAQs, imposes new requirements related to FFCRA leave in order for an employer to claim the associated tax credits.
Most notably, the guidance:
- imposes very specific written documentation requirements for employees requesting emergency paid sick leave or expanded FMLA leave under the FFCRA;
- makes clear that expanded FMLA leave available to employees when their child’s school or place of care is closed, or childcare provider is unavailable, can be taken only when the employee alone is caring for the child;
- added a requirement that employees explain in writing what “special circumstances” require the employee to care during daylight hours for the employee’s child who is older than 14 years when leave is requested due to closure of the child’s school or place of care; and
- clarifies employers’ record-keeping obligations.
Employee Requests for Paid Leave Must Be in Writing
The IRS guidance states unequivocally that, in order to substantiate an employee’s eligibility for emergency paid sick leave or expanded FMLA under the FFCRA, the employer must receive a written request for leave that includes:
- The employee’s name;
- The date or dates for which leave is requested;
- A statement of the COVID-19 related reason the employee is requesting leave and written support for such reason; and
- A statement that the employee is unable to work, including by means of telework, for such reason.
In the case of leave based on a quarantine order or self-quarantine advice, the statement must also include the name of the entity ordering quarantine or health care provider advising self-quarantine, and, if the person subject to quarantine or advised to self-quarantine is not the employee, that person’s name and relation to the employee.
In the case of leave based on a school closing or child care provider unavailability, the statement must also include the name and age of the child to be cared for, the name of the school that has closed or place of care that is unavailable, and a representation that no other person will be providing care for the child during the period for which the employee is taking leave. This means that co-parents of the child cannot take leave simultaneously to care for the child during a school closure or period of child care provider unavailability.
The guidance imposes an additional (and unexpected) requirement that an employee explain in writing what “special circumstances” require the employee to care for the employee’s child who is older than 14 during daylight hours when taking leave due to closure of the child’s school or place of care. This is a surprising development, as there was no suggestion in the FFCRA or its pre-existing interpretative guidance that employees would be presumptively ineligible to take leave to care for a child over 14 years old during expanded FMLA leave absent such “special circumstances.”
Employers Must Retain Written Leave Requests and Additional Records to Substantiate Eligibility for Tax Credits
In addition to retaining the written documentation described above for at least 4 years after the date the tax becomes due or is paid (whichever is later), employers must create and maintain:
- Documentation of how the employer determined the amount of qualified sick and family leave wages paid to employees that are eligible for the credit, including records of work, telework and qualified sick and family leave;
- Documentation of how the employer determined the amount of qualified health plan expenses that the employer allocated to wages;
- Copies of any completed Forms 7200 that the employer submitted to the IRS; and
- Copies of the completed Forms 941 that the employer submitted to the IRS.
Leave May Be Denied If Employee Fails to Provide Materials Sufficient to Support Applicable Tax Credit
Employers may be wondering what recourse is available if an employee fails to provide the leave-related documentation necessary to support the employer’s eligibility for the associated tax credit.
Spoiler alert! The DOL’s temporary rule containing FFCRA regulations, scheduled to be published in the Federal Register on April 6, 2020, states that an “[e]mployer is not required to provide leave if materials sufficient to support the applicable tax credit have not been provided.”
More to come on ReedGroup’s blog concerning the DOL’s new rule, which is over 100 pages long, and contains many tweaks to the emergency paid sick leave and expanded FMLA provisions of the FFCRA based on the DOL’s interpretation of Congress’s intent when drafting the legislation.
If you’re looking for assistance managing claims or to ensure compliance across your organization, ReedGroup has solutions for you. Check out our offerings here.
Information provided on this blog is intended for general educational use. It is not intended to provide legal advice. ReedGroup does not provide legal services. Consult an attorney for legal advice on this or any other topic.