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Tax bill includes FMLA provisions

Tax credit for paid leave

Posted December 21, 2017

Unless you’ve been hibernating, you’ve likely heard that Congress is working on a tax overhaul bill. But you might not have heard that the House version contains provisions regarding the Family and Medical Leave act (FMLA). Before you get too concerned, the provisions don’t directly change the way FMLA leave is currently taken. It does, however, allow eligible employers to take a tax credit for providing paid leave.

Eligible employers are those that have a policy allowing full-time employees to take at least two weeks of paid family and medical leave per year. Part-time employees are to be allowed leave at a ratio of the number of hours an employee is expected to work to the number of hours a full-time employee is expected to work.

Qualifying employees are those who have worked for the company for at least one year, and were paid no more than $72,000 (subject to change) in the previous year.

Qualified employees may take the leave for the same reasons as they would under the FMLA. If employees take leave for other reasons, it would not be considered family and medical leave.

The bill would allow eligible employers to claim a general business credit equal to 12.5 percent of the amount of wages paid to a qualifying employee during any period in which the employee is on family and medical leave if the rate of payment under the program is 50 percent of the wages normally paid to an employee.

The credit would be increased by 0.25 percent for each percentage point by which the rate of payment exceeds 50 percent, to a maximum of 25 percent.

The proposal would be effective for wages paid starting in 2018, but would expire on December 31, 2019.

The measure is H.R. 1, the Tax Cuts and Jobs Act

Written by Darlene M. Clabault of J. J. Keller & Associates, Inc.

Family and Medical Leave Act (FMLA) Consulting ServicesJ. J. Keller's Family and Medical Leave Act (FMLA) Consulting Services can help your company ensure compliance with FMLA requirements and minimize the law’s burden to your organization.


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