On March 18, 2020 President Trump signed the Families First Coronavirus Response Act (Act) to provide relief to employees and small and midsize businesses. The Act is effective until December 31, 2020. The Act requires covered employers, except those with fewer than 50 employees who receive an exemption, to provide the following:
- Two weeks (up to 80 hours) of paid sick timeat the employee’s regular rate of pay where the employee is unable to work because the employee is quarantined (pursuant to Federal, State, or local government order or advice of a health care provider), and/or experiencing COVID-19 symptoms and seeking a medical diagnosis (Emergency Paid Sick Leave Act or EPSL, specifically EPSL Cateogry 1); or
- Two weeks (up to 80 hours) of paid sick timeat two-thirds the employee’s regular rate of pay because the employee is unable to work because of a bona fide need to care for an individual subject to quarantine (pursuant to Federal, State, or local government order or advice of a health care provider), or to care for a child (under 18 years of age) whose school or child care provider is closed or unavailable for reasons related to COVID-19, and/or the employee is experiencing a substantially similar condition as specified by the Secretary of Health and Human Services, in consultation with the Secretaries of the Treasury and Labor (EPSL Category 2); and
- Up to an additional 10 weeks of paid family leaveat two-thirds the employee’s regular rate of pay where an employee, who has been employed for at least 30 calendar days, is unable to work due to a bona fide need for leave to care for a child whose school or child care provider is closed or unavailable for reasons related to COVID-19 (Emergency Family and Medical Leave Expansion Act or EFMLA).
A covered employer for purposes of the Act is generally defined as a private entity or individual engaged in commerce that employs fewer than 500 employees, and certain public agencies. The Act does not specify a time period or method for determining whether the 500 employee threshold has been met. The Act also does not address aggregation of controlled groups of businesses.
Covered employers, other than public agencies, are eligible to receive a tax credit to offset the cost of paid leave required to be provided under the Act, up to specified limits ($511 per day up to a cumulative $5,110 in the aggregate for EPSL Category 1, $200 per day and $2,000 in the aggregate for EPSL Category 2, and $200 per day up to $10,000 in the aggregate for EFMLA). The credit is against the employer and employee shares of Social Security (not Medicare required payments and withholdings). While the terms of the Act suggest employers would be required to wait until they file their quarterly employment tax return to receive the credit (which is refundable), the IRS announced on March 20, 2020 that it will release guidance the week of March 23rd which permits covered employers to retain an amount of payroll taxes (from employees not on covered leave, including withheld federal income taxes, the employee share of Social Security and Medicare taxes, and the employer share of Social Security and Medicare taxes) equal to the amount of required paid leave paid by the employer. This is welcome guidance and should make the payment of required leave cash flow neutral for most employers. The IRS has also indicated that if there are not sufficient payroll taxes to cover the cost of covered leave an expedited refund process will be established. The expedited process is expected to take two weeks or less.
Payments of required leave are not subject to the employer share of Social Security taxes, but are subject to the employer share of Medicare taxes. Normal employee withholding is required (income tax, employee share of Social Security, and employee share of Medicare). To ensure an employer is made whole for the cost of providing required paid leave, the credit is increased by the amount of the employer’s share of Medicare and the costs required to maintain health insurance coverage for an employee on eligible leave. The costs required to maintain health insurance for an employee on eligible leave are defined as amounts paid to maintain a group health plan. A pro-rata, per diem method can be used to determine such costs. 
An employer is required to include the amount of the credit it receives in gross income to prevent a double tax benefit (i.e. credit plus deduction of compensation expense).
 The exception can apply where the requirements to provide leave would jeopardize the viability of the business. The Department of Labor is expected to provide emergency guidance to articulate a standard which is based on simple and clear criteria to determine the exception is applicable.
 An employer of a health care provider can elect to exclude health care provider employees from the EPSL provisions.
 The Department of Labor will be issuing a temporary non-enforcement policy, expected to last 30 days, where it will not bring an enforcement action against an employer who acts reasonably and in good faith to comply with the Act.
 When aggregation has been required or permitted in provisions of the Internal Revenue Code aggregation has been specifically addressed. The lack of an aggregation provision, coupled with the definition of an employer as a “private entity or individual”, suggests that aggregation is not permitted and the Act should be applied on an entity by entity basis. However, aggregation principles are generally applied in the Family Medical Leave Act context and for employee benefit purposes. Guidance on this issue is needed.
 Self-employed individuals are also eligible for equivalent benefits. The self-employed individual provisions are not addressed in this summary.
 The IRS is authorized to issue additional guidance to determine what costs are qualified.
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