COVID-19: Changes in Federal Tax Law You Need to Know

In response to the COVID-19 pandemic, the last few weeks have seen an unprecedented series of legislative actions by Congress, as well as a number of significant administrative actions by the Internal Revenue Service. Here is a brief synopsis of federal tax extensions and changes due to COVID-19.

Federal Filing and Payment Deadlines Extended

Initially, the IRS only offered a payment deadline extension in response to COVID-19. However, after much pressure, the IRS in response has instead provided much more comprehensive relief to mostly taxpayers in the U.S.

All taxpayers refers to: individuals, trusts, estates, (some) partnerships, associations, companies (including LLCs), corporations, nonprofits, and more that have a filing date of April 15, 2020.

  • For all taxpayers who are required to file a federal income tax return and/or submit a federal income tax payment for the 2019 tax year, due on April 15, 2020, the due date for both filing and paying is extended to July 15, 2020. This applies to all taxpayers regardless of the amount of their federal tax obligation.
  • This applies to all filers of Forms 1040, 1040-SR, 1040-NR, 1040-NR-EZ, 1040-PR, 1040-SS, 1041, 1041-N, 1041-QFT, 1120, 1120-C, 1120-F, 1120-FSC, 1120-H, 1120-L, 1120-ND, 1120-PC, 1120-POL, 1120-REIT, 1120-RIC, 1120-SF, 8960 and 8991.
  • For self-employed taxpayers, relief is also provided for making federal estimated income tax payments.
  • The period of April 15, 2020 through July 15, 2020 is considered disregarded for the purposes of calculation of any interest, penalty, or addition to tax for failure to file the income tax returns or pay the income tax owed. Interest, penalties and any additions of tax will begin to accrue again on July 16, 2020.
  • No extension is provided for the payment or deposit of any other type of federal tax- including federal estate and gift tax.
  • Important to note that any taxpayer returns that were due on March 16, 2020, which include Form 1065, 1065-B, Form 1066, and Form 1120-S, are not included in any of the COVID-19 extensions for both filing and payment. However, any timely filed extensions will still extend the due date six months as normal.
  • For fiscal year taxpayers, if their federal income tax return for the fiscal year ending during 2019 is due on April 15, 2020, whether that is the original due date or the extension date, the taxpayer’s filing due date is postponed to July 15, 2020.

For taxpayers that qualify for extension, no additional form is required for the July 15, 2020.  Any additional extension beyond July 15, 2020 will require filing Form 4868 as usually required.

Business Tax Credits

On March 18, 2020, President Trump signed into law the Families First Coronavirus Act which eases compliance burdens on businesses. Additional business credits were then signed into law through the Coronavirus, Aid, Relief and Economic Security Act (CARES) on March 27.

Payroll Sick Leave Credit

The Emergency Paid Sick Leave Act (EPSLA) requires private employers with fewer than 500 employees to provide 80 hours of paid sick time to employees who are unable to work for virus-related reasons (certain exceptions may apply to less than 50-employee businesses). The pay is up to $511 per day with a $5,110 overall limit for each employee directly affected by the virus and up to $200 per day with a $2,000 overall limit for an employee providing care for someone with the virus.

The employer is allowed to receive a tax credit against their 6.2{45ef85514356201a9665f05d22c09675e96dde607afc20c57d108fe109b047b6} of the Social Security (OASDI) payroll tax (commonly known as the Railroad Retirement tax). This credit amount tracks to the per-employee limits described above. This credit can also be increased by both the amount of expenses in connection with a qualified health plan if the expenses are excludible from employee income, and the employer’s share of the payroll Medicare hospital tax imposed on any payments required under the EPSLA. Any credit amounts earned in excess of the 6.2{45ef85514356201a9665f05d22c09675e96dde607afc20c57d108fe109b047b6} Railroad Retirement tax are refundable. The credit applies to wages paid in a period beginning no later than April 2, 2020, and ending on December 31, 2020.

Self-Employed Sick Leave Credit

Self-employed persons also qualify for a sick leave credit.  The credit treats the self-employed person as both the employer and employee for credit purposes. The $5,110 and $2,000 limits as described above in EPSLA, also apply here unless the self-employed person has insufficient self-employment income based on a formula. The credit applies to wages paid in a period beginning no later than April 2, 2020, and ending on December 31, 2020.

Payroll Family Leave Credit

The Emergency Family and Medical Leave Expansion Act (EFMLEA) requires employers with fewer than 500 employees to provide both paid and unpaid leave. This leave occurs when an employee must take care of a minor child due to a COVID-19 related emergency. The first 10 days can be unpaid, but then paid leave is required, based on the employee’s pay rate and pay hours. The leave cannot exceed $200 a day or $10,000 total per employee.

The corresponding tax credit functions substantially similar to the payroll tax credit described above. The credit is against the same 6.2{45ef85514356201a9665f05d22c09675e96dde607afc20c57d108fe109b047b6} Railroad Retirement Tax, and tracks to the $200 and $10,000 dollars employee limits described above.

Self-Employed Family Leave Credit

The Act also provided the self-employed a similar refundable income tax credit for family leave. The self-employed person is treated as both employer and employee for purposes of the credit. The credit is subject to a $10,000 limit, and may be reduced if there is insufficient self-employment income determined by formula.

Wage Exemption

Any wages paid as required sick leave payments for either EPSLA or EFMLEA are not considered wages for purposes of the employer’s 6.2{45ef85514356201a9665f05d22c09675e96dde607afc20c57d108fe109b047b6} portion of the payroll tax, again often referred to as the Railroad Retirement Tax.

Employee Retention Credit for Employers

For eligible employers who have their operations fully or partially suspended as a result of government order, or who have experienced a greater than 50{45ef85514356201a9665f05d22c09675e96dde607afc20c57d108fe109b047b6} reduction in quarterly receipts, measured on a year-over-year basis, the provision provides a refundable payroll tax credit for 50{45ef85514356201a9665f05d22c09675e96dde607afc20c57d108fe109b047b6} of wages to certain employees. Employers receiving Small Business Interruption Loans do not qualify for the credit. The qualifying wages depend on whether the employer has an average number of full-time employees in 2019 of 100 or fewer, if so, all employee wages are eligible.  If over 100 full-time employees, only the wages of furloughed employees or faced a reduction of hours as a result of employer’s closure or reduced gross receipts are eligible for the credit.

Other Changes in the Federal Tax Code

Recovery Rebates for Individuals

The CARES Act provides individuals with a refundable credit against income taxes they owe for the 2020 tax year equal to $1,200 ($2,400 for joint filers), not to exceed the tax liability for the year. Any taxpayer that has qualifying income (earned income, social security, and/or pension income), taxable income greater than zero, and gross income greater than the standard deduction, then the taxpayer is entitled to a refundable credit of at least $600 ($1,200 for joint filers), plus $500 per qualifying child. The phase-out begins at $75,000 ($150,000 for joint filers).

Payroll Tax Deferment

The CARES Act also allows employers and self-employed individuals to defer paying the employer portion of certain payroll taxes through the end of 2020. Half of the deferred amount of payroll taxes will be due December 31, 2021, and the remaining half will be due December 31, 2022. Any taxpayer receiving a Small Business Act Loan are excluded from this deferral program.

Deductibility of Interest Expenses Temporarily Increased

The Cares Act temporarily and retroactively increases the limitation of the deductibility of interest expense under Code Sec. 163(j)(1) from 30{45ef85514356201a9665f05d22c09675e96dde607afc20c57d108fe109b047b6} to 50{45ef85514356201a9665f05d22c09675e96dde607afc20c57d108fe109b047b6} for tax years 2019 and 2020.

Temporary Repeal of Taxable Income Limitation for Net Operating Losses (NOLs)

The Cares Act temporarily removes the taxable income limitation to allow an NOL to fully offset income. This will apply to the 2018, 2019 and 2020 tax years, allowing taxpayers to file amended returns and receive refunds for those that qualify.

Net Operating Loss (NOL) Rule Changes

Any losses arising in 2018, 2019, and 2020 can be carried back to the five preceding years. For any NOLs arising in tax years before 2021, those carrybacks may offset 100 percent of income for the prior 5 years. An amended return may be filed to claim the benefit back to the 2013 tax year.

Cancellation of Indebtedness Income

For small businesses that receive certain loans from the government under the CARES act, any such forgiveness of the loan granted to these taxpayers shall not be considered income.

More Changes Likely to Come

As the situation develops, we will continue to document additional changes made at the federal level.

Michael D. Walker is a business, tax and estate planning attorney who has worked with individuals and small to medium-sized businesses for nearly 30 years. A careful listener, Michael skillfully guides his clients to meet the wide variety of legal challenges they face in our current complex world.

Nicholas Rogers - Attorney

 

Nicholas D. Rogers joins SYK Estate Planning and Taxation practice with a passion for helping individuals, small business and nonprofits. His practice includes a focus on estate planning, federal and state tax controversy, business formation and planning, as well as trust and estate administration.

The COVID-19 Oregon Special Session

For those of you who are following the Oregon Legislature’s response to the COVID-19 pandemic, we expect the Governor to announce a special session in the next day or two. Topics that we expect the legislature to address include: provisions for rent and mortgage assistance, bans on evictions, loans to small businesses, food benefits, and expanded healthcare access. The Salem Statesman Journal has been doing a great job tracking the proposals for this emergency session:

https://www.statesmanjournal.com/story/news/2020/03/30/coronavirus-oregon-legislative-response-covid-19-special-sessions/2928604001/

We also expect that the Oregon Laws Commission’s remote notary proposal to be included in the proposal.

As expected, it doesn’t sound like Oregon corporate activity estimates made the cut to address, so Q1 estimates will need to made as usual.

Valerie Sasaki specializes in jurisdictional tax consulting, working closely with Fortune 50 companies involved in audits before the Oregon or Washington Departments of Revenue. She also works with business owners on tax, business, and estate planning issues in Oregon or Southwest Washington.

Family Law Experts Issue Recommendations for Co-Parenting During Pandemic

Lots of families are struggling with how to best protect and parent children as the world responds to the COVID-19 pandemic. However, divorced parents may have additional concerns, such as “Is it safe to allow my children to travel to their other parent’s house for parenting time?,” “How can supervised parenting time continue if it was usually held at a restaurant?,” and “When is spring break, anyway?”

While each family may decide to approach these issues differently, the Oregon Statewide Family Law Advisory Committee (“SFLAC”) has issued recommendations for families who cannot reach their own agreements. Some common issues are addressed, such as:

  1. Definition of Spring Break, Summer Break/Vacation or Holidays: While the schools are closed, parenting time shall continue as if the children are still attending school in accordance with the school calendar of the relevant district. ‘Spring break,’ ‘summer break/vacation’ or other designated holidays, means the regularly calendared breaks/vacations or holidays in the school district where the children are attending school (or would attend school if they were school aged). The closure of the school for public health purposes will not be considered an extension of any break/vacation/holiday period or weekend.
  2. Parenting Time in Public Places: Governor Brown has forbidden all nonessential gatherings, regardless of size. If the parenting plan states that parenting time will occur in a public place, parenting time should continue at locations that are permitted under the health and safety guidelines for the state, such as a large park or nature hike. Public places where people routinely touch common contact surfaces (such as parks and play equipment) should be avoided. However, activities where parents and children can maintain social distancing and avoid such surfaces are encouraged. If that is not possible, then the parenting time should be conducted virtually via videoconferencing or by telephone.
  3. Governor’s Executive Orders regarding Travel: The Governor has issued executive orders that restrict travel except for essential activities, which generally include caring for minors, dependents and/or family members. Therefore, unless otherwise directed by the Governor or other executive order, the parties should continue to follow the parenting plan as written while such orders are in effect.
  4. Transparency: Unless the parties are restrained from communicating, parents are encouraged to communicate about precautions they are taking to slow the spread of COVID-19. A parent is not permitted to deny parenting time based upon the other parent’s unwillingness to discuss their precautionary measures taken, or belief that the other parent’s precautions are insufficient.

The full list can be found here: http://courts.oregon.gov/programs/family/sflac/SFLAC{45ef85514356201a9665f05d22c09675e96dde607afc20c57d108fe109b047b6}20Documents/SFLACGuidelineForParentsDuringCOVID19Pandemic.pdf. SFLAC is a panel of judges, trial court administrators, mediators and evaluators, attorneys, family court service providers, and representatives from various state agencies who advise the State Court Administrator on family law issues in the courts.

National groups The Association of Family Conciliation Courts (AFCC) and the American Academy of Matrimonial Lawyers (AAML) provided a joint statement last week with additional guidelines for co-parents. These can be found here: https://www.thecenterforfamilylaw.com/afcc-aaml. The consensus among professionals is that while parents should be mindful of protecting their children from infection and transmission of the disease, it is also important to continue following the parenting plan or other court orders unless doing so becomes impossible.

If you have additional questions about how to appropriately co-parent in this stressful and uncertain time we recommend that you reach out to a family law attorney.

Emily Clark Cuellar is a litigator at Samuels Yoelin Kantor. Her practice is centered around families, and her passion is helping families navigate all the various obstacles they may face. Her practice focuses on domestic relations and fiduciary and probate litigation.

Creative (and free!) Options When You Can’t Hit the Gym

We have a few free and fun ways to get moving and out of your head when you can’t get out of the house.

The recent Stay-at-Home order issued in Portland, Oregon has many of us adjusting to the new day to day life of remote work. It can be a hard balance when your work and home life all take place in the same building. Remember to take a few minutes for yourself and your mental wellness – stretch, or engage in a form of exercise you enjoy.

Though we are still able to go outside for walks and recreation (allowing for 6 feet of distance), Portland weather isn’t always so accommodating. If you’re in need of a creative way to move, but don’t have the space for an at home gym, we have a few suggestions.

Portland based BurnCycle, a high energy spin studio, is offering free access to home workouts and lead meditation. Find them here.

If you enjoy HIIT, strength training, boxing, yoga, there’s an app for that. Chris Hemsworth’s app, Centr, is currently offering six weeks of free memberships for new users. It also includes meal plans and guided meditations.

Don’t have any equipment? Keep It Cleaner is offering a free virtual gym with workouts on Wednesdays and Fridays. You can join via their Facebook page.

Annie Belcher, a Melbourne yoga teacher, has free audio yoga classes available for download on her website.

Orange Theory is even getting in on the virtual wave. They are sharing a new workout online every day. You might need equipment for some of the classes, but just a random 3-5kg item, or my personal favorite, a gallon of water, will do.

Daily Burn is a subscription platform with routines for yoga, running, and at-home HIIT workouts. They’re currently offering 60 free days of membership.

The App Store’s highest-rated yoga app, Down Dog, is completely free until April 1st. The offer is also extended to their other apps: Yoga for Beginners, HIIT, Barre, and 7 Minute Workout. For school teachers and health care workers, the app is free until July.

If you need more inspiration, MSN has a few more fun suggestions.

Congress Passes CARES Act, Adds Forgivable Loan Program for Small Businesses

Congress passes the CARES Act, by 96-0 vote. Adds forgivable loan program for small businesses.

Late in the evening on March 25th, the United States Senate passed the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) by a vote of 96-0. The House passed the Act on Friday, March 27th. President Trump signed the Act into law a few hours later. While SamuelsLawBlog.com will provide additional details on the CARES Act in the coming days, here are additional details of the Act’s significant $349 billion expansion of the Small Business Administration’s (“SBA”) Section 7(a) loan program:

Eligibility Requirements.

Small business and nonprofit organizations are eligible if they have not more that 500 employees (or the SBA’s applicable size standard for the industry, if higher). Independent contractors and other self-employed individuals are also eligible for loans.

Maximum Loan Amounts.

Business will be able to borrow the lesser of: (i) $10 million; or (ii) the business’s average monthly payroll costs during the prior year, times 2.5, plus any outstanding principal owed on SBA disaster loans entered into after January 31, 2020. For this purpose, payroll costs include salaries and wages (but excluding annual compensation to any individual in excess of $100,000), commissions, tips, health insurance premiums, retirement benefits, state and local taxes assessed on employee compensation, as well as vacation, parental, family medical or sick leave benefits. Qualified sick leave and family leave wages under the recently-passed Families First Coronavirus Response Act are not to be included in the calculation of monthly payroll costs for purposes of this calculation.

Use of Loan Proceeds. 

Borrowers under this program can use the loan proceeds to cover costs for payroll (including sick, medical, and family leave, and health benefits), rent, mortgage interest payments (not principal), utilities, and interest on any other debt obligations that were incurred before February 15, 2020.

Loan Terms.

The Act caps the maximum interest for these loans at 4 percent. If the loan is not forgiven (see below), the remaining loan balance will have a maturity of not more than 10 years. Additionally, the Act waives collateral and personal guarantee requirements under the 7(a) program.  Loan payments under this program can be deferred for at least six months and not more than a year.

Loan Forgiveness

Borrowers that receive loans under this program would be eligible, under certain circumstances, to have a portion of these loans forgiven. The total amount of loan forgiveness would not be allowed to exceed the amount of 7(a) loans granted by the CARES Act but would otherwise be equal to the amount of expenditures of the borrower made in the 8 weeks following the loan’s closing on payroll costs, including payroll costs for tipped workers in excess of their normal pay level, mortgage interest (not principal), rental payments, and utilities, in each instance for arrangements that were in place prior to February 15, 2020.

Reduction in Loan Forgiveness Amount.

The policy behind the loan forgiveness provisions is to encourage businesses to keep employees on the payroll. Therefore, the amount that can be forgiven is reduced proportionally by the reduction in employees as compared to a prior base period (i.e. at the election of the borrower, either: the period from February 15, 2019 to June 30, 2019, or the period from January 1, 2020 to February 29, 2020). The amount of loan forgiveness would also be further reduced for any reduction in wages to an employee beyond a 25{45ef85514356201a9665f05d22c09675e96dde607afc20c57d108fe109b047b6} reduction in compensation compared to the prior year’s compensation. This would only apply to employees that earn not more than $100,000 on an annualized basis in any pay period. For employees that are laid off or that have their wages cut between February 15, 2020 and 30 days after passage of the Act, the borrower will not have to take those cuts into account if those employees are rehired or their wages are restored to prior levels by June 30, 2020.

Tax Free Loan Forgiveness.

Interestingly, the CARES Act also states that the amount of loan forgiveness provided under the Act is not included in the borrower’s income (i.e. the forgiveness is tax free!).

Timing of Loan Program.

The CARES Act allows the SBA to move quickly to approve loans under this program.  Once a lender receives an application for loan forgiveness, they have 60 days to issue a decision on the application.

Michael D. Walker is a business, tax and estate planning attorney who has worked with individuals and small to medium-sized businesses for nearly 30 years. A careful listener, Michael skillfully guides his clients to meet the wide variety of legal challenges they face in our current complex world.

Senate Bill Provision Offers Hope to Small Business

Senate Bill Provision Offers Loan Forgiveness to Small Business for Payroll Costs

In the face of the COVID-19 pandemic, the United States Senate is currently debating S. 3548, the Coronavirus Aid, Relief, and Economic Security Act, or the “CARES Act.” It is estimated that the CARES Act could provide a $1 to $2 Trillion stimulus in economic aid to both businesses and workers.

While multifaceted, one provision sets forth a significant benefit to small businesses that can apply for forgivable loans from the Small Business Administration (SBA). Here are the basics of what this section of the CARES Act provides:

  • Provides for bridge loans to small businesses under 500 employees
  • Uses the SBA’s current Section 7(a) loan program
  • Loans support payroll costs incurred between March 1st & June 30th, 2020 (referred to as the “Covered Period”)
  • Employers can borrow up to $33,333 (equivalent to annual compensation of $100,000 per year) of compensation paid to employees during the Covered Period
  • Borrowers under this program can have the loans forgiven if they maintain “payroll continuity” during the Covered Period (presumably not laying employees off)
  • Application processes are to be expedited by the SBA and certain fees are waived
  • Loans forgiven under the program are not considered taxable loan cancellation income
  • At this writing, the bill appropriates $350 billion for this program

The Senate bill is currently embroiled in intense partisan debate, although the SBA loan provision stands a real chance of passage. Watch the SamuelsLaw Blog for future updates.

Michael D. Walker is a business, tax and estate planning attorney who has worked with individuals and small to medium-sized businesses for nearly 30 years. A careful listener, Michael skillfully guides his clients to meet the wide variety of legal challenges they face in our current complex world.

Family First Law & What It Means

I. Federal Legislative Actions

On Friday, March 13, 2020, the House announced that they reached a deal with President Trump’s administration in response to the COVID-19 outbreak.

At 1:00am early Saturday morning, the House passed HR 6201 with a 363 – 40 vote. The emergency bill is cited as “Families First Coronavirus Response Act.”

On March 18, 2020, the Senate passed the bill with a 90 – 8 vote. On March 18, 2020, the President signed the bill into law.

The law provides temporary paid sick and family medical leave, increases funding for health, food security and unemployment insurance programs, and provides free coronavirus testing.

Below is an outline of the highlights of the law.

II. Emergency Family Medical Leave Expansion Act

Division C | p. 12

Term

Begins on the date the Act takes effect, and ends December 31, 2020.

Eligible Employees

Eligible employees are employees who have been employed at least 30 calendar days by the employer with respect to whom leave is requested.

Employer Threshold

The Act creates a threshold for qualifying employers. Accordingly, Employers who employ 50 or more employees for each working day during each of 20 or more calendar workweeks in the current or preceding calendar year are subject to the Emergency Medical Leave Expansion Act.

Employers with fewer than 50 employees

The Secretary of Labor has the authority to issue regulations for good cause to exempt small businesses with fewer than 50 employees from the paid leave requirement.

Qualifying Need Related to a Public Health Emergency

The Act protects employees with a “qualifying need related to a public health emergency.” The term “qualifying need related to a public health emergency,” with respect to leave, means that the employee is unable to work due to a need for leave to care for the son or daughter under 18 years old of such employee if the school or place of care has been closed, or the child care provider of such son or daughter is unavailable, due to a public health emergency.

Unpaid Leave – Initial 10 Days

The first 10 days that an employee takes leave may be unpaid. The employee may elect to substitute any accrued vacation leave, personal leave, or medical or sick leave for unpaid leave under this section; however, the employer may not require the election to substitute.

Paid Leave – After Initial 10 Days

The employer shall provide paid leave for each day of leave that the employee takes after taking the initial 10 days’ leave. The pay shall be calculated based on:

  1. An amount that is not less than 2/3 of an employee’s regular rate of pay; and
  2. The number of hours that the employee would otherwise be normally scheduled to work.

In no event shall paid leave exceed $200 per day, or $10,000 in the aggregate.

Employees with Varying Schedules

For those employees whose schedules vary week-to-week, the employer should calculate hours by determining the average number of hours that employee is scheduled for per day over the 6-month period ending on the date that the employee’s leave begins. If the employee has not worked for 6-months prior, the employer should consider the reasonable expectation of hours that the employee would normally be scheduled.

Notice

Where practicable, the employee shall give notice to the employer where the necessity for leave is foreseeable.

III. Emergency Unemployment Insurance Stabilization and Access Act of 2020

Division D | p. 15

Notification

The State shall notify an employee at the time of their separation from employment of the availability of unemployment compensation.

Notice of Received/Processed Application

The State must then notify the applicant when the application is received and is being processed.

Non-Charge for COVID-19

The State may not charge employers directly impacted by COVID-19 due to an illness in the workplace, or direction from a public health official to isolate or quarantine workers. (p. 41).

IV. Emergency Paid Sick Leave Act

Division E | p. 18

Covered Employers

The Emergency Paid Sick Leave Act applies to private employers that employ fewer than 500 employees, and public agencies that employ one or more employees.

Employers Must Provide

An employer shall provide to each employee employed by the employer paid sick time for any of the following uses:

  1. The employee is subject to a Federal, State, or local quarantine or isolation order related to COVID-19.
  2. The employee has been advised by a health care professional to self-quarantine due to concerns related to COVID-19.
  3. The employee is experiencing symptoms of COVID-19 and seeking medical diagnosis.
  4. The employee is caring for an individual who is subject to an order described in (i), or has been advised as described in (ii).
  5. The employee is caring for the son or daughter of such employee if the school or place of care for the son or daughter has been closed or the childcare provider is unavailable due to COVID-19 precautions.
  6. The employee is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services in consultation with the Secretary of the Treasury and the Secretary of Labor.

Amount of Paid Time

For full time employees, the employee is entitled to 80 hours of paid sick time.

For part time employees, the employee is entitled to the number of hours equal to the number of hours that employee works on average, over a 2-week period.

No Carryover

Paid sick time under this Act shall not carry over from one year to the next.

Termination

Paid sick leave under this Act terminates beginning with the employee’s next scheduled work shift immediately following termination of the need for paid sick time, as described in (b) above.

Immediate Use

Paid sick time under this Act shall be available for immediate use by the employee for purposes described in section (b) above, to cover the hours during which the employee is using paid sick time.

Employer with Existing Paid Sick Time Policy

The employee may first use the paid sick time under the Act. The employer may not require the employee to use the paid leave provided by the employer before using paid sick leave under the Act.

Cover Employee

The employer may not require the employee seek a replacement employee to cover in their absence.

Notice

The employer shall post, and keep posted, in a conspicuous place on the premises, the requirements described in the Act.

Model Notice

Seven days after the enactment of this Act, the Secretary of Labor shall make publicly available a model of a notice that meets the requirements of the Act.

Discrimination, Discipline, Discharge

It is unlawful for an employer to discriminate against, discharge, or discipline an employee who takes leave in accordance with the Act and has filed any complaint or proceeding under this Act.

Violation

An employer who fails to provide paid sick leave will be considered to have failed to pay minimum wages in violation of section 6 of the Fair Labor Standards Act of 1938 (29 USC 206), and shall be subject to the penalties described in sections 16 and 17 therefrom.

Effective Date

This Act and the requirements of this Act shall take effect not later than 15 days after the date of enactment for the Emergency Paid Sick Leave Act. The Act shall expire on December 31, 2020.

Payroll Tax Credits for Paid Sick and Paid Family and Medical Leave

Division G | p. 33

The Act makes several changes to Federal Insurance Contributions Act (FICA), which is at IRC 3111.  The FICA taxes are Social Security, Medicare, and Medicaid.  We anticipate larger changes to the income and excise tax rules as part of the $1 trillion economic stimulus package currently working its way through Congress.

Paid Sick Leave.

    1. 100% Tax Credit. The employer shall be allowed as a credit against the tax imposed under Section 3111(a) of the Internal Revenue Code of 1986 for each calendar quarter an amount equal to 100% of the qualified sick leave wages paid by the employer with respect to such calendar quarter.
    2. $200 Daily Limit per Employee. The amount of qualified sick leave wages taken into account with respect to any individual shall not exceed $200 for any day for which the individual is paid qualified sick leave wages.
    3. Overall Limit on Number of Days Taken into Account. The aggregate number of days taken into account under this section for any calendar quarter shall not exceed the excess of:
      1. 10, over
      2. The aggregate number of days so taken into account for all preceding calendar quarters.
    4. Election of Applicability. This section shall not apply with respect to any employer for any calendar quarter if such employer elects not to have this section apply.

Self-Employed Individuals.

      1. Eligibility. Must be someone who regularly carries on a trade or business under Section 1402 of the IRC, and would be entitled to paid leave during the taxable year under the Emergency Paid Sick Leave Act (see section (2) of Division E highlights above).
      2. Coverage. There shall be allowed as a credit against the tax imposed by subtitle A of the Internal Revenue Code of 1986 for any taxable year an amount equal to 100% of the qualified sick leave equivalent amount with respect to the individual.
  • (There are more details in the self-employment provisions that I can dig into should our clients prefer. I am not sure is this section is particularly relevant to our clients.)

Paid Family Leave.

    1. 100% Tax Credit. The employer shall be allowed as a credit against the tax imposed under Section 3111(a) of the Internal Revenue Code of 1986 for each calendar quarter an amount equal to 100% of the qualified family leave wages paid by the employer with respect to such calendar quarter.
    2. Wages Limit. The amount of qualified family leave wages taken into account with respect to any individual shall not exceed:
      1. $200 for any day for which the individual is paid qualified family leave wages; and
      2. In the aggregate with respect to all calendar quarters, $10,000.

Credit Limit. The credit allowed under this subsection with respect to any calendar quarter, shall not exceed the tax imposed under Section 3111(a) of the Internal Revenue Code of 1986 for each calendar quarter on the wages paid with respect to the employment of all employees of the employer.

Election of Applicability. This section shall not apply with respect to any employer for any calendar quarter if such employer elects not to have this section apply.

Tax on Employers.

  • Not Wages. Any wages required to be paid by reason of the Emergency Paid Sick Leave Act and Emergency Family and Medical Leave Expansion Act shall not be considered wages for the purposes of Section 3111(a) of the Internal Revenue Code of 1986.

A more sweeping tax bill is still pending at this time related to income tax and insurance tax implications. For more specifics on the current law, as well as pending legislation, we encourage you to consult one of the experienced tax lawyers at Samuels Yoelin Kantor LLP.

A Letter to our Clients: COVID-19

To our clients,

As we all continue to closely monitor the Coronavirus (COVID-19) situation, we wanted to share the proactive steps we, as a firm, are taking to ensure the health and safety of our clients, professionals, staff, families, and community. While we are following the rapidly changing health related guidelines and recommendations to help mitigate the Coronavirus’ impact, we are committed to offering the best legal representation to our clients, in the most health conscious way possible.

The health and safety of our firm and our office environment will always be a top priority. However, as the situation continues to develop in North America, we have taken additional steps to ensure we are here to serve you in the safest way possible.

These enhanced measures include:

  • Hourly disinfecting all high-touch areas, including office doors, lobby furniture and conference room surfaces with a high grade disinfecting cleaner.
  • Increased accessibility of hand sanitizer for our clients and our employees.
  • Encouraging digital conferences or teleconferences, in lieu of face to face meetings.
  • Increased flexibility to meet clients where they are most comfortable, whether it be at one of our offices (downtown, Lake Oswego, Hood River, or our new Vancouver office), their homes or other appropriate locations.
  • Increased use of DocuSign and the digital transmission of documents.
  • Ensuring our employees have the information and resources they need to stay healthy, and the ability to stay home if they feel unwell.

We are prepared to address these challenging circumstances with everyone’s safety in mind. If you have any questions, concerns, or suggestions, we would love to hear from you.

Sincerely,

Timothy J. Resch
Managing Partner