COVID-19 Related Tax Credits: What is an Eligible Employer FAQs

 

What is an Eligible Employer?

19a. If an Eligible Employer that employs a health care provider or an emergency responder excludes the employee from eligibility for required paid sick leave or family leave for one or more reasons but not for other reasons, may the Eligible Employer claim the credit for paid leave it provides to the employee for any "non-excluded" reason? (Added November 25, 2020)

Yes. The FFCRA provides that Eligible Employers may exclude employees who are health care providers or emergency responders from the paid sick leave and expanded family and medical leave requirements.  Regulations issued by the Department of Labor Wage and Hour Division define which employees are considered health care providers and emergency responders for this purpose.  The preamble to the Department of Labor regulations explains that, because an employer is not required to exclude these employees from eligibility, if an employer does not elect to exclude a health care provider or emergency responder from taking paid leave under the FFCRA for a reason related to COVID-19, it is subject to all other requirements of the FFCRA.  For example, if an Eligible Employer excludes an employee who is a health care provider from taking paid sick leave to care for an individual family member, but does not exclude the employee from taking paid sick leave for reasons relating to the employee’s own health status, the Eligible Employer is required to provide the employee with paid sick leave if the employee has been advised by a health care provider to self-quarantine due to concerns related to COVID-19 or is experiencing symptoms of COVID-19 and is seeking a medical diagnosis.  In this case, the Eligible Employer may claim the credit for any such qualified sick leave wages it pays to the employee, as well as the credit for allocable qualified health plan expenses and the Eligible Employer’s share of Medicare tax on those qualified sick leave wages.

For information on who is a health care provider and emergency responder, see “Who is a ‘health care provider’ who may be excluded by their employer from paid sick leave and/or expanded family and medical leave?”, at the Department of Labor’s website. 

19b. Can government employers receive tax credits for providing paid leave wages under the FFCRA? (Added November 25, 2020)

No.  The Federal government, the government of any State or political subdivision thereof, and any agencies or instrumentalities of those governments are not Eligible Employers and are not entitled to receive tax credits for providing paid leave wages under the FFCRA. 

However, under the Department of Labor (DOL) rules, non-federal public sector employers generally must provide paid sick and family leave wages under the FFCRA, while federal public sector employers generally must provide paid sick leave wages.  For more information on whether and to what extent public sector employers must provide paid leave wages under the FFCRA, see Families First Coronavirus Response Act: Questions and Answers, available at the DOL’s website.

Note: To the extent that the FFCRA requires public sector employers to provide paid leave wages under the FFCRA, under section 7005(a) of the FFCRA, the paid leave wages paid by the government employer are not subject to the Employer’s share of social security tax.

19c. What organizations are considered an "instrumentality" of the Federal government, or of a State or local government, for purposes of determining if an employer is not eligible for the FFCRA leave credits? (Added November 25, 2020)

In general, for employment tax purposes, the IRS considers six factors in determining whether an organization is an instrumentality.  The six factors that are used to determine whether an organization is an instrumentality are:

  1. whether the organization is used for a governmental purpose and performs a governmental function;
  2. whether performance of the organization’s function is on behalf of one or more states or political subdivisions;
  3. whether there are any private interests involved, or whether the states or political subdivisions involved have the powers and interests of an owner;
  4. whether control and supervision of the organization is vested in public authority or authorities;
  5. if express or implied statutory or other authority is necessary for the creation and/or use of such an instrumentality, and whether such authority exists; and
  6. the degree of financial autonomy and the source of its operating expenses.

See Rev. Rul. 57-128, 1957-1 C.B. 311.  No one factor is determinative; instrumentality status is based on all the facts and circumstances.  For purposes of determining whether an employer is eligible for the FFCRA leave credits, these same factors apply to identify an instrumentality of the Federal government, or of a State or local government.

19d. Are employers in U.S. Territories eligible for the tax credits? (Added November 25, 2020)

Yes.  Employers in U.S. Territories are eligible to claim the tax credits for qualified leave wages, assuming they are otherwise Eligible Employers.  Sections 7001(c) and 7003(c) of the FFCRA provide that qualified sick leave wages and qualified family leave wages, respectively, are wages as defined in section 3121(a) of the Internal Revenue Code (the Internal Revenue Code (the “Code”)) for purposes of the Federal Insurance Contributions Act (“FICA”) tax.  Under section 3121(b), payments of wages by employers in U.S. territories are subject to FICA. 

For more information on defining an Eligible Employer, see “What employers may claim the tax credits?

19e. Are household employers eligible for the tax credits? (Added November 25, 2020)

Yes. Assuming a household employer is otherwise an Eligible Employer, the employer may claim tax credits for providing paid leave under the FFCRA if the leave is both (1) required to be paid under the FFCRA, and (2) wages (as defined in section 3121(a) of the Internal Revenue Code (the “Code”)) or compensation (as defined in section 3231(e) of the Code).

Whether a household employer must provide paid leave to a household worker under the FFCRA depends on whether the household employer is an employer under the Fair Labor Standards Act (FLSA).  In general, a household employer is considered to be the employer of the household worker under the FLSA if the household worker is “economically dependent” on the household employer for the opportunity to work.  For more information on how the DOL classifies household workers, see FAQ 89 (“I hire workers to perform certain domestic tasks, such as landscaping, cleaning, and child care, at my home. Do I have to provide my domestic service workers paid sick leave or expanded family and medical leave?”) of the DOL’s Families First Coronavirus Response Act: Questions and Answers.

19f. Can employers claim the tax credit for amounts paid to H-2A visa holders? (Added November 25, 2020)

No.  Employers of H-2A workers are not eligible for the FFCRA credits with regard to such workers because they do not pay wages subject to FICA.  FFCRA sections 7001(c) and 7003(c) define “qualified leave wages” for purposes of the Emergency Public Sick Leave Act and Emergency Family and Medical Leave Expansion Act, respectively, as wages as defined in section 3121(a) of the Internal Revenue Code (the “Code”).  Section 3121(b)(1) of the Code excludes from “employment” services performed by H-2A workers.  Accordingly, employers are not entitled to credits under the FFCRA for payments to H-2A workers.

19g. Are tribal governments eligible for the tax credits?(Added November 25, 2020)

Yes.  Tribal governments that provide paid sick and paid family and medical leave pursuant to the FFCRA are eligible to claim the tax credits for qualified leave wages, assuming they are otherwise Eligible Employers.