Tax Credits for Paid Leave Under the American Rescue Plan Act of 2021: Determining the Amount of Allocable Collectively Bargained Contributions

 

Note: These FAQs address the tax credits available under the American Rescue Plan Act of 2021 (the "ARP") by employers with fewer than 500 employees and certain governmental employers without regard to the number of employees ("Eligible Employers") for qualified sick and family leave wages ("qualified leave wages") paid with respect to leave taken by employees beginning on April 1, 2021, through September 30, 2021, as well as the equivalent credits available for certain self-employed individuals. For information about the tax credits that may be claimed for qualified leave wages paid with respect to leave taken by employees prior to April 1, 2021, under the Families First Coronavirus Response Act ("FFCRA") and the COVID-related Tax Relief Act (the "Relief Act"), see Tax Credits for Paid Leave Under the Families First Coronavirus Response Act for Leave Prior to April 1, 2021 FAQs.

Although the requirement that Eligible Employers provide leave under the Emergency Paid Sick Leave Act ("EPSLA") and Emergency Family and Medical Leave Expansion Act ("Expanded FMLA") under the FFCRA does not apply after December 31, 2020, the tax credits under sections 3131 through 3133 of the Internal Revenue Code ("the Code") are available for qualified leave wages an Eligible Employer provides with respect to leave taken by employees beginning on April 1, 2021, through September 30, 2021, if the leave would have satisfied the requirements of the EPSLA and Expanded FMLA, as amended for purposes of the ARP.

Throughout these FAQs, the use of the word "work," unless otherwise noted, is inclusive of telework.

Eligible Employers are entitled to include certain collectively bargained contributions in determining the credit for qualified sick leave and family leave wages.

50. What are amounts paid under certain collectively bargained agreements for which credits are allowed? (added June 11, 2021)

Credits are allowed for the amount of the Eligible Employer's collectively bargained defined benefit pension plan contributions and the amount of the Eligible Employer's collectively bargained apprenticeship program contributions that are properly allocable to the qualified leave wages for which a credit is otherwise allowed.

51. How are amounts for collectively bargained defined benefit pension plan contributions and collectively bargained apprenticeship program contributions determined? (added June 11, 2021)

Amounts are collectively bargained defined benefit pension plan contributions if they are (1) paid or incurred to a defined benefit plan (as defined in section 414(j) of the Code) that meets the requirements of section 401(a) of the Code and (2) paid based on the pension contribution rate set forth in a collective bargaining agreement. The collectively bargained defined benefit pension plan contributions are properly allocable to qualified leave wages if the contributions are required, pursuant to the applicable collective bargaining agreement, to be paid for the hours for which the qualified leave wages were provided.

Amounts are collectively bargained apprenticeship program contributions if they are (1) paid or incurred with respect to a registered apprenticeship program (registered under the Act of August 16, 1937 and meeting the standards of 29 CFR Pt. 29, Subpt. A and 29 CFR Pt. 30) and (2) paid or incurred based on an apprenticeship program contribution rate set forth in a collective bargaining agreement. The collectively bargained apprenticeship program contributions are properly allocable to the qualified leave wages if the contributions are required, pursuant to the applicable collective bargaining agreement, to be paid for the hours for which the qualified leave wages were provided.

If the applicable collective bargaining agreement specifies a contribution rate based on a unit of measure (contribution base unit) other than hours, the collectively bargained defined benefit pension plan contributions and collectively bargained apprenticeship program contributions that are properly allocable to the qualified leave wages will be based on the contributions associated with qualified leave wages under the terms of the applicable collective bargaining agreement.

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