U.S. Tax Reform (Part 7) New credit for employer paid family and medical leave 

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On December 22, 2017, President Trump signed into law the U.S. tax reform legislation, also known as the Tax Cuts and Jobs Act. This new legislation includes major changes to the previously existing tax system and will affect both businesses as well as individuals. 


Generally, the new legislation applies for tax years beginning after December 31, 2017. The IRS is working to develop guidance regarding the implementation of the U.S. tax reform legislation and publishes statements as it becomes available. Below are the highlights of the new corporate tax provisions which may have an impact on your business.
                                     

New credit for employer paid family and medical leave.

The U.S. tax reform Act introduces a general business credit equal to 12.5% of wages paid to qualifying employees during their family and medical leave, provided the amount paid during the leave amounts to at least 50% of the employee’s normal wage.
Employers are eligible for this business credit if they allow all full-time employees at least two weeks of annual paid family and medical leave and part-time employees a similar amount on a pro-rata basis. A “qualifying employee” is generally any employee who has been employed by the employer for at least one year.


In addition, the business credit is increased with 0.25% (up to a total credit of 25%) for each additional percentage exceeding the 50% rate of the employee’s normal wage.


Note that this credit is available for wages paid in tax years beginning after December 31, 2017 but no longer for wages paid in tax years beginning after December 31, 2019.

 

Authors: Antoine Guillaud, Ben Troch, Pierre Arrouy

Chicago January 31st 2018

 

This article only includes general information and IMS is not, by means of this article, rendering any tax, legal or other professional services. This communication should not be relied upon for any decision or action that may have an impact on your business. Prior to taking any action, you should be in contact with your advisor.