Details of Public Law 116-127, section 7003 , Payroll Credit for Required Paid Family Leave

This section provides an employer a credit applied against the Social Security Tax (SST) and the Railroad Retirement Tax (RRT) for each calendar quarter in an amount equal to 100% of the qualified family leave wages paid by such employer with respect to such calendar quarter. For purposes of this credit, the amount of qualified family leave wages taken into account with respect to any individual cannot exceed for any day (or portion thereof) for which the individual is paid qualified family leave wages, $200, and, in the aggregate, with respect to all calendar quarters, cannot exceed $10,000.

The credit allowed for any calendar quarter is limited to the SST and RRT tax imposed for such calendar quarter, and any excess will be treated as an overpayment that can be refunded under IRC section 6402(a), credits against estimated taxes, and IRC section 6413(b), overpayments of certain employment taxes. The amount of the credit allowed under this provision can be increased by certain employer qualified health plan expenses.

For purposes of this section, the term “qualified family leave wages” means wages, defined by IRC section 3121(a), and compensation, defined by IRC section 3231(e), paid by an employer, which is required to be paid by reason of the Emergency Family and Medical Leave Expansion Act, including amendments made by this Act.

In addition, the gross income of the employer for the taxable year, which includes the last day of any calendar quarter with respect to which a credit is allowed under this section, shall be increased by the amount of such credit. Any wages taken into account in determining the credit allowed under this section shall not be taken into account for purposes of determining the credit allowed under IRC section 45S, the employer credit for paid family and medical leave.

Employers can elect not to have these provisions apply.