Details of Public Law 119-21, section 70304 , One Big Beautiful Bill Act

The provision makes permanent the employer credit for paid family and medical leave created under the Tax Cuts and Jobs Act (Public Law 115-97, section 13403).

The provision also expands the eligibility for employers to claim a general business credit for paid family and medical leave to include premiums paid or incurred for an insurance policy, regardless of whether any qualifying employees were on family and medical leave during the taxable year. The provision would allow any leave paid by State or local government to be taken into account when determining the amount of family and medical leave provided by the employer but that leave should not be used when determining the amount of credit. Additionally, there cannot be a double benefit for the premiums paid or incurred as a deduction as provided in IRC section 280C.

The provision also modifies the definition of “qualifying employee” to require that the employee be customarily employed for not less than 20 hours per week and, at the election of the employer, must be employed for not less than six months. The definition also specifies that compensation be determined on an annualized basis, or pro-rata for part-time employees.

The provision also modifies the “aggregation rules” to provide that all persons treated as a single employer under IRC section 414 are treated as a single employer unless the person has a substantial and legitimate business reason for not having a written family medical leave policy as specified.

California does not conform to IRC section 45S, relating to the employer credit for paid family and medical leave, and has no comparable credit. As a result, California does not conform to the changes made by this provision.