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139 STAT. 196 PUBLIC LAW 119–21—JULY 4, 2025 which is in force during the taxable year, the applicable percentage of the total amount of premiums paid or incurred by such employer during such taxable year with respect to such insurance policy.’’, and (B) by adding at the end the following: ‘‘(3) RATE OF PAYMENT DETERMINED WITHOUT REGARD TO WHETHER LEAVE IS TAKEN.—For purposes of determining the applicable percentage with respect to paragraph (1)(B), the rate of payment under the insurance policy shall be determined without regard to whether any qualifying employees were on family and medical leave during the taxable year.’’, (2) in subsection (b)(1), by striking ‘‘credit allowed’’ and inserting ‘‘wages taken into account’’, (3) in subsection (c), by striking paragraphs (3) and (4) and inserting the following: ‘‘(3) AGGREGATION RULE.— ‘‘(A) IN GENERAL.—Except as provided in subparagraph (B), all persons which are treated as a single employer under subsections (b) and (c) of section 414 shall be treated as a single employer. ‘‘(B) EXCEPTION.— ‘‘(i) IN GENERAL.—Subparagraph (A) shall not apply to any person who establishes to the satisfaction of the Secretary that such person has a substantial and legitimate business reason for failing to provide a written policy described in paragraph (1) or (2). ‘‘(ii) SUBSTANTIAL AND LEGITIMATE BUSINESS REA- SON.—For purposes of clause (i), the term ‘substantial and legitimate business reason’ shall not include the operation of a separate line of business, the rate of wages or category of jobs for employees (or any similar basis), or the application of State or local laws relating to family and medical leave, but may include the grouping of employees of a common law employer. ‘‘(4) TREATMENT OF BENEFITS MANDATED OR PAID FOR BY STATE OR LOCAL GOVERNMENTS.—For purposes of this section, any leave which is paid by a State or local government or required by State or local law— ‘‘(A) except as provided in subparagraph (B), shall be taken into account in determining the amount of paid family and medical leave provided by the employer, and ‘‘(B) shall not be taken into account in determining the amount of the paid family and medical leave credit under subsection (a).’’, (4) in subsection (d)— (A) in paragraph (1), by inserting ‘‘(or, at the election of the employer, for not less than 6 months)’’ after ‘‘1 year or more’’, (B) in paragraph (2)— (i) by inserting ‘‘, as determined on an annualized basis (pro-rata for part-time employees),’’ after ‘‘com- pensation’’, and (ii) by striking the period at the end and inserting ‘‘, and’’, and (C) by adding at the end the following: ‘‘(3) is customarily employed for not less than 20 hours per week.’’, and Definition.