Sponsors (3)
The bill makes it easier and more predictable for employers who buy leave insurance to claim the paid family and medical leave credit and clarifies coordination with state programs, but it tightens eligibility and aggregation rules and reduces benefits for part‑time workers and some employers, shifting costs and increasing compliance considerations.
Employers (especially small businesses) can claim the paid family and medical leave credit based on insurance premiums rather than wages, simplifying calculation and allowing firms that purchase leave insurance to access the credit.
Employers receive predictable credit amounts because policy-rate premiums count even if leave isn’t taken, improving budgeting and cash‑flow planning for firms that offer insured leave.
States and localities: clarifying that state/local–mandated or -paid leave can count toward an employer’s leave obligations reduces the risk of double counting and preserves the integrity of the federal credit while enabling coordination with local programs.
Part-time workers scheduled under 20 hours/week are excluded from employer eligibility for the credit, reducing support for parents and low‑income workers with irregular or part‑time schedules.
Tighter aggregation rules presume commonly controlled businesses are a single employer, which may force small entities to adopt uniform written leave policies or lose separate treatment, increasing compliance costs and reducing flexibility for small business owners.
State- or local‑paid leave is excluded from the federal credit, meaning employers in jurisdictions with government leave programs lose a federal offset and may face higher net costs for providing leave.
Based on analysis of 2 sections of legislative text.
Modifies the employer paid family and medical leave tax credit: adds an insurance‑premium election, sets a 20‑hour/week employee threshold, tightens aggregation rules, and excludes state‑paid leave.
Official title: To amend the Internal Revenue Code of 1986 to enhance the paid family and medical leave credit, and for other purposes.
Introduced February 5, 2025 by Randy Feenstra · Last progress February 5, 2025
Makes changes to the federal paid family and medical leave tax credit for employers. Employers can elect to claim the credit either on wages paid to employees on qualifying leave or on premiums paid for employer‑held paid‑leave insurance; the bill also adds a 20‑hour/week employee work threshold, tightens aggregation rules so related entities are treated as a single employer unless they show a substantial legitimate business reason, clarifies that state‑mandated or state‑paid leave does not itself qualify for the federal credit, requires outreach by SBA partners and the IRS about the credit and written leave policies, and makes these changes effective for taxable years beginning after enactment.