Paid Family and Medical Leave Tax Credit Extension and Enhancement Act

Summary

Expands and clarifies the federal tax credit for employer-provided paid family and medical leave (PFML). Employers may claim the credit either as a percentage of wages paid to qualifying employees while on leave or as a percentage of premiums paid for an employer-maintained PFML insurance policy; the premium option uses the policy rate regardless of whether employees took leave. The bill tightens the employee eligibility standard, changes aggregation and reporting rules for employers, prevents a double tax benefit for premiums, requires outreach by SBA and Treasury/IRS, and applies to taxable years beginning after enactment.

• Employers may elect the PFML tax credit based on wages paid to employees on leave or based on premiums for employer PFML insurance.
• The premium-based credit is calculated from the insurance policy rate regardless of whether employees took leave.
• Qualifying employees must customarily work at least 20 hours per week to be counted for the credit.
• State or local government–paid or mandated leave counts toward determining employer-provided leave but is excluded from the credit itself.
• Aggregation rules are tightened by treating aggregated employers as a single employer, with a narrow exception for demonstrable business reasons.
• Amendment denies a business deduction for the portion of premiums equal to the credit to prevent a double tax benefit.
• SBA offices and resource partners, and Treasury/IRS, are directed to conduct outreach to encourage use and ensure compliance.
• Applies to taxable years beginning after enactment and may require IRS guidance to resolve drafting ambiguities.