Sponsors (4)
The bill makes it easier and clearer for employers to claim a PFML credit (including flexible premium-based or wage-based options and outreach), concentrating benefits on regular workers, but it risks subsidizing unused insurance with taxpayer dollars, raises net costs for some employers, limits separate claims by small affiliates, excludes many part-time workers, and leaves some legal uncertainty.
Employers can claim the PFML credit based either on wages paid to employees on leave or on premiums paid for employer PFML insurance, giving businesses flexible ways to access the credit.
Targeted SBA and IRS outreach to small businesses increases awareness and the likelihood that eligible employers will claim the credit.
Clarifying that state- or local-mandated or -paid leave counts toward an employer's provided leave (while excluding that portion from the credit) reduces ambiguity for employers calculating benefits and compliance obligations.
Allowing the credit to be claimed based on insurance premiums could result in taxpayers subsidizing premiums even when no employees actually take leave (i.e., paying for unused coverage).
An aggregation rule treating affiliated employers as a single employer may prevent smaller member employers from claiming credits separately and increases compliance complexity for multi-entity businesses.
Denying a tax deduction under section 280C(a) for the premium portion equal to the credit reduces tax deductions for employers and can raise the net cost of providing coverage for some businesses.
Based on analysis of 2 sections of legislative text.
Expands and clarifies the employer paid family and medical leave tax credit, adds an insurance-premium option, tightens eligibility and aggregation rules, and prevents double deductions for credited premiums.
Official title: Amend the Internal Revenue Code of 1986 to enhance the paid family and medical leave credit, and for other purposes.
Introduced February 4, 2025 by Debra Fischer · Last progress February 4, 2025
Expands and clarifies the paid family and medical leave (PFML) employer tax credit by letting employers claim it either as a percentage of wages paid to qualifying employees on leave or as a percentage of premiums paid for employer-maintained PFML insurance. It tightens and clarifies who counts as a qualifying employee, revises aggregation rules for related employers, prevents a double tax benefit for insurance premiums, and directs SBA and Treasury/IRS outreach to small businesses, payroll providers, and tax professionals. The changes apply to taxable years beginning after enactment.