n-20-21.pdf

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Effective Date for Employment Tax Credits Under the Families First Coronavirus
Response Act

Notice 2020-21

I. PURPOSE
This notice provides that the tax credits for qualified sick leave wages and
qualified family leave wages required to be paid by the Families First Coronavirus
Response Act will apply to wages paid for the period beginning on April 1, 2020, and
ending on December 31, 2020. This notice also provides that days occurring during the
period beginning on April 1, 2020, and ending on December 31, 2020, will be taken into
account for credits for qualified sick leave equivalent amounts and qualified family leave
equivalent amounts for certain self-employed individuals.

II. BACKGROUND
The Families First Coronavirus Response Act (the Act), P.L. 116-127, 134 Stat.
178, was enacted on March 18, 2020. Division C (Emergency Family and Medical
Leave Expansion Act) and Division E (Emergency Paid Sick Leave Act) of the Act
require certain employers to provide expanded family and medical leave and paid sick
leave to employees unable to work or telework due to certain circumstances related to
COVID-19. The Emergency Family and Medical Leave Expansion Act and Emergency
Paid Sick Leave Act are administered by the U.S. Department of Labor (DOL).

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Division G (Tax Credits for Paid Sick and Paid Family and Medical Leave) of the
Act provides for a credit against the tax imposed by section 3111(a) or 3221(a) of the
Internal Revenue Code (Code) for each calendar quarter in an amount equal to 100
percent of the “qualified sick leave wages” and “qualified family leave wages” required
to be paid under the Act (or the equivalent amounts thereof for certain self-employed
individuals). Specifically, sections 7001 and 7003 of Division G of the Act provide for
refundable tax credits for most employers with fewer than 500 employees that pay
qualified sick leave wages and qualified family leave wages to their employees, as
required by the Emergency Paid Sick Leave Act and the Emergency Family and
Medical Leave Expansion Act. Sections 7002 and 7004 of Division G of the Act also
provide comparable credits for self-employed individuals carrying on any trade or
business within the meaning of section 1402 of the Code if the self-employed individual
would be entitled to receive paid leave under the Emergency Paid Sick Leave Act or the
Emergency Family and Medical Leave Expansion Act if the individual were an employee
of an employer (other than him or herself).
Sections 7001(g) and 7003(g) of Division G of the Act provide that the tax credits
for employers for qualified sick leave wages and qualified family leave wages “apply
only to wages paid with respect to the period beginning on a date selected by the
Secretary of the Treasury (or the Secretary’s delegate) which is during the 15-day
period beginning on the date of the enactment of this Act, and ending on December 31,
2020.” Section 3106 of Division C and Section 5108 of Division E of the Act provide

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that the Emergency Family and Medical Leave Expansion Act and Emergency Paid Sick
Leave Act are effective not later than 15 days after the date of enactment of the Act.
DOL has published guidance providing that the Emergency Family and Medical Leave
Expansion Act and Emergency Paid Sick Leave Act requirements take effect on April 1,
2020.
Sections 7002(e) and 7004(e) of Division G of the Act provide that the
comparable credits for qualified sick leave equivalent amounts and qualified family
leave equivalent amounts for self-employed individuals are determined based only on
“days occurring during the period beginning on a date selected by the Secretary of the
Treasury (or the Secretary’s delegate) which is during the 15-day period beginning on
the date of the enactment of this Act, and ending on December 31, 2020.”

III. IMPLEMENTATION OF SECTIONS
With respect to the period "beginning on a date selected by the Secretary (or the
Secretary’s delegate) which is during the 15-day period beginning on the date of the
enactment of this Act” as specified in sections 7001(g), 7002(e), 7003(g), and 7004(e)
of Division G of the Act, the date selected by the Secretary is April 1, 2020. This date is
coordinated with the DOL’s determination of the effective date for employers’
compliance with the Emergency Family and Medical Leave Expansion Act and
Emergency Paid Sick Leave Act requirements. Accordingly, the refundable tax credits
for employers apply to qualified sick leave wages and qualified family leave wages paid
for the period from April 1, 2020 to December 31, 2020. Additionally, the self-

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employment tax credit is determined based on days occurring during the period
beginning on April 1, 2020, and ending on December 31, 2020.

IV. DRAFTING INFORMATION
The principal author of this notice is NaLee Park of the Office of Associate Chief
Counsel (Employee Benefits, Exempt Organizations, and Employment Taxes). For
further information regarding this notice, contact NaLee Park at (202) 317-6798 (not a
toll-free call).