COVID-19 Updates - Statewide Stay-at-Home Order & HR 6201 Tax Credits
We’ve seen a flurry of activity over the last few days. Here’s a brief update as you start this week:
Stay-Home Order Expected Today
Last Friday, Governor Brown held a press conference to promote a statewide Stay Home, Stay Healthy campaign. The details of the campaign were unclear, but over the weekend many Oregon Mayors and public health advocates called on the Governor to act swiftly and order Oregonians to stay at home. We expect an executive order to be released today, effective immediately. As reported by Willamette Week, who reviewed a draft of the executive order, all nonessential gatherings, regardless of size will be prohibited and Oregonians will be required to stay in their homes whenever possible. The draft order does not include an across-the-board closure of nonessential business. Instead, it requires closure of “amusement parks, hair salons, bowling alleys, furniture stores, boutiques, gyms, ‘indoor and outdoor malls,’ spas, museums, senior centers, ski resorts, social and private clubs, tattoo parlors and theaters.” It also authorizes the Oregon Health Authority to add other “nonessential businesses” to that list. The draft order does not close offices, but requires management to offer telecommuting to office workers to the maximum extent possible. Violations of the order may constitute a class C misdemeanor.
The final version of Governor Brown’s executive order has not been released yet, so some of the details above may change. We’ll keep an eye out for it and send another update as soon as possible.
HR 6201 Compliance and Tax Credits
The IRS and U.S. Department of Labor issued a press release related to paid leave for workers and their plan to help small businesses swiftly recover these costs. Their “key takeaways” are:
Health insurance costs are also included in the credit.
Employers face no payroll tax liability.
Self-employed individuals receive an equivalent credit.
An immediate dollar-for-dollar tax offset against payroll taxes will be provided.
Where a refund is owed, the IRS will send the refund as quickly as possible.
Employers with fewer than 50 employees are eligible for an exemption from the requirements to provide leave to care for a child whose school is closed, or child care is unavailable in cases where the viability of the business is threatened.
Requirements subject to 30-day non-enforcement period for good faith compliance efforts.
As always, the details are more nuanced. For example, health insurance costs are defined as “amounts paid or incurred by the employer to provide and maintain” a qualified group health plan. Additionally, only properly allocated health insurance costs are allowed and such allocated costs, plus wages, may not exceed the maximum allowable credit.
In an effort to help small businesses recoup these expenses as quickly as possible, here is the IRS’ description of what the process will entail:
When employers pay their employees, they are required to withhold from their employees' paychecks federal income taxes and the employees' share of Social Security and Medicare taxes. The employers then are required to deposit these federal taxes, along with their share of Social Security and Medicare taxes, with the IRS and file quarterly payroll tax returns (Form 941 series) with the IRS.
Under guidance that will be released next week, eligible employers who pay qualifying sick or child care leave will be able to retain an amount of the payroll taxes equal to the amount of qualifying sick and child care leave that they paid, rather than deposit them with the IRS.
The payroll taxes that are available for retention include withheld federal income taxes, the employee share of Social Security and Medicare taxes, and the employer share of Social Security and Medicare taxes with respect to all employees.
If there are not sufficient payroll taxes to cover the cost of qualified sick and child care leave paid, employers will be able file a request for an accelerated payment from the IRS. The IRS expects to process these requests in two weeks or less. The details of this new, expedited procedure will be announced next week.
Examples to illustrate the concept are also provided:
If an eligible employer paid $5,000 in sick leave and is otherwise required to deposit $8,000 in payroll taxes, including taxes withheld from all its employees, the employer could use up to $5,000 of the $8,000 of taxes it was going to deposit for making qualified leave payments. The employer would only be required under the law to deposit the remaining $3,000 on its next regular deposit date.
If an eligible employer paid $10,000 in sick leave and was required to deposit $8,000 in taxes, the employer could use the entire $8,000 of taxes in order to make qualified leave payments and file a request for an accelerated credit for the remaining $2,000.
Equivalent child care leave and sick leave credit amounts are available to self-employed individuals under similar circumstances. These credits will be claimed on their income tax return and will reduce estimated tax payments.
The U.S. Department of Labor also updated its website to provide the following resources that explain what’s required under the Families First Coronavirus Response Act:
The new required poster and guidance is still in the works. Both should be available before April 2nd. The Department also plans to “provide emergency guidance and rulemaking to clearly articulate” the small business (fewer than 50 employees) exemption later this week.