Small Business Tax Credit for Vaccination Paid Leave

This week, President Biden announced a new federal tax credit for small businesses that provide employees with paid time off to receive a COVID-19 vaccine or to recover from side effects of receiving the vaccine.  Businesses with fewer than 500 employees may receive up to $511 per day per employee.

In California, employers with 25 or more employees are already required to provide this paid time off related to vaccination, under the state’s recently passed Supplemental Paid Sick Leave (SPSL) law.  Employers with fewer than 25 employees who voluntarily offer this paid time off are now eligible for a federal tax credit to offset the costs.

Prior to the passage of SPSL, California employers of any size that voluntarily offered paid time off for reasons related to COVID-19 were eligible for a similar federal tax credit.  Now that this paid time off is required by SPSL, it is not yet clear how SPSL and the federal tax credit will interact.  Neither the California Labor Commissioner nor the IRS has provided direct guidance on the issue.

The same is true for the new vaccination tax credit; we do not yet know if employers with 25 or more employees will receive the tax credit even if they are required to offer the paid time off under state law, rather than voluntarily offering the paid time off.

We encourage employers to consult with their CPA about the tax implications of the federal and California laws.