The big news of this week is that Congress stands poised to pass the biggest overhaul of the tax code in more than thirty years. As we have discussed, this overhaul should be pretty good for employers. It will significantly reduce the tax rate for both businesses and partnerships, and implement business-friendly deductions like those for investments into capital goods. One provision I noticed, made it into the final bill that has not received much attention is a tax credit for paid family leave.
This provision offers businesses a tax credit for wages paid to employees who take up to 12 weeks of paid family leave. The tax credit is equal to 25% of the amount of wages that an employer pays the employee on leave. So, if an employee is paid $10,000 during his or her 12 weeks of family leave, then the employer will receive a tax credit of $2,500. The employee on leave must be receiving at least 50% of his or her wages during the leave for the employer to qualify for the tax credit. The employee also must have been working for the employer for at least one year. The provision comes from a stand-alone bill proposed by Senator Deb Fischer.
Another interesting provision in the tax bill that has not been widely discussed is a prohibition on deductions for confidential settlements arising out of sexual misconduct. The bill would allow deductions for settlement agreements that are not made confidential. If an employer must pay a large sexual harassment settlement, like some of those rumored to have been paid in the Harvey Weinstein and Bill O’Reilly scandals, that will provide a pretty powerful incentive, in the form of hundreds of thousands or even millions of dollars of reduced taxes, not to include a confidentiality provision.
