26 USC 45S - Employer credit for paid family and medical leave

U.S Code last checked for updates: Aug 16, 2025

§ 45S.

Employer credit for paid family and medical leave

(a)

Establishment of credit

(1)

In general

For purposes of section 38, in the case of an eligible employer, the paid family and medical leave credit is an amount equal to either of the following (as elected by such employer):

(A)

The applicable percentage of the amount of wages paid to qualifying employees with respect to any period in which such employees are on family and medical leave.

(B)

If such employer has an insurance policy with regards to the provision of paid family and medical leave which is in force during the taxable year, the applicable percentage of the total amount of premiums paid or incurred by such employer during such taxable year with respect to such insurance policy.

(2)

Applicable percentage

(3)

Rate of payment determined without regard to whether leave is taken

(b)

Limitation

(1)

In general

(2)

Non-hourly wage rate

(3)

Maximum amount of leave subject to credit

(c)

Eligible employer

For purposes of this section—

(1)

In general

The term “eligible employer” means any employer who has in place a written policy that meets the following requirements:

(A)

The policy provides—

(i)

in the case of a qualifying employee who is not a part-time employee (as defined in section 4980E(d)(4)(B)), not less than 2 weeks of annual paid family and medical leave, and

(ii)

in the case of a qualifying employee who is a part-time employee, an amount of annual paid family and medical leave that is not less than an amount which bears the same ratio to the amount of annual paid family and medical leave that is provided to a qualifying employee described in clause (i) as—

(I)

the number of hours the employee is expected to work during any week, bears to

(II)

the number of hours an equivalent qualifying employee described in clause (i) is expected to work during the week.

(B)

The policy requires that the rate of payment under the program is not less than 50 percent of the wages normally paid to such employee for services performed for the employer.

(2)

Special rule for certain employers

(A)

In general

An added employer shall not be treated as an eligible employer unless such employer provides paid family and medical leave in compliance with a written policy which ensures that the employer—

(i)

will not interfere with, restrain, or deny the exercise of or the attempt to exercise, any right provided under the policy, and

(ii)

will not discharge or in any other manner discriminate against any individual for opposing any practice prohibited by the policy.

(B)

Added employer; added employee

For purposes of this paragraph—

(i)

Added employee

(ii)

Added employer

(3)

Aggregation rule

(A)

In general

(B)

Exception

(i)

In general

(ii)

Substantial and legitimate business reason

(4)

Treatment of benefits mandated or paid for by State or local governments

For purposes of this section, any leave which is paid by a State or local government or required by State or local law—

(A)

except as provided in subparagraph (B), shall be taken into account in determining the amount of paid family and medical leave provided by the employer, and

(B)

shall not be taken into account in determining the amount of the paid family and medical leave credit under subsection (a).

(5)

No inference

(d)

Qualifying employees

For purposes of this section, the term “qualifying employee” means any employee (as defined in section 3(e) of the Fair Labor Standards Act of 1938, as amended) who—

(1)

has been employed by the employer for 1 year or more (or, at the election of the employer, for not less than 6 months), and

(2)

for the preceding year, had compensation, as determined on an annualized basis (pro-rata for part-time employees), not in excess of an amount equal to 60 percent of the amount applicable for such year under clause (i) of section 414(q)(1)(B), and

(3)

is customarily employed for not less than 20 hours per week.

(e)

Family and medical leave

(1)

In general

(2)

Exclusion

(3)

Definitions

(f)

Determinations made by Secretary of Treasury

(g)

Wages

(h)

Election to have credit not apply

(1)

In general

(2)

Other rules

(Added Pub. L. 115–97, title I, § 13403(a)(1), Dec. 22, 2017, 131 Stat. 2135; amended Pub. L. 116–94, div. Q, title I, § 142(a), Dec. 20, 2019, 133 Stat. 3234; Pub. L. 116–260, div. EE, title I, § 119(a), Dec. 27, 2020, 134 Stat. 3051; Pub. L. 119–21, title VII, § 70304(a), July 4, 2025, 139 Stat. 195.)

cite as: 26 USC 45S