On July 27, Senate Republicans released a series of COVID-19 relief bills, including the “American Workers, Families, and Employers Assistance Act” (the “Bill”).  The Bill is a successor to several provisions in the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, passed in March of this year, which attempted to blunt the early effects of the COVID-19 pandemic.

Section 213 of the Bill would create a new “safe and healthy workplace tax credit,” which would provide a refundable payroll tax credit equal to 50% of an employer’s “qualified employee protection expenses,” such as COVID-19 tests, protective personal equipment, and cleaning supplies.  The new tax credit would also cover “qualified workplace reconfiguration expenses,” including workspace modifications to protect employees and customers from the spread of COVID-19, and “qualified workplace technology expenses,” including technologies designed to reduce contact between employees and customers that were acquired by the employer on or after March 13, 2020, and were not acquired pursuant to a plan in existence before that date.

“Qualified workplace reconfiguration expenses” must be incurred for reconfigurations, the plans for which were not in place before March 12, 2020, with respect to tangible property described in section 168 of the Code that is owned or leased by the employer.  Both “qualified workplace reconfiguration expenses” and “qualified workplace technology expenses” must have a primary purpose of preventing the spread of COVID-19 to qualify for the credit and must be commensurate with the risks faced by employees or customers or be consistent with recommendations made by the CDC or OSHA.

The aggregate amount of the total credit each quarter for “qualified employee protection expenses,” “qualified workplace reconfiguration expenses,” and “qualified workplace technology expenses” incurred during the quarter would be limited to $1,000 per employee for each of a taxpayer’s first 500 employees, $750 for each additional employee up to 1000 employees, and $500 for each additional employee after the first 1000 employees.  The credit would be available to both employers and self-employed individuals, including sole proprietors, independent contracts, and farmers.  Self-employed individuals would be treated as employers with a single employee under the Bill.

The credit would apply to amounts paid or incurred for qualified expenses after March 12, 2020, and before January 1, 2021.

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Photo of Joseph Sullivan Joseph Sullivan

Joe Sullivan advises multinational clients on all aspects of federal tax controversy, including IRS audit preparation and defense, investigations, administrative appeals, and tax litigation. Joe also advises clients on inbound and outbound international tax planning, transfer pricing and intangible asset valuation, and on…

Joe Sullivan advises multinational clients on all aspects of federal tax controversy, including IRS audit preparation and defense, investigations, administrative appeals, and tax litigation. Joe also advises clients on inbound and outbound international tax planning, transfer pricing and intangible asset valuation, and on tax policy and legislative initiatives. Joe has been actively involved in the OECD’s Pillar Two project, and is a frequent speaker and panelist on that subject.

Joe worked for three years in the Office of Tax Analysis at the U.S. Treasury Department prior to law school.

Joe received his J.D., magna cum laude, from Harvard Law School. He received his M.S. from Johns Hopkins University and B.A., magna cum laude, from the University of Washington, where he was elected to Phi Beta Kappa.

Photo of S. Michael Chittenden S. Michael Chittenden

Michael Chittenden practices in the areas of tax and employee benefits with a focus on withholding taxes, including state and federal employment taxes, Chapter 3, and the Foreign Account Tax Compliance Act (FATCA) and information reporting (e.g., Forms 1095, 1096, 1098, 1099, W-2…

Michael Chittenden practices in the areas of tax and employee benefits with a focus on withholding taxes, including state and federal employment taxes, Chapter 3, and the Foreign Account Tax Compliance Act (FATCA) and information reporting (e.g., Forms 1095, 1096, 1098, 1099, W-2, 1042, and 1042-S.

Michael advises large employers on their employment tax compliance obligations, including the special FICA and FUTA rules for nonqualified deferred compensation, the successor employer rules, and executive perquisites, such as the taxation of company cars, corporate aircraft (including the use of SIFL valuations), and employer-provided housing. In addition, he has worked with clients to submit voluntary corrections of employment tax mistakes and seek abatement of late deposit and information reporting penalties. Michael has extensive controversy experience representing clients in IRS examinations and before the IRS Independent Office of Appeals in employment tax, late deposit, and information reporting penalty cases.

As part of Covington’s Global Workforce Solutions practice, Michael counsels clients on all aspects of mobile workforce issues including state income tax withholding for remote workers and mobile employees. He also advises on treaty claims and various tax issues related to expatriate and inpatriates.