The IRS has provided guidance for changes to the paid family and medical leave (PFML) tax credits in the IRS Code as a result of the One Big Beautiful Bill Act (OBBBA). The changes made by the OBBBA are as follows:

- Section 455 of the IRS Tax Code provides for tax credits for employer expenses as a result of offering employees PFML. The OBBBA has made those tax credits permanent.

- Employers may now receive tax credits for a portion of any premiums paid by an employer for a PFML policy. This “premium-based” reimbursement is significantly different from the “wage-based” reimbursement used by the IRS Code prior to the OBBBA (where employers received credit for a percentage of the wages of the employees on PFML).

- The tax credits used to be available to employers for employees who have worked for the employer for at least 1 year (no tax credits could be claimed for PFML taken by an employee who has been working for less time). Thanks the OBBBA, this has been reduced to 6 months.

- Employers may only take tax credits for PFML taken by employees who work at least 20 hours per week.

- Employers must provide at least two weeks of PFML to be eligible for tax credit.

This new guidance is intended to be compiled into a proposed regulation in the near future, but both the Department of the Treasury and the IRS have stated that this guidance may be relied upon until such time. You can read the entire IRS Notice HERE.