Paid Family and Medical Leave Tax Credit Extension and Enhancement Act

This bill amends the Internal Revenue Code to enhance the existing paid family and medical leave credit for employers. It introduces an election for employers, allowing them to calculate the credit based on either the applicable percentage of wages paid to qualifying employees on leave or the premiums paid for a family and medical leave insurance policy. Notably, the credit for insurance premiums will be determined without regard to whether any employees actually took leave during the taxable year. The legislation also refines the definition of a qualifying employee , now including those employed for at least six months (an alternative to one year) and customarily working a minimum of 20 hours per week. It clarifies aggregation rules for employers, providing an exception for those with a substantial and legitimate business reason for not having a uniform policy. Furthermore, leave mandated or paid for by state or local governments will be considered when determining an employer's provision of leave, but it will not be factored into the federal credit amount. To promote awareness and utilization, the Act mandates extensive outreach efforts by the Small Business Administration and its resource partners, including targeted communications and technical assistance. The Internal Revenue Service is also directed to conduct targeted outreach to employers, payroll services, and tax professionals regarding the credit's availability and requirements. These changes, which also prevent a double benefit from deductions, will apply to taxable years beginning after the date of enactment.