United States

District of Columbia: Universal Paid Leave Act of 2016 Sent to Congress for Review

Feb 27, 2017
From KPMG TaxWatch

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The District of Columbia Universal Paid Leave Amendment Act of 2016 was recently approved by the D.C. Council without the mayor’s signature. The Act will now be transmitted to Congress for a mandatory 30-day review period, which is required before any District legislation is considered enacted. The Act provides paid leave for District of Columbia employees under certain conditions, even those employees who reside in Maryland and Virginia. To fund the paid leave, “covered employers” are required to make contributions to the Universal Paid Leave Implementation Fund. The amount to be contributed is 0.62 percent of the wages (defined with reference to the district’s unemployment law definition of “wages”) of each “covered employee” in a manner to be prescribed by the mayor. A “covered employer” is generally any type of entity that is required to pay District of Columbia unemployment insurance on behalf of its employees. There is no exception for businesses that currently provide paid leave to employees. The term “covered employer” for purposes of the Act does not include the United States, the District of Columbia, or any employer that the District cannot tax under federal law or a federal treaty. A “covered employee” is generally an employee who spends more than 50 percent of his or her time working for the covered employer in the District, or an employee based in the District and who does not spend more than 50 percent of his or her work time in another jurisdiction. The program does not cover federal government or District employees. Within 180 days of the effective date of the Act, the mayor is required to provide notice to employers regarding the manner in which contributions will be collected, which are to begin by July 1, 2019.

The Universal Paid Leave Amendment Act of 2016 was not supported by Mayor Bowser and two District Council Members recently introduced an alternative bill, the Paid Leave Compensation Act of 2017. This Act likewise adopts a paid leave program, but distinguishes between large and small employers with respect to contributions. Specifically, under the Paid-Leave Compensation Act, the beginning October 1, 2018, each month small employers would pay an amount equal to 0.4 percent of the wages of each of its employees and large employers would pay 0.2 percent. Please stay tuned to TWIST for futures updates on these proposals.

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The following information is not intended to be "written advice concerning one or more federal tax matters" subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230.

The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.