The American Institute of CPAs has sent recommendations and asked for guidance from the Department of the Treasury and Internal Revenue Service regarding section 45S of the Internal Revenue Code – the paid family and medical leave credit. Currently, there is no guidance on the changes to the credit made by the One Big Beautiful Bill Act (OBBBA).
The OBBBA changed section 45S, giving a broader group of employers access to the credit; however, due to the credit, employers must ensure that their written leave policies are compliant during the first full year that the amended section 45S changes are in effect (2026). Section 45S(c) defines “eligible employer” as an employer that has a written policy that meets the requirements to claim the Credit. In general, the written policy must provide a certain level and duration of coverage for all “qualifying employees.”
The AICPA’s letter requests guidance and offers recommendations to update existing guidance on section 45S in the following areas:
- Calculating the Credit
1. Allow employers to base the Credit on both wages paid and premiums paid
2. Clarify the method of calculating the premium-based Credit
3. Clarify how to determine the applicable percentage for an aggregated employer
4.Provide a transition period regarding the effective date of employer written paid family and medical leave policies
- Employee Considerations
1. Permit an eligible employer to choose to cover employees after six months of employment through applicable plan documents
2. Allow use of safe harbors when determining an employee’s compensation
3. Clarify how to determine if an employee is a qualifying employee if they worked for the employer for less than one year
4. Clarify treatment of an employee’s prior service with regards to an employer’s written paid family and medical leave policy
5. Permit exclusion of certain employees from an employer’s written paid family and medical leave policy
- Eligible Employers
1. Clarify eligible employer status when legally distinct entities have different industry classifications
2. Clarify application of the Credit to employers aggregated with non-US employers
“The Paid Family and Medical Leave credit is now permanent and has been enhanced, allowing more employers to offer paid family and medical leave as a benefit to their employees,” says Kristin Esposito, AICPA Director, Tax Policy & Advocacy. “The purpose of our letter is to help practitioners obtain clarity on how to implement the changes to the credit.”
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Tags: 2026 taxes, AICPA, family leave credit, IRS, obbba, tax guidance, Treasury
