WASHINGTON—NAFCU President and CEO Dan Berger has sent a letter to Treasury Secretary Steven Mnuchin regarding federal credit union eligibility for the payroll tax credit received under the paid sick leave and paid family medical leave provisions of the Families First Coronavirus Response Act (FFCRA) and the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).
Earlier this week, NAFCU held a call with the Treasury Department to discuss coronavirus relief efforts. NAFCU shared with Treasury the challenges credit unions are facing and how an exception to the payroll tax credit, which could create uncertainty as to whether federal credit unions are eligible for the credit, could further hinder their abilities to support members and employees during this time, according to the association.
The leave provisions require companies, including credit unions, with under 500 employees to provide paid leave to employees impacted by the coronavirus in certain situations to help alleviate financial hardship. The FFCRA also established payroll tax credits to provide some support to companies offering the leave.
Issue With Ambiguity
However, NAFCU is asserting there is some ambiguity as to whether language contained in the bills could prevent federal credit unions from being able to receive the tax credit due to the use of the term "instrumentality" in the language creating government exceptions to the credit.
Berger, in his letter, argued that it was not Congress' intent "to exclude federal credit unions while permitting state-chartered credit unions to receive this payroll tax credit," according to ongoing conversations the association has had with lawmakers and administration officials who worked on this provision.
Arbitrary Disadvantages
"To create such a bifurcation would arbitrarily disadvantage a large portion of the credit union industry that could otherwise leverage federal relief to better aid members and employees affected by the public health and economic crises," Berger said. "It would also create a divergent set of tax policies for institutions that otherwise receive the same practical treatment with respect to federal tax obligations.
"Additionally, such a bifurcation would appear to be contrary to the spirit of these paid leave provisions, which were designed to ensure that employees would get the COVID-19 related leave that they needed, while not jeopardizing the economic condition of their employers."