Has the IRS issued guidance related to the Presidential Memorandum deferring payroll taxes?
Yes. Late last Friday (August 28), the Treasury
Department issued a three-page Notice that ostensibly provides “guidance” on the
deferral of withholding, deposit, and payment of certain payroll taxes in
response to COVID-19.
Our preliminary interpretation of the guidance is that: (1) a
city as employer has the option of deciding whether or not to withhold taxes
during the deferral period; (2) the employer, not the employee, will likely
be responsible for any tax obligations if the deferred taxes are not paid by
April 30, 2021 (city attorneys may want to review this issue in light of the
“gift prohibition” in Article III, Section 52, of the Texas Constitution);
and (3) city officials should review the factors to consider in the Q&A
below prior to deciding how to proceed.
Here is a more detailed analysis of the document:
-What payroll taxes may be deferred? The deferral
applies only to the employee’s share of social security taxes, and then only
for wages paid to an employee from September 1, 2020, through December 31,
2020. Further, the deferral applies only to employees who are paid less
than $4,000 on a bi-weekly pay period, or an equivalent threshold amount with
respect to other pay periods. Each pay period is considered separately.
-Are employers required to temporarily stop withholding
taxes? The guidance does not explicitly state that the tax deferral
is optional for employers, and it makes no mention of an employee’s right to
defer (or not defer) withholding of the employee’s portion of the social
In a footnote, the guidance provides that the deposit
obligation for an employee’s social security tax does not arise until the tax
is withheld, and by postponing the time for withholding the tax, the deposit
obligation is delayed. The guidance further provides that this “Notice does
not separately postpone the deposit obligation.” In a
round-about-way, this language seems to indicate that because deferral is
triggered by an employer withholding taxes, the employer has the option of
deciding whether or not to withhold taxes during the deferral period. As this
issue is not clear, each city should consult with its local counsel.
-What happens after the deferral period? If a city
chooses to temporarily stop withholding taxes, the amount deferred shall
be deferred without any penalties, interest, additional amount, or addition
to the tax until April 30, 2021. After this date, the
employer shall accrue interest, penalties and additions to tax for any
unpaid taxes. An employer has between January 1, 2021 and April 30,
2021, to withhold and pay the total applicable taxes that the employer
deferred. However, the employer may make arrangements to otherwise
collect the total taxes from the employee. It is likely that the
employer, not the employee, will be responsible for any tax obligations if
the deferred taxes are not paid by April 30, 2021.
-What should a city consider before it temporarily stops
withholding taxes? A city that is contemplating the tax deferral may
want to consider the following: (1) give an employee the option to defer (or
not defer) the tax; (2) inform employees that the deferred taxes will
have to be paid back between January 1, 2021 and April 30, 2021; (3) enter
into an agreement with the employee that clearly provides how the city will
recoup the deferred taxes between January 1 and April 30, 2021, including
whether the employee will be subject to double withholding; and (4) enter
into an agreement with the employee that spells out how the employee will
reimburse the city for deferred taxes should the employee no longer be
employed by the city at the time the deferred taxes are due or in the event
the employee is not making enough money to pay back the tax. Each city
should consult its legal counsel before taking any final action on this issue.
Has the Department of Labor issued guidance related to school
re-openings and paid leave under the FFCRA?
Yes. On August 27, 2020, the Department issued the
following new guidance related to school re-openings and eligibility
for paid leave under the FFCRA (the numbering matches those in the guidance):
98. My child’s school is operating on an alternate
day (or other hybrid-attendance) basis. The school is open each day, but
students alternate between days attending school in person and days
participating in remote learning. They are permitted to attend school only on
their allotted in-person attendance days. May I take paid leave under the
FFCRA in these circumstances?
Yes, you are eligible to take paid leave under the FFCRA on
days when your child is not permitted to attend school in person and must
instead engage in remote learning, as long as you need the leave to actually
care for your child during that time and only if no other suitable person is
available to do so. For purposes of the FFCRA and its implementing
regulations, the school is effectively “closed” to your child on days that he
or she cannot attend in person. You may take paid leave under the FFCRA on
each of your child’s remote-learning days.
99. My child’s school is giving me a choice between
having my child attend in person or participate in a remote learning program
for the fall. I signed up for the remote learning alternative because, for
example, I worry that my child might contract COVID-19 and bring it home to
the family. Since my child will be at home, may I take paid leave under the
FFCRA in these circumstances?
No, you are not eligible to take paid leave under the FFCRA
because your child’s school is not “closed” due to COVID–19 related reasons;
it is open for your child to attend. FFCRA leave is not available to take
care of a child whose school is open for in-person attendance. If your child
is home not because his or her school is closed, but because you have chosen
for the child to remain home, you are not entitled to FFCRA paid leave.
However, if, because of COVID-19, your child is under a quarantine order or
has been advised by a health care provider to self-isolate or
self-quarantine, you may be eligible to take paid leave to care for him or
her. See FAQ 63.
Also, as explained more fully in FAQ 98, if your child’s school is operating on an
alternate day (or other hybrid-attendance) basis, you may be eligible to take
paid leave under the FFCRA on each of your child’s remote-learning days
because the school is effectively “closed” to your child on those days.
100. My child’s school is beginning the school year under
a remote learning program out of concern for COVID-19, but has announced it
will continue to evaluate local circumstances and make a decision about
reopening for in-person attendance later in the school year. May I take paid
leave under the FFCRA in these circumstances?
Yes, you are eligible to take paid leave under the FFCRA while
your child’s school remains closed. If your child's school reopens, the
availability of paid leave under the FFCRA will depend on the particulars of
the school’s operations. See FAQ 98 and 99.
Has the Department of Labor issued guidance related to school
re-openings and eligibility for Pandemic Unemployment Assistance?
Yes. On August 27, 2020, the Department issued this letter to State Workforce Agencies spelling out the
eligibility of individuals who are caregivers of students and who are
affected by school re-openings for unemployment benefits, as well as
providing guidance on the intersection of the PUA with paid leave under the
Families First Coronavirus Response Act.
What’s been the general tone of the United States Supreme
Court regarding virus-related litigation?
Lisa Soronen is the Executive Director of the State and Local
Legal Center (SLLC) in Washington, D.C. (@SLLCSCOTUS). The Big Seven national organizations representing state and
local elected and appointed officials are members of the SLLC, including
the National League of Cities, as well as the Texas Municipal League.
According to Soronen, the bottom line is that “the Court has
not been interested in overturning lower court decisions upholding
stay-at-home orders (even where those orders don’t seem to comply with the
First Amendment) and isn’t willing to tolerate judges rewriting voting
Visit the SLLC website for more details on the various cases that
suggest this trend.
What’s the latest on the Gulf storms?
If you need hurricane-related assistance, the Texas Municipal
League Intergovernmental Risk Pool has resources available for cities, including a link to the
main TML’s emergency management web page. If you need further
TML IRP assistance, please contact one of the following:
-Mike Rains 512-491-2342
-David Nix 512-491-2347
-David Goldston 512-491-2426
City officials who need immediate assistance from TML legal
can contact Scott Houston, TML general counsel, at firstname.lastname@example.org or
by phone at 512-231-7464.
What additional information on the effect of the virus on the
economy has the comptroller compiled?
Texas Comptroller Glenn Hegar shared the following information
in an email titled “Investigating COVID’s Economic Impact:”
In these uncertain times, having the latest data and analyses
is essential. That’s why the Comptroller’s office is monitoring and reporting
on COVID-19’s impact on the Texas economy and state government. Here’s some
recommended reading from our recent publications:
-“Recessions and Revenues” explains how public health
concerns curtailed economic activity, resulting in decreased tax collections.
-“Pandemic Drives Record Unemployment” gauges the
unprecedented number of claims that flooded the Texas Workforce Commission
this past spring.
-“Texas’ International Trade” examines the disruption of
supply chains and trade flows.
-Texas’ professional sports franchises explore creative
options in the pandemic economy.
-A top education official outlines how community colleges are coping with the crisis.
-Nonprofit organizations and volunteers are stepping up to
plug gaps in social services and educational activities.
-The pandemic is forcing telemedicine to ramp up rapidly to meet the health care
Fiscal Notes is available online and can be received
by subscribing via the Comptroller’s website. For
questions about how tax functions are continuing during the outbreak, visit
the Comptroller’s COVID-19 News page or Virtual Field Office.
Where can I find archived issues of the TML Coronavirus
TML Coronavirus Updates are archived by date here and by subject here.