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Senate Passes Bill to Update COVID-19 Emergency Paid Sick Leave, Unemployment Insurance, and PPP Loans

BOSTON, MA – The Massachusetts State Senate recently passed a comprehensive COVID-19 Bill that guarantees Emergency Paid Sick Leave consisting of five paid days off for every employee in the Commonwealth, seeks to stabilize the state’s Unemployment Insurance (UI) trust fund, provides substantial tax relief to businesses and workers, and delays the state tax filing deadline.

“Since the start of the new legislative session, my colleagues and I have been working together to put forward a bill to address these important issues and I am proud to say that we have delivered,” said Senator Patrick O’Connor (R-Weymouth). “People should not have to choose between putting food on the table or potentially risk spreading COVID-19 even further. Likewise, small businesses and residents should not be punished for accepting help when they needed it the most. I am appreciative of the work of my colleagues to get this done quickly so that we may look ahead and tackle additional pressing issues as we seek to overcome the social and economic impacts of COVID-19 on our communities.”

To help protect employees on the front lines, and prevent the further spread of COVID-19, this bill ensures that all workers in Massachusetts have access to paid leave if they are unable to work as a result of a COVID-19 infection or a quarantine order. Significantly, given the state’s push to increase vaccination rates, employees will be able to use this paid leave time to take time off to receive the vaccine. In addition, the legislation provides for leave if the worker needs time to care for a family member unable to work because of COVID.

Under this legislation, employees are eligible for up to five days of paid leave, at their regular rate of pay, capped at $850 per week—which is the same maximum weekly benefit provided for in the Massachusetts Paid Family Medical Leave (PFML) law. Employers covered by federal legislation providing for paid leave will have the cost of providing such leave paid for through the federal tax credit. For all other employers, the bill creates a $75 million COVID-19 Emergency Paid Sick Leave Fund to reimburse eligible employers for providing their employees with emergency paid sick leave. The state requirement for paid leave would extend until September 30, 2021 or until the fund is exhausted.

The COVID-19 public health crisis has created a surge of pandemic-related unemployment claims, which has depleted the Commonwealth’s unemployment trust fund, necessitating borrowing from the federal government to pay out those benefits. The bill therefore authorizes up to $7 billion worth of borrowing to replenish the UI trust fund and to repay all federal UI loans, funded by an employer charge, and creates a separate time-limited employer assessment to repay interest on federal UI loans by their due dates to ensure the solvency of the UI trust fund.

The Senate accepted an amendment to establish a commission on the solvency of the UI trust fund to pursue long-term solutions for solvency.

“It is critical for the Commonwealth’s long-term financial health that we have strategies in place to ensure the UI trust fund remains solvent,” said Senator O’Connor. “By convening legislators with a balance of leaders in business and advocacy interests it is my hope that we will be presented with options that allow for a timely repayment of what is owed without placing a further burden on the taxpayer.”

The bill also provides much-needed UI-related relief to businesses and employees. For businesses, the bill prevents increases in the UI rate schedule for 2021 and 2022, providing employers with needed stability and relief as the Commonwealth continues to recover. For unemployed workers, some navigating the UI system for the first time, the bill waives tax penalties on UI benefits in 2020 and 2021. It also mirrors federal tax provisions included in the recent American Rescue Plan and excludes $10,200 of unemployment compensation received by an individual with a household income of less than 200% of the federal poverty level from gross income for tax purposes, putting up to $500 into the hands of lower income unemployed individuals. This would apply to individuals making $25,760 or under, or a total income of $53,000 for a famil­­y of four.

Further relief for businesses comes in the form of a change in state tax policy regarding PPP loans. In Massachusetts, corporate excise, but not personal income tax, is tied to the current federal Internal Revenue Code. As a result, Massachusetts' tax law treats forgiven Paycheck Protection Program loans differently depending on whether the recipient small businesses is organized as a pass-through entity or a c-corp. This bill conforms to federal law and ensures that all forgiven PPP loans, advance Economic Injury Disaster Loans and payments made under the federal Small Business Debt Relief are excluded from gross income, regardless of how the business is organized.

“This change will make a real difference for the 140,000 businesses who received PPP loans and ensure that they are not hit with an insurmountable tax bill this spring,” said Senator O’Connor. “I’ve had the opportunity to have conversations with many small business owners on the South Shore who have advocated for this change and I am grateful that we were able to get this done for them – they’ve endured more than their fair share of economic hardship due to COVID-19.”

Finally, to align state tax deadlines with federal tax deadlines, the bill extends the Commonwealth’s tax filing deadline from April 15, 2021, to May 17, 2021. This tax flexibility, similar to a delay authorized last year by the Legislature, will provide stability and ensure residents have time to prepare and file taxes as the state continues to weather the impacts of the COVID-19 pandemic.

The bill has been enacted by the Senate and House and now moves to Governor Baker’s desk for his signature.

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