By Payroll and Entitlements Editorial Staff
On July 30, Senators Bill Cassidy, M.D. (R-La.), and Kyrsten Sinema (D-Ariz.) unveiled their paid leave plan, calling it "Congress’ first bipartisan paid leave proposal for American families." The Cassidy-Sinema plan would give new parents the option to bring forward their recently increased Child Tax Credit (CTC) to receive up to a $5,000 benefit, giving them flexibility to cover costs after having or adopting a child (under age six).
Changing the timing of CTCs. Congress recently increased the CTC from up to $1,000 to up to $2,000 per year. The Cassidy-Sinema proposal would permit parents of a newborn or recently adopted child (under the age of six) to bring forward their child tax credits to receive up to $5,000 immediately and then receive a lesser $1,500 CTC for the following 10 years (essentially "repaying" the CTC amount taken).
This $5,000 could be used to replace income while taking leave from work, or to pay for childcare if parents decide to stay at work.
For low-income families that do not qualify for the full, refundable portion of the CTC, $500 annual installments against the credit would be burdensome, a summary of the plan notes. These families would also be able to bring forward their CTC benefit to receive the equivalent of 12 weeks of wage replacement, but they would then receive their adjusted CTC over the next 15 years.
"Parents can think of this option as changing the timing of when they will benefit from the CTC," according to FAQs about the plan. "This proposal helps growing families get access to these funds now, rather than later."
Employers incur no new obligation or mandate under this proposal. Should parents choose to take leave rather than pay for childcare, they must qualify under the FMLA or other state program for their leave to be job-protected.
FMLA is not enough. Cassidy and Sinema noted that under the Family and Medical Leave Act (FMLA), eligible parents are guaranteed 12 weeks of unpaid leave without the threat of loss of job. But many parents are unable to take advantage of FMLA because they do not qualify or cannot afford to go without pay for any amount of time. The Pew Research Center reported that in 2016, 50 percent of Americans who took leave used savings set aside for something else to cover lost wages or salary due to childcare expenses; 37 percent took on debt; 41 percent cut their leave time short.
Eligibility. Benefits under the Cassidy-Sinema plan would be available to all new parents who will be eligible for the CTC. Parents would be able to seek the advanced benefit immediately available upon birth or adoption, or wait and claim the benefit anytime within the first year after birth or adoption. Notably, for the benefit to apply, adopted children must be under age 6 when adopted.
To be eligible for the CTC, these requirements must be met:
- The parent must claim the child as a dependent on his or her federal tax return;
- The child must be a U.S. Citizen, U.S. National, or a U.S. resident alien with a Social Security Number;
- The child cannot have provided more than half of his or her own financial support during the tax year;
- The child must have lived with the parent for more than half of the tax year for which the parent claims the credit (with an exception for the year of birth); and
- The parent must have an earned income of at least $2,500 to qualify for the credit.
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