New DC Employer Tax to Begin July 1, 2019
Starting July 1, 2019, the District of Columbia will collect taxes from “covered employers” to fund the Paid Family Leave (PFL) benefit. Employers must begin recording wages for workers on April 1, 2019. The first PFL quarterly tax will cover wages paid to workers in April, May, and June 2019.
The tax rate is 0.62 percent (.0062) of wages–so for an employee whose gross wages are $40,000 a year, the annual tax will be $248.
The tax will fund DC’s Paid Family Leave Program which will provide up to eight weeks of parental leave to bond with a new child, six weeks of family leave to care for an ill family member with a serious health condition, and two weeks of medical leave to care for one’s own serious health condition. Eligible employees may not begin requesting leave until July 1, 2020.
Who is affected by this employment tax? Any business performing services in the District of Columbia, that also pays unemployment insurance taxes for its employees, will be required to pay paid family leave taxes. This also includes nonprofit organizations and household employers that pay unemployment insurance tax, as well as self-employed individuals who have opted into the paid family leave program. Additionally, a “covered employer” is an organization or person who employees any employee who spends more than 50% of his or her time working in DC, or an employee based in DC who spends not more than 50% of his or her time working outside of DC.
Maryland and Virginia employers will need to monitor the percentage of time that workers spend working in DC as compared to other sites. Payroll systems will need to be modified to categorize employee wages that are subject to the tax and quarterly electronic payments will need to be computed and remitted. It appears to be a cliff tax on employees who tip over 50% of time working in DC–once the employee tips over the 50% threshold, all wages are subject to the tax.
As of April 3, 2019, the final tax regulations were with the District Council for review and approval. In the meantime, the DC Department of Employment Services has launched a website regarding the program: dcpaidfamilyleave.dc.gov. Inquiries about the program can also be addressed to does.opfl@dc.gov.