• In its annual General Explanations of the Administration’s Revenue Proposals, the U.S. Department of Treasury proposed clarifications and amendments to the Internal Revenue Code to address on-demand pay arrangements (also known as earned wage access or “EWA” programs).
  • The proposals would confirm, among other things, that EWA programs are not loans.
  • The proposals would also clarify the applicable payroll period for EWA wages, as well as certain tax withholding and depositing obligations.

Why It Matters
The proposals offer insight into how the Treasury Department views EWA programs, and, if adopted, would provide needed clarity and consistency for employers and EWA providers.


Each year, the U.S. Department of Treasury issues its General Explanations of the Administration’s Revenue Proposals, commonly known as the “Green Book.” The Green Book, issued in March 2022 for fiscal year 2023, contains several proposals of interest to employers offering or wanting to offer on-demand pay arrangements (also known as EWA programs) and EWA providers.

Specifically, the Treasury Department recommends amending the Internal Revenue Code (Code) to provide for a standard definition of on-demand pay arrangements “as an arrangement that allows employees to withdraw earned wages before their regularly scheduled pay dates.” The proposals would also amend the Code to expressly clarify that on-demand pay arrangements are not loans. This is an important recommendation, because the Consumer Financial Protection Bureau’s (CFPB) guidance isn’t clear about the distinction between EWA and extensions of credit, and consumer advocates have asked the CFPB to retract its guidance. Not surprisingly, employers have increasingly sought guidance from the Treasury Department on this point.

The proposals also address the question of whether an employee is in constructive receipt of their earned wages, which can affect tax withholding and depositing obligations for employers, depending on the EWA program’s design. Uncertainty regarding whether an employee was in constructive receipt of wages when participating in an EWA program also led to confusion with regard to how to properly calculate the required FICA tax and income tax withholdings when the employee elects to receive a payment of earned wages.

The proposal first confirms the Treasury Department’s position that “[e]mployees with access to an on-demand pay arrangement may be in constant constructive receipt of their wages as they are earned.” Moreover, the proposal notes that “[e]mployers that offer on-demand pay arrangements should maintain either a daily or miscellaneous payroll period and should withhold and pay employment taxes on employees’ earned wages on a daily basis.” However, the proposal acknowledges that few employers follow this approach in practice because it would be a “significant financial and administrative burden.”

Thus, the proposal recommended additional changes to the Code to provide a consistent pay period for on-demand pay arrangements. The Treasury Department proposes that such arrangements should be treated as weekly payroll periods, even if employees have access to wages during the week.

These amendments, if enacted, would be effective for calendar years and quarters beginning after December 31. Thus, employers offering EWA products and EWA service providers should consider whether the Treasury Department’s position on EWA programs as explained in the proposals affects their current EWA arrangement or offering. And, of course, should the amendments become law, they should consider whether changes are needed to ensure compliance. For example, employers with biweekly or semimonthly payrolls may be required to run payroll weekly if they offer an on-demand pay arrangement to comply with the proposal that the payroll period for on-demand pay arrangements is treated as a weekly payroll period. Finally, the amendments, if enacted, may position state departments of labor as the primary regulators for EWA products rather than federal and state banking regulators.

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Photo of James Kim James Kim

James advises fintechs, banks, investors, and other clients regarding federal and state consumer financial laws and regulations, including Title X of the Dodd-Frank Act (UDAAP), TILA, RESPA, EFTA, and the FCRA. He helps clients navigate examinations and investigations with the Consumer Financial Protection…

James advises fintechs, banks, investors, and other clients regarding federal and state consumer financial laws and regulations, including Title X of the Dodd-Frank Act (UDAAP), TILA, RESPA, EFTA, and the FCRA. He helps clients navigate examinations and investigations with the Consumer Financial Protection Bureau (CFPB), Federal Deposit Insurance Corporation (FDIC), Federal Reserve Board, Federal Trade Commission (FTC), and various state agencies.

James also assists clients with product development, regulatory due diligence, and matters involving cutting-edge issues, such as financial technology, data aggregation, credit and prepaid cards, and marketplace lending.

James served as a senior enforcement attorney with the CFPB, where he coordinated with the FTC, Office of the Comptroller of the Currency, FDIC, Federal Communications Commission, and state attorneys general. He was lead counsel in the CFPB’s first enforcement actions involving mobile payments, and a member of an interdepartmental credit card/prepaid card/emerging payments issue team.

James is highly rated by Chambers USA, which uses client and peer feedback to list top attorneys in private practice. As one client told Chambers in 2021: “James is excellent. He came from the CFPB so he has the insider knowledge…He has a very strong background in enforcement and supervision matters, a very quick turnaround time and meets the deadline every single time.”

Photo of Jason Cover Jason Cover

Jason’s practice focuses on federal and state consumer lending and payments laws, including those that apply to installment loans, vehicle-secured loans, lines of credit, unsecured loans, credit cards, point-of-sale finance, and timeshare/vacation finance.

He counsels providers of consumer financial services, including banks, licensed…

Jason’s practice focuses on federal and state consumer lending and payments laws, including those that apply to installment loans, vehicle-secured loans, lines of credit, unsecured loans, credit cards, point-of-sale finance, and timeshare/vacation finance.

He counsels providers of consumer financial services, including banks, licensed lenders, and fintech providers, on regulatory compliance matters and government supervisory and enforcement matters.

Jason regularly provides guidance on electronic payments and payment network rules; electronic contracting and mobile commerce; online banking; retail installment sales; preparing for examinations by the Consumer Financial Protection Bureau (CFPB); responding to CFPB supervisory requests (including so-called PARR letters); Article 9 of the Uniform Commercial Code; lease-purchase transactions and consumer protection laws, such as the Telephone Consumer Protection Act (TCPA), Truth in Lending Act (TILA), Fair Credit Reporting Act (FCRA), Equal Credit Opportunity Act (ECOA), Electronic Funds Transfer Act (EFTA), Electronic Signatures in Global, and National Commerce Act (E-SIGN); UDAAP statutes prohibiting unfair, deceptive, and abusive acts and practices; and the CFPB’s Rule on Payday, Vehicle Title, and Certain High-Cost installment Loans (Payday Rule).

He also routinely counsels clients on issues related to online small business lending, electronic consents, contracts and disclosures, and recurring payment methods.

Earlier in his career, Jason served as lead in-house counsel to a premier consumer financial services company where he advised on an array of regulatory, legal, and compliance issues.

Photo of Emily Schifter Emily Schifter

Emily Schifter works with clients on a wide variety of labor and employment-related matters, including employment discrimination, leave, disability accommodation, and wage and hour litigation. Additionally, she counsels employers on many aspects of employment law and human resources issues.