Indicates Matter Stricken

Indicates New Matter

 

Committee Report

January 31, 2024

 

H. 3992

 

Introduced by Reps. Blackwell, McGinnis, Sandifer and Ligon

 

S. Printed 01/31/24--H.

Read the first time February 16, 2023

 

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The committee on House Labor, Commerce and Industry

To whom was referred a Bill (H. 3992) to amend the South Carolina Code of Laws by amending Section 41-31-60, relating to delinquent unemployment compensation tax rates, so as to permit employers with, etc., respectfully

Report:

That they have duly and carefully considered the same, and recommend that the same do pass with amendment:

 

    Amend the bill, as and if amended, SECTION 1, by striking Section 41-31-60(B) and inserting:

    (B) No employer is permitted to pay his unemployment compensation tax at a reduced tax rate class for any quarter when a tax execution issued in accordance with Section 41-31-390 with respect to delinquent unemployment compensation tax for a previous quarter is unpaid and outstanding against the employer. If on the computation date upon which an employer's tax rate is computed as provided in Section 41-31-40 there is an outstanding tax execution, the tax class twenty rate must be assigned to the employer until the next computation date or until such time as all outstanding tax executions have been paid. An employer who has a department-approved installment payment agreement shall be permitted to pay its unemployment compensation tax at a reduced rate. However, any such employer's tax rate shall immediately revert to the tax class twenty rate if the employer fails to make any one of the succeeding deferred payments or fails to submit any succeeding wage report and payment in a timely manner as required by the department-approved installment payment agreement.

 

Renumber sections to conform.

Amend title to conform.

 

W.E. "BILL" SANDIFER for Committee.

 

 

statement of estimated fiscal impact

Explanation of Fiscal Impact

State Expenditure

This bill allows employers with a delinquency report from DEW to enter into an installment payment agreement with the department for their outstanding unemployment compensation tax at a reduced rate as long as they are current with their installment payments and do not fail to submit succeeding wage reports and payments on time.

 

DEW indicates that it is already administering installment payment agreements for delinquent employers paying at tax class twenty, the maximum rate. DEW states it can also administer installment payment agreements at reduced rates with existing staff and resources.

 

State Revenue

DEW currently administers installment payment plans for delinquent employers, but employers are forced to pay at the highest tax rate of 5.46 percent in tax class twenty. As a result, delinquent employers are penalized over the entire period their tax debt is outstanding, which may force them further into debt even if they are current on their payments. According to DEW, most employers are normally taxed at the significantly lower rates ranging from 0.06 percent in tax class one up to 1.576 percent in tax class nineteen. The bill is likely to incentivize employers with outstanding unemployment compensation tax debt to enter into installment payment agreements with payments set at their normally calculated tax rate. This, in turn, will prevent delinquent employers from incurring additional debt that would otherwise accrue if their payments stayed at the current highest rate of class twenty. Although the bill will induce lower tax payment amounts at the normal rates, DEW considers that such an incentive scheme will ultimately benefit collection efforts in the long term.

 

DEW indicates that the bill will not impact the State Unemployment Insurance Trust Fund solvency, but it may marginally lower revenue due to the avoidance of the class twenty tax rate penalty. However, DEW is unable to estimate the number of employers who may choose to enter into such a payment plan. In addition, because employers are assigned different tax rates (based on their computed benefit ratio), have different employee counts, have different amounts of taxable wages, and other varying financial characteristics, the estimation of the employer's cost per employee for the unemployment compensation tax is further complicated. As a result, the revenue impact of the bill on the State Unemployment Insurance Trust Fund and the Department of Employment and Workforce Special Administration Fund is undetermined.

 

 

Frank A. Rainwater, Executive Director

Revenue and Fiscal Affairs Office

 

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A bill

 

TO AMEND THE SOUTH CAROLINA CODE OF LAWS BY AMENDING SECTION 41-31-60, RELATING TO DELINQUENT UNEMPLOYMENT COMPENSATION TAX RATES, SO AS TO PERMIT EMPLOYERS WITH INSTALLMENT PAYMENT AGREEMENTS APPROVED BY THE DEPARTMENT OF EMPLOYMENT AND WORKFORCE TO PAY THE TAX AT A REDUCED RATE, AND TO PROVIDE FOR THE AUTOMATIC REVERSION OF THIS RATE UPON FAILURE TO TIMELY COMPLY WITH THE PAYMENT AGREEMENT.

 

Be it enacted by the General Assembly of the State of South Carolina:

 

SECTION 1.  Section 41-31-60(B) of the S.C. Code is amended to read:

 

    (B) No employer is permitted to pay his unemployment compensation tax at a reduced tax rate class for any quarter when a tax execution issued in accordance with Section 41-31-390 with respect to delinquent unemployment compensation tax for a previous quarter is unpaid and outstanding against the employer. If on the computation date upon which an employer's tax rate is computed as provided in Section 41-31-40 there is an outstanding tax execution, the tax class twenty rate must be assigned to the employer until the next computation date or until such time as all outstanding tax executions have been paid. An employer who has a department-approved installment payment agreement as of the computation date shall be permitted to pay its unemployment compensation tax at a reduced rate. However, any such employer's tax rate shall immediately revert to the tax class twenty rate if the employer fails to make any one of the succeeding deferred payments or fails to submit any succeeding wage report and payment in a timely manner as required by the department-approved installment payment agreement.

 

SECTION 2.  This act takes effect upon approval by the Governor.

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