House Bill 7033 has been signed by Governor Crist, substantially reducing state unemployment tax payments for 2010 and 2011 for Florida employers. The downside is that this legislation will cause greater borrowing from the federal government to pay for unemployment benefits, and there will eventually be costs associated with this borrowing. Following are the most significant changes:
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The taxable wage base is reduced from $8,500 to $7,000 for 2010 and 2011.
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Tax rates for experience-rated employers will be reduced, retroactive to January 1, 2010, because the “positive adjustment factor” is suspended for 2010 and 2011.
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Allows employers to make quarterly installment payments of UI taxes for 2010 and 2011 without interest or penalties, as long as payments are made according to schedule.
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Provides for payment of interest on federal advances through an employer assessment. The first assessment will be in 2011.
This legislation provides welcome relief for Florida employers, but to a great extent it moves costs out into the future instead of eliminating them. At some point the unemployment trust fund balance must be restored, and this happens by bringing in tax revenue that exceeds the amount of UI benefits being paid.
Florida employers can expect to pay higher federal unemployment taxes for 2012 because of a partial loss of credit due to an outstanding loan. H.B. 7033 increases the likelihood that the federal loan, currently in excess of $1 billion, will not be repaid in time to avoid a federal unemployment tax rate of 1.10% (as opposed to the normal 0.80% rate) for 2012. However, the 0.30% FUTA tax increase will be used to offset the loan balance. The elevated federal unemployment tax rate may continue and escalate after 2012 until such time as the loan is fully repaid.
We contacted the Florida Department of Revenue, and we were advised that the Department will start to generate amended 2010 unemployment tax rate notices tomorrow, and they expect to mail the amended tax rate notices by the end of March. The Department does not anticipate changing the due date for the first quarter tax returns and payments (April 30th).
Click here for the full text of H.B. 7033. As always, if there are any questions please do not hesitate to contact us.
Click here for a printable version.