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On February 5, 2023, the U.S. Department of Labor (DOL) announced its efforts to celebrate the 30th anniversary of the Family and Medical Leave Act (FMLA) with nationwide events that included interagency outreach and collaboration and the launch of a dedicated webpage with new and updated resources [DOL News Release, 23-3-NAT, 02/06/2023].
This program has certain requirements for eligibility that are not without issue when it comes to a possible loophole regarding the number of employees at a worksite and the distance between worksite locations. Several legislators acknowledged the FMLA's milestone with calls to expand the program with provisions that would include paid leave.
Unpaid time off. The Family and Medical Leave Act (FMLA) is a federal law enacted in 1993 that provides eligible employees of covered employers (50 or more employees) with unpaid, job-protected leave for specified family and medical reasons. Eligible employees may take up to 12 workweeks of leave in a 12-month period for certain reasons.
Qualifying. To qualify for FMLA, a worker must: (1) have worked for their employer for at least one year; (2) have worked at least 1,250 hours for their employer in the past year; and (3) work for an employer that has at least 50 employees within a 75-mile radius.
Employer requirements. In addition to providing eligible employees an entitlement to leave, the FMLA requires that employers maintain employees’ health benefits during leave and restore employees to their same or an equivalent job after leave. The law sets requirements for notice, by both the employee and the employer, and provides employers with the right to require certification of the need for FMLA leave in certain circumstances.
The law protects employees from interference and retaliation for exercising or attempting to exercise their FMLA rights. The law also includes certain employer recordkeeping requirements.
Leave loopholes. Under current law, all worksites with at least 50 employees within a 75-mile radius must comply with FMLA. Any worksite that does not meet those standards is exempt. This means it is possible for an employer with several worksites and hundreds or thousands of employees to be exempt from the FMLA requirements if those worksites are outside of the 75-mile radius and each worksite employs fewer than 50 employees.
Under 29 C.F.R. §825.111, a worksite for FMLA purposes can refer to either a single location or a group of contiguous locations. The offices of each employer are considered separate sites of employment for purposes of FMLA. An employee's worksite under FMLA will ordinarily be the site the employee reports to or, if none, from which the employee's work is assigned.
However, this potential loophole in FMLA coverage would not apply to remote workers. As 29 C.F.R. §825.111 explains, "an employee's personal residence is not a worksite in the case of employees...who work at home, as under the concept of flexiplace or telecommuting." So, when many more employees were working remotely during the COVID-19 pandemic, their eligibility was not affected for coverage under the FMLA. The DOL recently released a Field Assistance Bulletin further clarifying how the FMLA is to be applied to remote workers.
Legislators talk expansion. On February 1, 2023, several Democratic legislators from the House of Representatives and Senate held a press conference to announce a legislative package to establish a paid family and medical leave program and expand and modernize the 30-year old FMLA.
FAMILY Act. Congresswoman DeLauro (D-CT) and Senator Kirsten Gillibrand (D-NY) are the authors of the FAMILY Act, which would establish the nation's first national paid family and medical leave program. The legislation would require paid leave for both full-time and part-time workers (and self-employed).
Job Protection Act. Congresswoman Lauren Underwood (D-IL) and Tina Smith (D-MN) are the sponsors of the Job Protection Act, which would close gaps in FMLA coverage and expand protections to workers for smaller employers. It would also protect part-time workers and ensure those changing jobs or returning to the workforce would be able to access leave.
This legislation specifically addresses the leave loophole and would eliminate the requirement that a workplace have 50 or more employees within a 75-mile radius. According to a fact sheet on the bill, this excludes an estimated 35 million workers
The American Institute of Certified Public Accountants (AICPA) has outlined a number of recommendations for guidance on prevailing wage and apprenticeship requirements for claiming increased clean energy credits in a letter dated January 25, 2023 addressed to Holly Porter, Associate Chief Counsel at the IRS.
Background. On August 16, 2022, President Biden signed the Inflation Reduction Act (P.L. 117-169), that included provisions for increased clean energy tax credits or deduction amounts if certain prevailing wage and apprenticeship requirements are met.
Specifically, the prevailing wage and apprenticeship requirements pertain to: (1) Alternative Fuel Refueling Property Credit (Code Sec. 30C);P(2) Production Tax Credit (Code Sec. 45 and Code Sec. 45Y); (3) Credit for Carbon Dioxide Sequestration (Code Sec. 45Q); (4) Credit for Production of Clean Hydrogen (Code Sec. 45V); (5)Clean Fuel Production Credit (Code Sec. 45Z); (6) Investment Tax Credit (Code Sec. 48 and Code Sec. 48E); (7) Advanced Energy Project Credit (Code Sec. 48C); and (9) Energy Efficient Commercial Buildings Deduction (Code Sec. 179D).
The prevailing wage requirements pertain to: (1) New Energy Efficient Home Credit (Code Sec. 45L) and (2) Zero-Emission Nuclear Power Production Credit (Code Sec. 45U).
AICPA Recommendations. The AICPA expressed concern that individuals, such as real estate developers, bankers and tax professionals, may not be familiar with prevailing wage standards and the apprenticeship requirements to make determinations for claiming the increased tax credits. The AICPA pointed out that Notice 2022-61 does not provide information regarding locating and identifying the correct prevailing wage determination information. The AICPA made the following suggestions to provide clarification for claiming the increased tax credits:
On February 9, 2023, the U.S. Department of Labor's Wage and Hour Division (WHD) released Field Assistance Bulletin (FAB) No. 2023-1, "Telework Under the Fair Labor Standards Act and Family and Medical Leave Act" and Opinion Letter FMLA 2023-1-A regarding reduced schedules under the FMLA.
FAB No. 2023-1. A Field Assistance Bulletin (FAB) provides guidance to WHD investigators and staff on enforcement positions and policies. Payroll practitioners may find the information in an FAB helpful in terms of understanding employer responsibilities as such guidance determines how the WHD would approach an investigation. The FAB explains that:
Opinion Letter FMLA 2023-1-A. In an Opinion Letter, the WHD clarified that an employee with a chronic serious health condition may use FMLA leave to work a reduced schedule for an indefinite period of time until FMLA leave entitlement is exhausted. In the scenario, the employee requested to work an eight-hour day in a position that normally requires over 8 hours per day. The WHD explained that the FMLA entitles employees to take intermittent leave or work a reduced schedule under 29 USC 2612(b). The WHD also clarified that the FMLA provides up to 12 workweeks of leave per year. The WHD cautioned this cannot be broken down as 480 hours (12 X 40 hours per week) because in this case, the employee is regularly scheduled to work over 8 hours per day. Therefore, 12 workweeks would be based on the usual total hours of work and not assumed to be 40 hours per week.
On February 7, 2023, President Biden delivered his State of the Union address. The speech urged bipartisan cooperation and touched upon a few issues of interest to payroll professionals [The White House, Remarks of President Joe Biden – State of the Union Address as Prepared for Delivery, 2/7/2023].
No Income tax increases. The President stated that there were no plans on raising income tax rates for income under $400,000 per year.
Billionaire Minimum Tax. Biden reiterated his commitment to a proposal for the Billionaire Minimum Tax. President Biden first introduced the concept of the Billionaire Minimum Tax in his 2023 budget proposal, released in March 2022. The proposal would impose a 20% minimum tax on incomes that exceed $100 million. The 2023 budget proposal noted that the tax would apply only to the wealthiest 0.01% of households. A bill was proposed in the prior legislative session (HR8558) but the bill has not yet been reintroduced in the current legislative session. With a Republican majority in the House, it is unlikely such a measure would be passed.
Paid leave. In his address, Biden gave a shout-out to the needs of working parents and the need for paid sick days and paid family and medical leave. However, unlike his 2022 address, the President did not reference any proposed legislation. There was a recent announcement, signally intent to reintroduce the FAMILY Act, a bill that would establish a national paid FMLA program. HR856 and S274 propose paid family and medical leave for federal employees. The House bill has bipartisan support. The bills would provide up to 12 weeks of paid family and medical leave to federal workers. Currently, paid parental leave is available to federal employees, however, family and medical leave is unpaid. There are two bills that would expand the FMLA to include part-time workers (the Job Protection Act) and certain educational staff (ESP and School Support Staff Family Leave Act). However, these bills do not call for paid family and medical leave.
Non-competes. A topic that has been hot in state legislation, though tangentially related to payroll, received a call out by Biden. The President discussed non-compete agreements and said "For too long, workers have been getting stiffed. Not anymore. We’re beginning to restore the dignity of work...We’re banning those agreements so companies have to compete for workers and pay them what they’re worth." A non-compete clause is a contractual term between an employer and a worker that typically blocks the worker from working for a competing employer, or starting a competing business, within a certain geographic area and period of time after the worker's employment ends. The Federal Trade Commission has a proposed regulation (88 FR 3482), published in the Federal Register on January 19, that would provide that non-compete agreements are a form of unfair competition. Unfair competition is regulated by the FTC and thereby the FTC contends that non-competes violate FTC provisions. The FTC noted that 30 million American workers are bound by non-compete agreements. The public comment period on the proposed rule closes on March 20, 2023.
Unions. The President also put a spotlight on the Protecting the Right to Organize (PRO) Act. Introduced in the prior legislative session (S420), the PRO Act would expand employee rights to organize and collectively bargain in the workplace. Additionally, it would specify that wage deductions for union fees are permissible for all employees who are represented by a union. This would effectively preempt state Right to Work laws. Biden's mention in the speech may signal a reintroduction of the bill in the current legislative session.
The U.S. District Court for the Northern District of Ohio, Eastern Division, has dismissed a lawsuit by agreeing with the defendant that the Internal Revenue Code provides an employer with immunity from lawsuits for damages by employees claiming wrongful withholding [Harris v. Donley's, Inc., DC OH, 131 AFTR 2d ¶2023-356].
Employee wrongly claimed exempt from withholding.The plaintiff in the case was employed by the defendant prior to October 27, 2016. As an employee of the defendant, he was required to complete a Form W-4 (Employee's Withholding Certificate). The employee claimed he was exempt from federal income tax withholding because he is neither a business nor the owner of commercial property and does not believe he meets the Internal Revenue Code's definition of an employee under Code Sec. 3401(c).
The IRS orders employers to withhold at the highest rate. The employer submitted the Form W-4 to the IRS and the Service determined he was not entitled to the exemption and selected the employee for its Withholding Compliance Program, which required the employer to withhold taxes at the highest withholding rate (single with no allowances). Both the employer and employee were notified of the decision and ordered the employer to begin this withholding on the first pay period after December 26, 2016.
Employee claims employer should have ignored IRS notice.The employee claims that the employer should not have withheld taxes from his wages, despite the IRS order, and sought damages from the employer for mental harm and stress caused by the withholding of taxes from his wages.
Court finds plaintiff failed to meet pleading requirements. The Court explains that to meet federal notice pleading requirements, the plaintiff must provide the defendant fair notice of what the plaintiff's legal claims are and the factual grounds upon which they rest. The plaintiff provided some limited factual information and expressed his disagreement with the IRS's interpretation of the Internal Revenue Code.
Plaintiff provided no evidence for the claim. However, he also stated that his employer should have ignored the IRS order to withhold taxes from his wages and, therefore, is liable to him for emotional damages. The Court says that the plaintiff does not point to a single statute that allows him to sue his employer for withholding taxes, and does not specify any other cause of action.
IRC protects against such a lawsuit. Furthermore, the Internal Revenue Code prohibits a suit of this kind by an employee against the employer for withholding taxes from an employee's wages. Code Sec. 3402 requires employers to withhold federal income taxes and states that the IRS may notify the employer that an employee is not exempt from withholding or is not entitled to the number of allowances the employee requested.
Employers could be liable for failing to follow IRS orders. Code Sec. 3403 makes the employer liable to the IRS for failing to follow the IRS order concerning the denial of the employee's requested exemption or allowances. The latter also immunizes the employer from liability to the employee for following the IRS's withholding instructions.
Court finds employees can't sue employers for such actions. The Court concluded that in accordance with this statute, employees have no cause of action against employers to recover wages withheld and paid to the IRS to satisfy income tax liability.
Several pieces of proposed legislation introduced in the 118th Congress' first session could significantly alter the American payroll landscape. Bills in committees in the House of Representatives and Senate aim to: (1) provide worker protections for certain employees; (2) expand the FMLA to include certain school employees; (3) establish a wage and hour self-audit program on a permanent basis; (4) provide paid parental leave through the use of Social Security funds; (5) require teleworking IRS employees to return to the office to address backlog concerns; (6) expand the use of HSAs and increase the contribution limit; (7) expand the tax credit for tipped workers to include the beauty service industry; (8) eliminate the requirement of nondiscretionary bonuses in the calculation of the regular rate for overtime purposes; (9) codify the core two-factor approach for worker classification; (10) require paid rest breaks for construction workers; (11) expand the definition of "family" for FMLA purposes; (12) expand access to telehealth services as a benefit of employer-sponsored health coverage; (13) repeal prevailing wage requirements under the Davis-Bacon Act; (14) raise the threshold for contracts subject to the Davis-Bacon Act; and (15) raise the minimum wage to $15 per hour.
Senate Bills in Committee:
S74, the Providing for Life Act of 2023, introduced by Sen. Marco Rubio (R-FL) includes a provision that would amend the Social Security Act to provide parental leave benefits for up to three months. The bill requires a worker who has obtained paid parental leave benefits to repay the full cost of the benefit, to be deducted from Social Security benefits when the individual is entitled to such benefits. The bill also would make the adoption tax credit fully refundable. Finally, the bill proposes to expand the Child Tax Credit which includes eliminating the SALT deduction to help pay for the expanded credit. Also introduced by Rubio, S35, the New Parents Act of 2023, is a standalone bill that contains only the paid parental leave benefits portion of the aforementioned Act and would permit benefits to be claimed for the birth or adoption of a child.
S122, the Ensuring Workers Get PAID Act of 2023, seeks to establish the Payroll Audit Independent Determination (PAID) program in the Department of Labor. The DOL ran a nationwide pilot PAID program that ran from 2018 to January 29, 2021. According to a report submitted in September 2019, the pilot program recovered over $4 million in back wages to 7,429 workers. The program allowed employers to self-report federal minimum wage and overtime violations to avoid litigation, penalties or damages, and prohibited affected workers from taking any private action on the identified violations. The proposed legislation would establish the PAID program permanently.
S155, the Require Employees To Uniformly Return Now (RETURN) Act, would require teleworking IRS employees to return to the office. Sen. John Kennedy (R-LA) introduced the legislation in the hopes that the return to offices would remedy the IRS's growing backlog of tax returns. The bill would maintain telework options that existed for select circumstances prior to the pandemic and allow a five-day grace period after enactment to allow employees to transition back to the office.
S226, the ESP and School Support Staff Family Leave Act, a reintroduced bipartisan bill sponsored by Sen. Tammy Duckworth (D-IL), aims to establish FMLA eligibility requirements for education support professionals. Education support professionals would include paraeducators (classroom aides), administrative staff, maintenance workers, cafeteria workers, transportation services workers, security staff, and nursing staff. Due to the school year, Duckworth noted that these employees fail to meet the 1,250 hour requirement for coverage under the FMLA. The legislation would carve out an exception where staff that work more than 60% of the total monthly hours expected would qualify for unpaid FMLA leave. The bill was originally introduced in the prior legislative session as S2821.
S270, the Protecting America’s Meatpacking Workers Act, introduced by Sen. Cory A. Booker (D-NJ) on February 2, 2023, is part of a package of bills for food system reform. The legislation includes protections for meatpacking workers that would prohibit an employer with 15 or more employees to establish a no-fault attendance policy unless certain conditions are met. A no-fault attendance policy is a policy under which employees are penalized for absences or tardiness through a system of demerits or deductions from a time bank with progressive disciplinary action, which may include failure to receive a promotion, loss of pay, or termination. To institute such a policy under the proposed legislation, the employer must provide a copy of the no-fault attendance policy in writing to all employees among other requirements. The bill is mirrored in HR798.
House Bills in Committee:
HR45, the Small Business Tax Fairness and Compliance Simplification Act, a bipartisan bill reintroduced this legislative session, proposes to expand the tax credit for a portion of the employer-paid Social Security taxes for employee cash tips, currently available to the food and beverage industry, to include beauty service establishments. Beauty service establishments would include barbering, hair care, nail care, esthetics, and body and spa treatments. The bill would also provide safe harbor for employer tip reporting for beauty service providers and an exemption from IRS tip examinations for employers who meet certain requirements for educational programs, reporting procedures, compliance with tax law, and recordkeeping. This bill was also introduced in the Senate as S45 on January 24, 2023.
HR107, the Freedom for Families Act, introduced on January 9, 2023, seeks to amend current provisions governing health savings accounts (HSAs). The bill would: (1) allow individuals to use HSA distributions for qualified medical expenses for periods of qualified caregiving under the FMLA; (2) eliminate the need to be enrolled in a high deductible health plan in order to participate in an HSA; and (3) increase the HSA contribution limit to $9,000 for individuals and $18,000 for married filing jointly. Currently, for 2023, the maximum aggregate annual contribution that can be made to an HSA is $3,850 for self-only coverage and $7,750 for family coverage. This bill has been referred to the House Committee on Ways and Means.
HR144, the Adjusting Davis-Bacon for Inflation Act, seeks to raise the threshold dollar amount of contracts subject to prevailing wage requirements from $2,000 to $50,000.
H505, the Living Wage Now Act, reintroduced in the current legislative session, seeks to increase the current federal minimum wage rate of $7.25 per hour to $15 per hour. This bill was HR325 in the prior legislative session. The bill does not use an incremental approach and proposes the increase to take effect on the first day of the third month that begins after enactment.
HR720, introduced by Rep. Bob Good (R-VA), currently with 9 co-sponsors, seeks to repeal wage rate requirements under the Davis-Bacon Act. Currently, under the Davis-Bacon Act, every federal construction contractor with a contract in excess of $2,000 is required to provide prevailing wage rates based on similar projects in the geographical area. A similar bill was introduced in the prior legislative session as HR2218, the Davis-Bacon Repeal Act (mirrored by S805).
HR741, the Employee Bonus Protection, has been reintroduced in the current legislative session. The proposed legislation would amend the FLSA to no longer require bonuses be included in the regular rate calculation for overtime purposes. Bonuses that would be excluded under the bill would include bonuses of a non discretionary nature for "meeting or exceeding the productivity, quality, efficiency, or sales goals as specified in a gainsharing plan, incentive bonus plan, commission plan, or performance contingent bonus plan." Rep. Ken Calvert (R-CA), who introduced the bill on February 2, 2023, said that current requirements "[pose] an unnecessary burden on businesses and employers, large and small alike, who are required to recalculate each employee's rate of pay depending on different bonuses earned every month. In fact, many businesses are forced to eliminate these incentives entirely because they cannot afford to hire an accountant or designate an employee to determine these changing rates of pay, disincentivizing employees to innovate and produce results for their employers, and ultimately their customers." A copy of the bill is not currently available, however, HR517 from the prior legislative session is available.
HR781, the Guaranteeing Independent Growth (GIG) Act, introduced February 2, 2023, seeks to amend the FLSA to clarify independent contractor status, specifically to address gig workers. The bill would codify the current DOL regulations on worker classification that utilize a two-core factor approach. These two core factors are: (1) the nature and degree of the worker’s control over the work, and (2) the worker’s opportunity for profit or loss based on initiative and/or investment. The DOL recently proposed regulations that would rescind these regulations and reintroduce the multi-factor approach and totality of the circumstances examination as historically favored by the courts. Opponents of the bill have argued that the return to the multi-factor approach would provide uncertainty for employers in making a worker status determination. The FLSA currently does not define the term "independent contractor." Rep. Drew A. Ferguson IV ( R-GA), who introduced the bill, noted that if the DOL's proposed regulations are finalized business costs would increase. Ferguson stated the legislation is supported by the National Federation of Independent Business, U.S. Chamber of Commerce, The Associated General Contractors of America, and the American Trucking Association. A copy of the bill is not currently available.
HR785, reintroduced on February 2, 2023 by Rep. Sylvia R. Garcia (D-TX), proposes to amend FLSA provisions to require paid rest breaks for certain construction employees. The bill was originally introduced in the prior legislative session as HR 8444 as the "Construction Injury Prevention Act" (CIPA). The bill would require certain construction employers to provide at least one 15-minute paid break for every four hours worked.
HR789, the Caring All Families Act, currently referred to the Committee on Education and the Workforce, the Committees on Oversight and Accountability, and House Administration, seeks to amend the Family and Medical Leave Act (FMLA) by updating the definition of "family" to include a "broader range of caregiving relationships," said Congresswoman Jahana Hayes (D-CT) in a recent press release. Under the bill, family would include "a domestic partner, parent-in-law, aunt, uncle, sibling, adult child, grandparent, grandchild, son- or daughter-in-law, and other significant relationship," and would permit parents and other family caregivers to take time off to attend a medical appointment or school function. The legislation is mirrored in S242.
HR824, the Telehealth Benefit Expansion for Workers Act, a bipartisan bill, proposes to expand access to telehealth services by classifying these services as an expected benefit for employer-sponsored health coverage. The bill has been referred to the Committee on Energy and Commerce, and Committees on Education and the Workforce, and Ways and Means.
The U.S. Department of Labor is already announcing a list of potential Federal Unemployment Tax Act (FUTA) tax credit reduction states for the 2023 tax year that includes four states and the U.S. Virgin Islands.
FUTA tax and credit. Employers pay FUTA tax on the first $7,000 in wages for each employee, each year. The FUTA tax rate is 6.0%. However, most employers benefit from a 5.4% FUTA credit reduction. As such, employers pay FUTA tax at a rate of 0.6% on the first $7,000 in wages per employee, each year.
Credit reduction. FUTA provides that employers in states that have an outstanding balance of advances under Title XII of the Social Security Act at the beginning of January 1 of two or more consecutive years are subject to a reduction in credits otherwise available against the FUTA tax, if all advances are not repaid before November 10 of the taxable year.
Credit reductions can add up. The first FUTA credit reduction is 0.3%. Another 0.3% is reduced from the 5.4% credit each year thereafter until the federal unemployment account loan is repaid. Other additional FUTA taxes may apply when the loan remains outstanding for three and five years (exceptions may apply and waivers may be granted).
Reporting FUTA credit reduction. IRS Form 940 (Employer's Annual Federal Unemployment (FUTA) Tax Return) and Schedule A (Form 940, Multi-State Employer and Credit Reduction Information) for tax year 2022 were due by January 31, 2023. Employers use Schedule A if they are located in a FUTA credit reduction state.
2022 FUTA credit reductions. For tax year 2022, employers in California, Connecticut, Illinois, New York, and the U.S. Virgin Islands were FUTA credit reduction states. Employers in the four states had their FUTA credit reduced by 0.3%. Employers in the Virgin Islands had their FUTA credit reduced by 3.6% (the territory received credit reduction add-on relief to avoid a greater increase).
Potential 2023 FUTA credit reductions. On January 18, 2023, less than two weeks before the tax year 2022 FUTA tax forms were due, the DOL announced a list of potential FUTA credit reduction states for the 2023 tax year. The list is the same as the tax year 2022 final list: California, Connecticut, Illinois, New York, and the Virgin Islands. These jurisdictions have until November 10, 2023 to repay their loans or employers will again pay more in FUTA taxes.
|
State (1) |
2023 Potential Credit Reduction Due to Outstanding Advance (2) |
Preliminary Estimate 2023 Potential 2.7 Add-On (3) |
Preliminary Estimate 2023 Estimated BCR Add-On (4) |
Preliminary Estimate 2023 Potential Total Credit Reduction (5) |
|
California |
0.6% |
0.0% |
N/A |
0.6% |
|
Connecticut |
0.6% |
0.0% |
N/A |
0.6% |
|
Illinois |
0.6% |
0.0% |
N/A |
0.6% |
|
New York |
0.6% |
0.0% |
N/A |
0.6% |
|
Virgin Islands |
3.9% |
0.0% |
0.9% |
4.8% |
According to a comparison of state unemployment insurance laws by the U.S. Department of Labor's (DOL) Employment and Training Administration (ETA), a little more than half of U.S. states provide for employers to obtain lower unemployment rates by making voluntary contributions.
In reserve-ratio states, a voluntary contribution increases the balance in the employer’s reserve, resulting in a lower rate being assigned that will save more than the amount of the voluntary contribution. In benefit-ratio states, an employer pays voluntary contributions to cancel benefit charges to its account, thereby reducing its benefit-ratio.
Federal law requires that voluntary contributions be made earlier than 120 days after the beginning of the rate year, though some states establish earlier due dates. Since federal law restricts refunds to only erroneous payments, if a voluntary contribution does not lead to a reduced rate or if an employer later changes their mind, no refund can be made.
The following is a chart of the states that permit voluntary unemployment contributions and the due dates for which the contributions must be received:
|
State |
Due Date |
Additional Information |
|
Arizona |
On or before February 28. |
No additional information. |
|
Arkansas |
On or before March 31. |
Not permitted if rate increased because of knowingly violating/attempting to violate state law regarding transfers of experience and assignment of rates |
|
California |
By the last working day in March in the calendar to which reduced rate would apply. |
Cannot reduce by more than three rates; employer must not have negative account balance or have any amounts owed; not allowed for any year in which schedule E or F or emergency solvency surcharge in effect. |
|
Colorado |
Before March 15. |
No additional information. |
|
Georgia |
Within 30 days following the date upon which a notice is mailed. |
No additional information. |
|
Indiana |
Within 30 days of receipt of rate notice. |
No additional information. |
|
Kansas |
Within 30 days of mailing of rate notice. |
No rate may be reduced by more than five rate groups for positive balance employers; negative balance employers may have their rates reduced to the highest five rates for positive balance employers. |
|
Kentucky |
Within 20 days following of rate notice. |
No additional information. |
|
Louisiana |
Within 30 days of mailing of notice of benefits charged to employer’s experience rating account. |
May not be permitted if solvency tax, advance interest tax, or special assessment to finance bonds used to prepay federal loan is assessed. |
|
Maine |
Within 30 days of mailing of rate notice; can be extended for 10 days for good cause. |
No additional information. |
|
Massachusetts |
No later than 30 days after date of issuance of notice of employer’s contribution rate. |
Employer must be assigned contribution rate, file all required reports, and pay all contributions, interest, and penalties due. |
|
Michigan |
Within 30 days of mailing of notice of adjusted contribution rate. |
No additional information. |
|
Minnesota |
Within 120 days of January 1. |
Contribute up to amount of benefits charged to account during period ending June 30 of preceding year plus 25% surcharge; not refundable unless request made in writing within 30 days of mailing of notice of new contribution rate; must not be delinquent in any amount |
|
Missouri |
On or before following January 15. |
Employer must be eligible for experience rate and must include signed written statement identifying it as voluntary payment |
|
Nebraska |
Before January 10. |
Limited to amount likely to reduce one rate category. |
|
New Jersey |
Within 30 days of mailing of employer’s rate notice; may be extended 60 days for good cause; if contribution not made within extended period, employer becomes subject to a penalty of 5% or $5.00, whichever is greater, up to $50.00. |
If employer transfers all/part of business to a successor in interest and both parties at time of transfer are under common ownership or control, neither may make voluntary contributions in year of transfer and the following year. |
|
New Mexico |
On or before March 1 |
No additional information. |
|
New York |
On or before April 1. |
No additional information. |
|
North Carolina |
Within 30 days of mailing of rate notice. |
No additional information. |
|
North Dakota |
Within 4 months of beginning of year. |
No additional information. |
|
Ohio |
By December 31 following computation date. |
No additional information. |
|
Pennsylvania |
Within 30 days of mailing of rate notice; can extend for good cause. |
No additional information. |
|
Rhode Island |
Within 30 days of mailing rate notice or prior to 120 days after the start of the calendar year, whichever is earlier. |
No additional information. |
|
South Dakota |
Before February 1 |
No additional information. |
|
Texas |
No later than 60 days after mailing date of rate notice; may extend an additional 15 days; if payment insufficient to cause decrease in employer’s rate, Commission will notify employer and grant an extension, not to exceed total of 75 days. |
No additional information. |
|
Washington |
By February 15. |
May contribute part or all of benefit charges from most recent 2 years ending June 30; only eligible if contribution rate increased at least 12 rate classes from prior tax rate year. |
|
West Virginia |
Within 30 days of mailing of rate notice. |
No additional information. |
|
Wisconsin |
By November 30. |
Can only lower one rate unless catastrophic event; not available for five years for certain employers whose benefit charges exceed their contributions. |
An investigation by the Department of Labor's (DOL) Wage and Hour Division (WHD) resulted in the recovery of $399K in unpaid overtime for 49 workers at the Supermercado Carrera specialty grocery store.
Overtime. Under the Fair Labor Standards Act (FLSA), employers are required to pay employees time and one-half for hours worked in excess of 40 hours per workweek unless otherwise exempt.
Investigation findings. The WHD investigation revealed that employees were not paid the required overtime, as it paid workers their normal rate of pay for overtime hours in violation of the Fair Labor Standards Act. Also, the business misclassified workers as independent contractors, thereby denying these workers overtime pay. Supermercado Carrera was also fined $734 for permitting a minor-aged employee to work beyond permitted hours.
What the WHD said. WHD Division District Director Tom Gauza in announcing the decision remarked that: "The nearly $400,000 in back wages and damages our investigation recovered will make a significant difference in the lives of 49 workers and their families. Typically, small grocers employ low-wage and vulnerable workers likely unaware of their basic rights to the federal minimum wage and overtime pay. Workers in the U.S. have the right to be paid their full earned wages" [Wage and Hour Division, News Release No. 23-101-CHI, 1/30/2023].
The IRS has announced a proposal to establish the Service Industry Tip Compliance Agreement (SITCA) program, a voluntary tip reporting program for employers in the service industry (gaming industry employers are excluded). The SITCA program is intended to replace the Tip Reporting Alternative Commitment (TRAC) program and the Tip Rate Determination Agreement (TRDA) program. The proposal is included in Internal Revenue Bulletin No. 2023-6 (02/06/2023; starting on page 454) [Notice 2023-13].
Background. Since 1995, the Tip Reporting Determination/Education Program (TRD/EP) has offered employers in the food and beverage industry the opportunity to enter into TRAC agreements. In general, TRAC agreements require employers to establish an educational program for tipped employees and tip reporting procedures for cash and charged tips.
How it worked. Under the TRDA program, the IRS and the employer work together to arrive at a tip rate for the employer’s various occupational categories and employees enter into Tipped Employee Participation Agreements (TEPAs) with their employers to report tips at the agreed upon tip rates.
Employer protection. The TRAC, TRDA and EmTRAC (only for employers in the food and beverage industry that have employees who receive both cash and charged tips) programs all provided a commitment that the IRS would provide protection to the employer from Code Sec. 3121(q) liability by not initiating any tip examinations of the employer for periods in which the agreements were in effect.
New program to replace the older ones. The proposed revenue procedure describes the SITCA program, which is a new voluntary tip reporting program being proposed by the National Tip Reporting Compliance Program (NTRCP) to replace the TRAC, TRDA, and EmTRAC programs.
Available to covered establishments. Under the proposed revenue procedure, the SITCA program is available to employers in all service industries (excluding gaming industry employers) with at least one business location, called a “covered establishment,” operating under the employer identification number (EIN) of the employer.
Incorporation of more modern systems. The SITCA program is designed to take advantage of advancements in POS (point of sales) systems and time and attendance systems, as well as the use of electronic payment settlement methods to improve tip reporting compliance and to decrease taxpayer and IRS administrative burden.
Annual proof of covered establishment(s). After acceptance into the SITCA program, an employer must annually establish that each of its participating covered establishments satisfies a minimum reported tips requirement with respect to its tipped employees in order for that covered establishment to continue with the program into the next year.
Requirements for participation. An eligible employer ("service industry employer") must meet the following requirements to participate: (1) is in a service industry where employees perform services for customers and those services generate sales that are subject to tipping by customers, (2) has at least one covered establishment, and (3) is compliant with federal, state, and local tax laws for the three completed calendar years immediately preceding the date the application is filed (the preceding period), plus the calendar quarters following the end of the preceding period through any calendar quarters during which the service industry employer’s application is pending for some or all of the quarter.
Modern systems requirement. A covered establishment must have tipped employees who utilize a technology-based time and attendance system to report tips under Code Sec. 6053(a). Each covered establishment must also utilize a POS system to record all sales subject to tipping, and that POS System must accept the same forms of electronic payment for tips as it does for sales.
Similar program protection. Similar to the TRAC, TRDA, and EmTRAC programs, the proposed SITCA program will provide accepted employers with protection from Code Sec. 3121(q) liability with respect to their covered establishments that remain in compliance with the program unless the liability is based on: (1) tips received by a tipped employee where the asserted liability is based upon the final results of an audit or agreement of the tipped employee or (2) the reporting of additional tip income by a tipped employee.
The protection from section 3121(q) liability applies only to service industry employers with covered establishments for the periods for which they have been approved to participate in the SITCA program.
Increased tip compliance. In response to concerns from prior Treasury Inspector General for Tax Administration (TIGTA) reports on the topic, the proposed SITCA program has several features designed to result in increased tip reporting compliance. The proposed SITCA program streamlines both compliance with and enforcement of tip reporting requirements by eliminating employee participation and the corresponding employee tip income audit protection and providing for automatic removal of a covered establishment that fails to satisfy SITCA’s minimum reported tip requirement in its annual report.
Transition period. The proposed revenue procedure provides that for employers with existing agreements in the TRAC, TRDA and EmTRAC programs, there will be a transition period during which the existing agreements will remain in effect.
Request for comments.The IRS is seeking comments on all aspects of the proposed revenue procedure, and specifically requests comments on the following issues:
Comments must be received by May 7, 2023 and may be submitted in one of two ways
The IRS requires employers to withhold employment taxes from their employees' wages. These taxes include federal income tax. This tax is deposited and related tax returns are filed so that there is an accurate accounting of this tax. Employees are also involved in this process as they indicate to employers certain information that helps determine how much federal income tax to withhold.
Both employers and employees can benefit from reviewing certain information to make sure the correct amount of tax is being withheld. Under or overwithholding can result in the need for filing corrected tax returns, among other issues.
The IRS recently issued a fact sheet on how to get income tax withholding correct. The following discusses some of the more important parts of the federal tax withholding process for both employers and employees [FS-2023-01, January 2023].
Publication 15-T. The IRS issues federal withholding tax tables annually in Publication 15-T (Federal Income Tax Withholding Methods). Employers use this publication to determine the amount of federal income tax to withhold from their employees' wages. Beginning in 2020, the IRS significantly redesigned Form W-4 (Employee's Withholding Certificate), with the biggest change being the elimination of withholding allowances.
To accommodate employers and employees, the IRS added Publication 15-T, which contains withholding tax tables and methods that help determine federal income tax withholding for employees with a Form W-4 from before 2020 and employees with a Form W-4 beginning with 2020 (and thereafter).
TCJA changes expire at the end of 2025. The notable changes to Form W-4 and the addition of Publication 15-T were due to provisions in the Tax Cuts and Jobs Act (TCJA; P.L. 115–97) of 2017. The IRS needed to implement the changes by 2020. However, these changes have an expiration date of December 31, 2025. Just as employers and employees alike needed to make considerations with the enactment of the TCJA, both may also need to be prepared for more changes after the end of 2025 should these provisions be allowed to expire.
Form W-4. According to the IRS, an employer withholds taxes based on the amount of income the individual earned and the information provided on Form W-4. Employees complete a Form W-4 so that their employer can withhold the correct federal income tax from their wages.
The IRS advises employees to consider completing a new Form W-4 each year and when an employee's personal or financial situation changes. Form W-4 currently has five sections for an employee to complete (though not all five sections must be completed by every employee).
Exemption from federal income tax withholding. An employee may claim exempt from withholding for 2023 if the worker meets both of the following conditions: (1) no federal income tax liability in 2022 and (2) no expected federal income tax liability in 2023. Those employees claiming exempt from withholding must complete a new Form W-4 by February 15 of the following year to continue the exemption.
If the employee does not do this, the employer is to withhold federal income tax as if the employee is single or married filing separately with no other entries in steps 2, 3, and 4 (Topic No. 753 Form W-4 – Employee's Withholding Certificate, last update 02/01/23).
Changes to Form W-4. Employees may want to change the entries on Form W-4 for any number of reasons when their personal or financial situation changes. If an employer receives a revised Form W-4 from an employee, it must put the updated form into effect no later than the start of the first payroll period ending on or after the 30th day from the date the employer received the revised Form W-4.
Don't use an invalid Form W-4 to determine withholding. Any unauthorized change or addition to Form W-4 makes it invalid. This includes taking out any language by which the employee certifies that the form is correct, material defacing of the form, or any writing on the form other than the entries requested. Employers should not use an invalid Form W-4 to determine federal income tax withholding.
IRS recommends employees check their withholding. The IRS recommends that employees check their withholding, especially for anyone whose refund is larger or smaller than expected. For those who owe, increasing tax withholding in the current year is the best way to avoid having to pay taxes when filing a tax return the following year. In addition, taxpayers should always check their withholding when a major life event occurs or when their income changes.
The IRS provides a checklist of when employees should check their withholding, which includes some of the following circumstances:
IRS Tax Withholding Estimator. The IRS offers a Tax Withholding Estimator for employees to check their withholding. Recently, the Service issued a reminder to taxpayers who earn wages to utilize this tool to adjust their 2023 withholding.
Proactive approach for withholding. When it comes to federal income tax withholding, both employers and employees benefit from a proactive approach to ensure the tax withheld is accurate. Employers should make sure the withholding methods they use match the year of the Forms W-4 on file for their employees. Employees should make sure they provide their employer with an accurate and up to date Form W-4 so that the federal income tax withholding is as accurate as possible. These and other steps can help to avoid needing to file corrected tax returns down the road.
The U.S. Department of Labor's Wage and Hour Division (WHD) has updated and renamed Fact Sheet #73: FLSA Protections for Employees to Pump Breast Milk at Work. Fact Sheet #73 was formerly entitled Break Time for Nursing Mothers under the FLSA and was last revised in April 2018.
Background. A provision in the Patient Protection and Affordability Act (Health Care Act, P.L. 111-148) amended the Fair Labor Standards Act (FLSA) to require covered employers to provide an employee with reasonable break time to express breast milk for her nursing child for one year after the child's birth.
On December 29, 2022, President Biden signed the Consolidated Appropriations Act of 2023 (CAA 2023) that contained the Providing Urgent Maternal Protections for Nursing Mothers Act (PUMP Act). The PUMP Act expanded FLSA provisions to cover exempt workers as well as cover categories of employees currently exempted from protections.
Break time. For one year after the birth of a child, employers are required to provide a reasonable amount of break time for a nursing worker to express milk. The frequency and duration of breaks needed to express milk will likely vary depending on factors related to the nursing employee and the child.
Location of break. Employers are required to provide "a place, other than a bathroom, that is shielded from view and free from intrusion from coworkers and the public" that the employee can use to express breast milk. Even a private bathroom is not an acceptable location. If the space is not strictly dedicated for use by nursing mothers, it must be available when needed in order to meet the statutory criteria. A space temporarily created, converted into a space for expressing milk, or made available when needed by the nursing mother, is an acceptable location if the space is shielded from view and free from any intrusion by co-workers and the public.
Covered employees. Under the PUMP Act, beginning December 29, 2022, nearly all FLSA-covered employees have the right to lactation accommodations for up to one year after a child's birth. Employers with fewer than 50 employees are not subject to the FLSA break time and space requirements if compliance with the provision would impose an undue hardship.
Remote workers. The Fact Sheet notes that the FLSA protections for nursing workers covers teleworking employees. A remote worker must be free from observation by any employer-provided or required video system, including computer camera, security camera, or web conferencing platform.
Compensability of nursing breaks. The Fact Sheet notes that if an employer provides paid breaks and the employee uses such break time to pump breast milk, the employee must be paid for the break time.
Violations. The PUMP Act provides, beginning April 28, 2023, that FLSA remedies will apply to employer violations of an employee's right to reasonable break time and space for nursing purposes. Such remedies may include employment, reinstatement, promotion, and the payment of wages lost and an additional equal amount as liquidated damages, compensatory damages and punitive damages where appropriate. Prior to April 28, 2023, only unpaid minimum wage or overtime violations related to break time and space were available and retaliation remedies.
State laws. The Fact Sheet notes that federal laws do not preempt state laws that provide greater protections to employees (for example, providing compensated break time, providing break time for exempt employees, or providing break time beyond one year after the child's birth).
Alabama—Additional Counties Qualify for Federal Tax Relief
The IRS has expanded its federal payroll tax relief to more counties for victims of severe storms, straight-line winds, and tornadoes beginning January 12, 2023. Mobile and Morgan counties are now eligible for tax relief. The extension is until May 15, 2023. This deadline applies to the quarterly payroll tax returns that are normally due on January 31, 2023 and April 30, 2023. Also, penalties on payroll tax deposits due on or after January 12, 2023, and before January 27, 2023, will be abated as long as the tax deposits were made by January 27, 2023. All counties in Alabama qualifying for payroll tax relief include: Autauga, Barbour, Chambers, Conecuh, Coosa, Dallas, Elmore, Greene, Hale, Mobile, Morgan, Sumter and Tallapoosa.
Arizona—EWA Service Providers Meeting Certain Criteria Do Not Need to Register as Consumer Lenders, Says State Attorney General
The Arizona Office of the Attorney General issued a general opinion in December 2022 that concludes an earned wage access (EWA) product that is “non-recourse” and does not charge any interest or other fees to access wages is not a “loan” as defined by state law and a provider of such an EWA product is not required to obtain a license as a “consumer lender” under the Consumer Lenders Act (CLA). The opinion notes that certain EWA products may charge the consumer a fee. However, as long as any fee charged falls within the fees described in Ariz. Rev. Stat. Ann. § 6-635(A), an EWA product will not be considered to have imposed a finance charge because the CLA stipulates that the term “finance charge” does not “include other fees allowed pursuant to Ariz. Rev. Stat. Ann. § 6-635(A).”
California—Voters to Decide on Higher Threshold for New/Increased State and Local Taxes
On February 1, 2023, Secretary of State Shirley N. Weber, Ph.D. announced a new initiative that became eligible for California's November 2024 ballot that would require a higher threshold for new or increased state and local taxes. Specifically, the measure says that new or increased taxes must be passed by a two-thirds legislative vote in each state legislative chamber and approved by a simple majority of voters. The initiative would also increase the vote requirement for local taxes proposed by local government or citizens to a two-thirds vote of the local electorate. The increased vote requirements for new or higher taxes would not apply to citizen-initiated state ballot measures. The November 2024 election will already include a ballot item to determine the fate of implementing the FAST Act.
California—Several Counties Added to Federal Payroll Tax Relief for Those Affected By Winter Storms
The IRS has further expanded its federal payroll tax relief for victims of winter storms, flooding, and landslides in the California counties of: Alameda, Butte, Colusa, Contra Costa, Fresno, Glenn, Humboldt, Los Angeles, Marin, Mendocino, Placer, Santa Clara, Siskiyou, Sonoma, Trinity, and Yolo. In response to the disaster, the IRS has postponed certain tax deadlines falling on or after December 27, 2022, and before May 15, 2023, to May 15, 2023. The May 15, 2023 deadline applies to the quarterly payroll tax returns normally due on January 31, 2023 and April 30, 2023. In addition, penalties on payroll tax deposits due on or after December 27, 2022, and before January 11, 2023, will be abated as long as the tax deposits were made by January 11, 2023. All of the California counties included in the disaster payroll tax relief include: Alameda, Butte, Calaveras, Colusa, Contra Costa, Fresno, Glenn, Humboldt, Los Angeles, Marin, Mendocino, Merced, Monterey, Placer, Sacramento, San Benito, San Joaquin, San Luis Obispo, San Mateo, Santa Barbara, Santa Clara, Santa Cruz, Siskiyou, Sonoma, Trinity, Tulare, Ventura, and Yolo [CA-2023-02, 01/24/23, updated 02/02/23].
Colorado—Employer Reminder: Register for FAMLI Before First Quarter 2023 Reports Due
As of January 1, 2023, Colorado employers and employees started contributing to the state's new Family Medical Leave Insurance (FAMLI) program. In 2024, Coloradans will be able to receive paid leave for things like bonding with a new child, taking care of a loved one with a serious health condition, or preparing for a loved one’s military deployment. The Colorado Department of Labor and Employment is reminding employers of their requirement to register with its Division of Labor and Statistics before the first quarter wage reports and premium payments are due on April 30, 2023. In addition, the CDLE has announced that its Employer Guide to Private Plans is now available for employers interested in fulfilling their FAMLI requirements by using an approved private plan.
Connecticut—Governor Proposes State Income Tax Rate Reduction
Connecticut Governor Ned Lamont announced that his fiscal years 2024 and 2025 biennial state budget proposal will include an income tax rate reduction. Currently, single filers pay a 3% state personal income tax on their first $10,000 of adjusted gross income ($20,000 for joint filers) and a 5% tax on income up to $50,000 for single filers ($100,000 for joint filers). Governor Lamont is proposing to permanently lower the 5% rate to 4.5% and the 3% rate to 2%, beginning with income year 2024. If approved by the legislature, this will become Connecticut’s first income tax rate reduction since 1996 [Governor Lamont Announces 2023 Legislative Proposal to Cut Income Tax Rates, 02/06/2023].
Delaware—State Labor Department Announces Unemployment Tax Rate Changes in 2023
On February 2, 2023, the Delaware Department of Labor (DOL) announced changes to the 2023 unemployment tax rates assigned to employers in the state. DOL Secretary Karryl Hubbard, with the unanimous support of the state's Unemployment Insurance Advisory Council, issued Emergency Rule 21 to implement new tax rates for 2023. The DOL estimates the reductions will save employers in the state $50 million. The DOL was able to take these actions on December 31, 2022 due in part to the $240 million investment in Corona Virus Response Act Funds that were placed in the state's unemployment trust fund in 2021. The changes include reducing the state's unemployment taxable wage base from $14,500 to $10,500. Also, for calendar 2023, the average employer assessment rate, the average industry assessment rate, and the average construction industry assessment rate will each be 1%. All other employers are assigned a basic assessment rate according to a table in place for 2023 that ranges from 0.1% to 5.0%. Specifically, the rates are: 0.1% (benefit wage ratio not exceeding 20%), 0.25% (benefit wage ratio not exceeding 30%), 0.50% (benefit wage ratio not exceeding 40%), 1.00% (benefit wage ratio not exceeding 50%), 2.00% (benefit wage ratio not exceeding 55%), 2.50% (benefit wage ratio not exceeding 60%), 3.50% (benefit wage ratio not exceeding 70%), 4.50% (benefit wage ratio not exceeding 80%), and 5.00% (benefit wage ratio not exceeding 90%). A 0.2% assessment tax rate is added to these rates. If an employer’s benefit wage ratio exceeds the highest percentage in the table above, their basic assessment rate is 5.40 %. Employers who are determined for calendar year 2023 to have the delinquency rate of assessment,shall continue to be assigned the delinquency rate of 6.5%.
Georgia—Proposed Legislation Would Increase State's Minimum Wage to $15 per Hour
On February 8, 2023, legislation was introduced that would increase Georgia's minimum wage rate to $15.00 per hour, a nearly $10 per hour increase. Currently, the state's minimum wage rate is $5.15 per hour, one of the lowest in the country. However, employers in Georgia subject to the federal Fair Labor Standards Act (FLSA) must pay employees the federal minimum wage rate of $7.25 per hour. House Bill 241 would also provide a 50% tip credit toward the cash minimum wage for tipped workers. The bill would provide for some exceptions from coverage including an exclusion of employers with sales of $50,000 per year or less, employers with five employees or less, and certain occupations. If signed into law, the legislation would take effect on January 1, 2024.
Illinois—Informational Bulletin Released on Enforcement of the Secure Choice Program
The Illinois Department of Revenue has issued an informational bulletin on the enforcement of the Illinois Secure Choice Savings Program Act (Secure Choice Program) to Illinois employers with at least five employees that have been in business for two or more years, and that do not offer a qualified retirement plan. Employers must offer a qualified plan or automatically enroll their employees into the Secure Choice Program. The Department of Revenue is responsible for enforcing penalty provisions for non compliant employers. The Department will begin issuing IDOR-2P-NT (Notice of Proposed Assessment) and IDOR-2-BILL-NT (Notice of Assessment) in February 2023. Employers can avoid proposed assessments by complying within 120 days of the notice date. Employers who receive a notice should take one of the following actions: register for and facilitate Secure Choice Program; report an exemption from Secure Choice Program; amend IL-941; pay a balance due or request an administrative hearing. Employers who do not comply will receive a Tier I penalty of $250 per employee, calculated for the first calendar year of noncompliance, or a Tier II penalty of $500 per employee, for each subsequent calendar year the employer is noncompliant [Illinois Dept. of Rev. Info. Bulletin No. FY 2023-9, 02/01/2023].
Indiana—EITC Changes Announced in January 2023 DOR Tax Bulletin
The Indiana Department of Revenue has released its January 2023 tax bulletin. The bulletin contains information concerning the 2023 tax filing season (for tax year 2022) and the state’s 2022 automatic taxpayer refund. The bulletin also details changes to Indiana’s adoption tax credit and earned income tax credit (ETIC) that are effective for the 2022 tax year [Indiana Department of Revenue Tax Bulletin, January 2023, Issue 45, 01/01/2023].
Louisiana—Appellate Court Deems Production Bonus Payable on Termination
A Louisiana appellate court upheld a lower trial court's ruling in favor of plaintiffs who were denied the payment of bonuses upon their resignation. Both courts ruled that "discretionary" bonuses were not owed as "earned wages" upon termination. However, "nondiscretionary" bonuses which are linked to the employee's performance are owed upon termination because it is remuneration for the work performed [DiVittorio v. Seale & Ross, PLC, Louisiana Ct. App., Dkt. No. 2022 CA 0392, 12/27/2022].
Massachusetts—Department of Revenue Will Not Amend Withholding Tables for High Earner Surtax
The Massachusetts Department of Revenue has updated its Hot Topics website to note that it will not be issuing a revised version of the 2023 Income Tax Withholding Tables to reflect the surtax of 4% withholding on income above $1 million. It will, however, give employers until January 31, 2024 to ensure that withholding tax returns and payments are calculated properly to avoid penalties or fines related to underwithholding of the surtax.
Michigan—Signatures on Returns, MDEQ Correspondence Confirms Officer Responsible for Liabilities
The Michigan Tax Tribunal found that the petitioner was a responsible person, that is, an officer with tax-specific responsibility, and so the Department of Treasury could assess unpaid withholding tax. The Tribunal found that the facts and evidence presented established that the petitioner was an officer of the limited liability company (LLC) in 2016 with tax-specific responsibility. The documentary evidence presented indicates that the Department established a prima facie case against the petitioner, and that the petitioner willfully failed to file returns or pay the tax due. The facts indicate that the petitioner was the only officer who signed all Sales, Use and Withholding (SUW) returns during the time period in question for the LLC; held himself out as an officer of the LLC, and was intimately involved with financial matters of the LLC. Additional supporting evidence includes the fact that the LLC represented the petitioner as a responsible official of the LLC with the State of Michigan Department of Environmental Air Quality (MDEQ), and while the petitioner asserts that this is not the same as "Responsible Officer" for purposes of tax, the Tribunal found that when viewed in light of the petitioner’s signing of tax returns, this supports the proposition that the petitioner was a responsible officer. Finally, the Tribunal said the facts also demonstrate that the Department was not accorded information that clearly identified a successor, as required by statute, until after the petitioner was assessed. The Tribunal also noted that the Revenue Act clearly contemplates and allows that multiple assessments may be issued [Mertz v. Michigan Department of Treasury, Mich. Tax Tribunal, Dkt. No. 21-002888, 01/31/2023].
Minnesota—St. Paul and Bloomington Update their Sick and Safe Time Off Ordinances
The cities of St. Paul and Bloomington have both made adjustments to their sick and safe time off ordinances. The St. Paul amendments, effective February 18, 2023, provide that even if their employer doesn't have a physical presence in the city, employees can accumulate leave while working in St. Paul. It also establishes details for the standard of proof in retaliation claims, and increases the statute of limitations to two years. The City of Bloomington has amended its ordinance to similarly provide that an employer does not need to have a "brick and mortar" presence in the city for the ordinance to apply to its employees who perform services in the city. These changes would make paid sick time requirements applicable to remote workers who work from home in these cities. The Bloomington ordinance further provides: (1) employees do not have to accrue leave in whole hour units; (2) the amount of time accrued (and used) must be shown on pay stubs; and (3) for the assessment of fines for first-time violations. The Bloomington ordinance goes into effect on July 1, 2023.
New Jersey—ABC Test Not Applicable When Determining Real Estate Agent's Employment Status
The New Jersey Superior Court, Appellate Division, has held that the "ABC Test" was not the proper test to use to determine the employment status of a real estate agent under the state's Wage Payment Law (WPL). James Kenney, a commissioned real estate salesperson with Weichert, alleged that the company violated the WPL when it deducted items such as marketing expenses and insurance from his wages without prior authorization. The Appellate Division ruled that the ABC test was inapplicable to real estate salespersons, as it was barred by the Brokers Act. Specifically, the court found that application of the ABC test in this instance was contrary to the plain language and legislative intent of the Brokers Act because employing the ABC test would determine all fully commissioned employees are employees of their broker regardless of how the relationship is defined. The court still remanded the case for the trial court to determine the relationship between the parties and declined to announce what test should be employed to determine the agent's worker classification [Kennedy v. Weichert Co., NJ App. Div., Dkt. No. A-0518-19, 1/30/2023 (view case) ].
New Jersey—Temporary Workers' Bill of Rights Legislation Would Require Temporary Workers to be Paid the Same Salary as Other Workers
A bill (Assembly Bill 1474), signed by Governor Murphy on February 6, requires temporary workers to be paid as much as their other employees in the same position. A1474 increases protections for temporary workers. Murphy initially vetoed the bill in September with a directive to narrow the bill's scope. The bill applies to temporary workers in a wide variety of jobs, although it does not cover specified health-care workers, business and finance professionals, salespeople, and information security and technology staff. In addition to required equal pay for temporary workers, the bill provides a requirement that businesses and staffing agencies provide specific information to temporary workers, at the start of employment, regarding: (1) the work assignment; (2) rate of pay; (3) type of work to be performed; and (4) their rights under the state's paid sick time law. Staffing agencies are limited in deducting certain specified expenses from the workers pay and would be prohibited from requiring temporary workers from using agency-provided transportation to the job. Murphy issued a press release upon signing the bill into law and stated: "Temporary workers will now have equal rights in the workplace. This is an invisible workforce that will now be protected against the abuses of unpaid wages, unsafe working conditions, unlawful deductions, and other forms of mistreatment."
Ohio—City of Lancaster Increases Tax Rate to 2.3%
The City of Lancaster has increased its municipal income tax to 2.3%, beginning January 1, 2023. Employers located or doing business in Lancaster are required to withhold municipal income taxes from qualifying wages from residents and nonresidents employees.
Oklahoma—Guidance on Unemployment Benefit Wage Charge Notices Updated
The Oklahoma Employment Security Commission (OESC) has updated its webpage to clarify that employers will receive OES-502 (Notice of Benefit Wages) when a former employee receives their fifth week of unemployment. The notice will show the amount of base period wages being charged. Employers may receive these notices electronically through the OESC's Employer Portal. The OESC notes that employers that wish to protest the charges must do so within 20 days of the receipt of the notice. Protests may be electronically filed through the Employer Portal or by submitting Form OES-502P (Benefit Wage Charge Protect Form). Protests submitted after 20 days will not be considered unless the employer can show "good cause."
Oklahoma—Governor Proposes Income Tax Rate Reduction of 3.99%
In his first State of the State speech, Oklahoma Governor Kevin Stitt noted that he has proposed an income tax reduction as laid out in the Executive Budget for FY 2024. The proposal would reduce the individual income tax rate by 0.76% to 3.99% at a cost of $260.9 million, according to the Executive Budget.
Oregon—PFMLI Contributions Calculator Now Available
Oregon has updated its Paid Leave Oregon website to include new tools for employers. Employers will now have an interactive contributions calculator to determine the payroll contribution to the Paid Family and Medical Leave Insurance (PFMLI) program and guidance is now provided for self-employed individuals, healthcare workers, and service providers. PFMLI benefits are available for leave associated with the birth or adoption of a child, serious illness or injury, caregiving for a seriously ill family member, and for survivors of domestic violence, sexual assault, stalking or harassment. Contributions to the program by large employers and all employees, regardless of employer size, started January 1. Benefits will be available to employees in September 2023.
Oregon—Guidance Released on Data Breach Reporting
The Oregon Department of Revenue (DOR) reminds tax practitioners that they must report data security breaches to help prevent fraudulent tax refunds from being issued. While the DOR will contact tax preparers if it suspects fraudulent filing, state law also requires tax professionals to notify the DOR within five days if they discover a data security breach or have reason to believe that a breach has occurred. Suspicious activity that may indicate a possible data breach includes: the DOR rejecting several of the preparer’s e-filed returns, receiving more efile acknowledgements than returns the preparer knows he or she has filed, or the preparer’s clients responding to emails that the preparer did not send. Data breaches may be reported to the DOR Identity Theft Hotline at 503-947-2000 or by email to Fraud.help@dor.oregon.gov [Tax professionals reminded to report data security breaches, Or. Dept. of Rev., 02/06/2023].
Puerto Rico—Governor Proposes 3% Income Tax Cut on Top Rate
Puerto Rico Governor Pedro R. Pierluisi announced a proposal that would reduce the top individual income tax rate from 33% to 30%. In his announcement, Pierluisi also noted, under the proposal, the income bracket of $41,500 to $61,500 would be expanded up to $81,500 and be reduced from 25% to 24%, thereby creating an overall 7% reduction for some taxpayers.
Rhode Island—Regulation Adopted On the Payment of Taxes by Electronic Funds Transfer
The Rhode Island Division of Taxation has adopted regulations, effective February 26, 2023, on the payment of Taxes by Electronic Funds Transfer (280-RICR-20-30-1). The proposed regulations reflect recent legislation that imposes an electronic filing and payment requirement on larger business registrants. A larger business registrant is a person who operates as a business whose combined annual liability for all taxes administered by the Division of Taxation for the entity is or exceeds $5,000.00; or operated as a business whose annual gross income is over $100,000.00 for the entity. The adopted regulations also include a new section on ACH credit submission criteria.
South Dakota—New Legislation Provides 0.5% Unemployment Tax Cut for Employers
New legislation (House Bill 1011), signed by South Dakota Governor Kristi Noem on February 1, 2023, will cut employer contributions to unemployment by 0.5%, an $18 million tax cut for South Dakota businesses. Specifically, the legislation creates a new tax schedule when the balance in the Unemployment Trust Fund at the end of the fiscal year is at or above an average high-cost multiplier (AHCM) of 1.5. An AHCM of 1.0 means enough funds exist to cover a full year of benefits during a recession. Currently, employer tax rates are based on the AHCM of the fund at the end of each fiscal year. Additionally, the bill adjusts the trigger point for a surcharge – this is an additional tax imposed when the balance of the fund drops below $11 million. The surcharge trigger will no longer be tied to a dollar amount, but to an AHCM ratio. Through December 31, 2023, Schedule A (rates range to 9.45%) is in effect when the AHCM is less than 1.60 and Schedule B (rates range to 9.3%) is in effect when the AHCM is greater or equal to 1.60. Beginning January 1, 2024, Schedule A (rates range to 9.45%) is in effect when the AHCM is less than 1.60 and Schedule B (rates range to 9.3%) is in effect when the AHCM is less than 1.5 and greater or equal to 1.3, and Schedule C (rates range to 8.80%) is in effect when the AHCM is greater or equal to 1.5 [L. 2023, H1011].
U.S. Virgin Islands—Unemployment Taxable Wage Base Decreases in 2023
The unemployment taxable wage base for employers in the U.S. Virgin Islands has decreased from $30,800 to $30,200 in 2023. Title 24, Chapter 12, Section 308(c) of the Virgin Islands Unemployment Insurance Act states that the territory's wage base is equal to 60% of the average annual wage in insured work rounded to the nearest $100.
Wisconsin—Reciprocity Publication Updated
The Wisconsin Department of Revenue (DOR) has updated Publication 121, entitled Reciprocity, which discusses Wisconsin's reciprocity agreements with four states consisting of Illinois, Indiana, Kentucky, and Michigan. This means that Wisconsin generally will not tax the salaries, wages, commissions, and fees earned by employees who are domiciled in Illinois, Indiana, Kentucky, or Michigan who are employed in Wisconsin; and Illinois, Indiana, Kentucky, and Michigan generally will not tax the salaries, wages, commissions, and fees of individuals who are domiciled in Wisconsin and who are employed in these states. There are no substantive changes from the prior version of this publication. The publication provides statements or interpretations of Wisconsin laws and regulations in effect as of February 6, 2023 [Wisconsin Dept. Rev. Tax Publication No. 121, 02/01/2023].
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