October 3 - 7 Compliance Updates: Labor Department Issues a Final Rule for Temporary Agricultural Employment of H-2A Nonimmigrants

Oct 10, 2022 6:36:29 AM
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Labor Department Issues a Final Rule for Temporary Agricultural Employment of H-2A Nonimmigrants

On October 6, 2022, the U.S. Department of Labor (DOL) issued a final rule that amends regulations governing the H-2A visa program to improve program protections for workers and enhance enforcement against fraud and abuse, while modernizing the H-2A application and temporary labor certification process [DOL News Release No. 22-1890-NAT, 10/6/2022].

Background. Section 218 of the Immigration and Nationality Act authorizes the lawful admission into the United States of temporary, nonimmigrant workers (H-2A workers) to perform agricultural labor or services of a temporary or seasonal nature. Before the U.S. Citizenship and Immigration Services (USCIS) can approve an employer's petition for such workers, the employer must file an application with the DOL Employment and Training Administration (ETA) stating, among other things, that there are not sufficient workers who are able, willing, qualified, and available, and that the employment of aliens will not adversely affect the wages and working conditions of workers similarly employed in the U.S.

Final rule. The final rule amends the standards and procedures by which the DOL grants certification of agricultural labor or services to be performed by H-2A workers on a seasonal or temporary basis and enforcement of the contractual obligations applicable to employers of H-2A workers. The major provisions contained in the final rule will strengthen protections for workers, modernize and simplify the H-2A application and temporary labor certification process, and ease regulatory burdens on employers [DOL, Temporary Agricultural Employment of H-2A Nonimmigrants in the United States, RIN 1205-AB89]. 

The DOL says that the changes in this final rule aim to enhance WHD’s enforcement capabilities, thereby ensuring that responsible employers are not faced with unfair competition and allowing for robust enforcement against program fraud and abuse that undermine the rights and interests of workers.

Summary of provisions. The final rule adopts the following major changes to the Department’s H-2A program regulations:

  • Revises the standards and procedures by which employers qualifying as H-2A Labor Contractors (H-2ALCs) obtain temporary labor certification by permitting the electronic submission of surety bonds, adjusting the required surety bond amounts based on changes to adverse effect wage rates (AEWR), adopting a common bond form that includes standardized bond language, and permitting department of H-2ALCs that fail to provide adequate surety bonds.
  • Clarifies the definitions of "employer" and "joint employment," the use of these terms in the filing of Applications for Temporary Employment Certification, and the responsibilities of joint employers. Employers that file as joint employers are treated as such as a matter of law for purposes of compliance and enforcement.
  • Provides that rental and/or public accommodations secured to house workers must meet applicable local, state, or federal standards addressing certain health or safety concerns (e.g., minimum square footage per occupant, sanitary food preparation and storage areas, laundry and washing facilities), and requires employers to submit written documentation that such housing meets applicable standards and contains enough bed(s) and room(s) to accommodate all workers requested.
  • Enhances the DOL’s debarment authority by holding agents and attorneys, and their successors in interest, accountable for their own misconduct independent of the employer’s violation(s), and clarifies that the Applications for Temporary Employment Certification filed by debarred entities during the period of debarment will be denied without review.
  • Codifies the use of electronic methods for the OFLC Certifying Officer (CO) to send notices and requests to employers, circulate approved job orders to appropriate SWAs for interstate clearance and recruitment of U.S. workers, and issue temporary labor certification decisions directly to the Department of Homeland Security (DHS).
  • Replaces outdated prevailing wage survey guidelines from the Department’s ETA Handbook 385 (Handbook 385) with modernized standards that are more effective in producing prevailing wages for distinct crop or agricultural activities, and expands the universe of State entities that may conduct prevailing wage surveys, including SWAs, other State agencies, State colleges, or State universities.
  • Establishes new standards that permit individual employers possessing the same need for agricultural services or labor to file a single Application for Temporary Employment Certification and job order to jointly employ workers in full-time employment, consistent with the statute and the DOL’s longstanding practice.
  • Codifies a unique set of standards and procedures, with some revisions, for employers that employ workers engaged in animal shearing, commercial beekeeping, and custom combining according to a planned itinerary across multiple areas of intended employment (AIE) in one or more contiguous states.

Effective date. The DOL's final rule takes effect on November 14, 2022 and is scheduled to be published in the Federal Register on October 12..

IRS Extends Grace Period for Perfecting Research Credit Refund Claims

On September 30, 2022, the IRS announced it has extended, through January 10, 2024, the transition period during which taxpayers have 45-days to perfect a research credit refund claim prior to the agency's final determination on the claim [IR-2021-203, 10/15/2021, updated 9/30/2022].

Chief Counsel Advice. In October 2021, the IRS released a Chief Counsel Advice (CCA) that set forth the information taxpayers need to include for the IRS to consider valid a Code Sec. 41 research credit claim for refund [Legal Advice Issued by Field Attorneys 20214101F]. 

According to the CCA, taxpayers are required to provide the following information with a timely filed refund claim:

  • Identify all the business components to which the Code Sec. 41 research credit claim relates for that year.
  • For each business component, identify all research activities performed and name the individuals who performed each research activity, as well as the information each person sought to discover.
  • Provide the total qualified employee wage expenses, total qualified supply expenses, and total qualified contract research expenses for the claim year.

Note. Taxpayers can use Form 6765, Credit for Increasing Research Activities, to provide this information to the IRS [LAFA 20214101F].

Information Release. At the same time it released the CCA, the IRS provided taxpayers with a grace period, until January 10, 2022, for providing the required information with a timely filed Code Sec. 41 research credit claim for refund. The IRS noted that when the grace period expired, there would be a one-year transition period during which taxpayers would have 30 days to perfect their research credit claims for refund before the IRS's final determination on the claim. IR-2021-203

Note. In January 2022, the 30-day period for perfecting research credit refund claims was modified to 45 days.

Update to IR-2021-203. On September 30, 2022, the IRS announced that taxpayers can continue to use the 45-day perfection period until January 10, 2024. 

For more information about claiming the qualified research credit.

DOJ Investigation Leads to Man Being Sentenced to Prison for Multimillion Dollar Tax Fraud Scheme Involving Professional Athletes and PPP Loan Fraud

An investigation by the FBI and the IRS' Criminal Division revealed that Quin Ngoc Rudin, a convicted felon, who has a corporate office with Mana Tax Services, a tax preparation business, engaged in a conspiracy to commit two fraud schemes using Mana Tax while on supervised release. As a result, he was sentenced to 10 years in prison for conspiring with others in schemes to defraud the IRS and the Paycheck Protection Program (PPP), a federal loans initiative designed to help businesses pay their employees and meet expenses during the COVID-19 pandemic. The scheme caused a total tax loss of more than $19 million.

Rudin conspired with his brother, Thanh Rudin, 59, as well as Seir Havana and others to file a series of false income tax returns on behalf of at least nine professional athletes, with the returns showing fictitious business and personal losses to generate refunds the athletes were not entitled to receive. Amended returns were then filed for most of the athletes for prior years to correct what were characterized as "errors" by previous accountants. Mana Tax charged the athletes a fee of 30% of the resulting refunds issued by the IRS. Rudin committed these crimes while he was on supervised release for another fraud scheme in California.

Additionally, Rudin and his co-conspirators, including Milton Estrada, prepared and submitted false applications for PPP loans on behalf of small businesses, shell companies, and other business entities they controlled. The defendants prepared fraudulent PPP loan applications for these firms in exchange for a fee of 30% of the resulting loan. The co-conspirators submitted false tax returns to support the PPP loan applications, and some of the business owners never saw their loan applications before Mana Tax filed them. In an attempt to conceal the 30% fee from the IRS, the defendant told the businesses to pay the co-conspirators with cashier's checks and to note on the memo lines that the checks were related to payroll. To obtain fraudulent PPP loans on behalf of shell companies and other business entities they controlled (several of which were not even eligible for a PPP loan), the defendants inflated the number of employees and monthly payroll costs claimed on the applications. This PPP scheme resulted in a fraud loss of more than $43 million.

Kevin Chambers, the Director of COVID-19 Fraud Enforcement commented that: "I commend the hard work of the Eastern District of Virginia, the Tax Division, IRS Criminal Investigation and the Federal Bureau of Investigation. The department will continue to aggressively pursue all who exploited the pandemic as a means to enrich themselves at the expense of those for whom pandemic relief funds were intended."

U.S. Attorney Jessica D. Aber added that: "Between the complex and calculated tax fraud scheme and the PPP fraud to steal funds designated to provide relief to Americans suffering from the pandemic, this defendant's crimes resulted in a staggering loss in the tens of millions. Today's sentence demonstrates the swift and exacting justice that awaits anyone who attempts to steal funds from the U.S. Government and taxpayers. This result is in no small part due to the diligence of the investigative agents on this case, who reacted decisively to identify the scheme and recover significant portions of defrauded taxpayer funds' [U.S. Department of Justice Press Release, No. 22-1070, 10/5/2022]. 

Healthcare Company/Owner Ordered to Pay $703K in Back Wages for Federal Overtime and Retaliation Violations

The U.S. Department of Labor (DOL) has announced that a home healthcare company and its owner have agreed to pay back wages to workers for federal overtime and retaliation violations.

The investigation. An investigation by the DOL's Wage and Hour Division (WHD) found that Heavenly Hands Home Healthcare LLC and owner, Lauren Wilson, willfully failed to maintain accurate records of all hours worked and paid straight time for hours worked over 40 in a work week, failing to pay the required overtime premium. The WHD also discovered that the employer told workers not to speak with DOL investigators and falsified employees' signatures on official payment and payroll receipt records to make it appear as though they had made the payment. These actions violated the anti-retaliation, overtime, and recordkeeping provisions of the Fair Labor Standards Act (FLSA).

FLSA overtime. Covered nonexempt employees must receive overtime pay for hours worked over 40 per workweek (any fixed and regularly recurring period of 168 hours – seven consecutive 24-hour periods) at a rate not less than one and one-half times the regular rate of pay. There is no limit on the number of hours employees 16 years or older may work in any workweek. The FLSA does not require overtime pay for work on weekends, holidays, or regular days of rest, unless overtime is worked on such days.

FLSA recordkeeping. Every employer covered by the FLSA must keep certain records for each covered, non exempt worker. There is no required form for the records, but the records must include accurate information about the employee and data about the hours worked and the wages earned. A list of basic records an employer must maintain includes regular rate of pay, total daily or weekly straight time earnings, and total overtime earnings for the workweek.

FLSA retaliation. Retaliation occurs when an employer (through a manager, supervisor, administrator or directly) fires an employee or takes any other type of adverse action against an employee for engaging in protected activity. Most of the acts enforced by WHD have regulations that prohibit retaliation, harassment, intimidation, or the taking of adverse action against employees for: inquiring about their pay, hours of work or other rights; asserting their worker rights; filing a complaint about their worker rights; and cooperating with a WHD investigation.

Legal actions. On June 1, 2022, an enforcement action and a motion for a temporary restraining order and preliminary injunction was filed by the DOL's Office of the Solicitor to enforce the workers’ rights under the FLSA, recover owed wages, prevent the employer and its owner from obstructing the investigation, retaliating against employees who cooperated with investigators, demanding kickbacks of back wages found due by the WHD and requiring the employer to provide payroll records.

On June 30, 2022, the U.S. District Court for the Eastern District of Virginia granted the DOL's preliminary injunction motion.On September 1, 2022, the court ruled that the employer and its owner must pay the back wages and damages to the affected home healthcare workers for its violations of federal law. 

Judgment to recover back wages.  The DOL now has a default judgment to recover $703,609 in back wages and liquidated damages for 38 employees who were denied overtime pay by the healthcare company and its owner for the aforementioned FLSA violations.

WHD on the judgment. "The judgment sends a clear message that the U.S. Department of Labor will seek legal remedies to ensure workers’ rights are protected and that we will not tolerate employers who shortchange wages or intimidate employees for exercising their federally protected rights," said Regional Solicitor Oscar L. Hampton III in Philadelphia.

IRS Releases Electronic Specifications for Information Returns for 2022 Tax Year

IRS Publication 1220 (Specifications for Electronic Filing of Forms 1097, 1098, 1099, 3921, 3922, 5498, and W-2G) has been revised for the 2022 tax year.

Quick Alert Issued: In a Quick Alert issued October 6, 2022, the IRS noted that Publication 1220 will be republished due to incorrect information in the Issuer A record and Payee B record sections. The corrected Publication 1220 will be released next week. 

Exhibit 2 of the revised publication will reflect these corrections:

  • Part C Sec. 2 Issuer “A” Record - Corrected Field Position 46-53 Field Title “Blank” to 46-51 and corrected Length to 6. The Field Position of all Field Titles that followed were reduced by 2.
  • Part C Sec. 3 Payee “B” Record, Record Layout Positions 545-746 for Form 1099-PATR - Corrected the Length and General Field Descriptions to be consistent with TY 2021.

In addition to providing the 2022 electronic filing specifications for the above forms, IRS Publication 1220 also provides the requirements and specifications for electronic filing under the Combined Federal/State Filing Program (CF/SF) and provides specifications to submit an automatic 30-day extension of time to file certain information returns.

The publication is divided into the following five parts: (1) Introduction and General Information; (2) Data Communication; (3) Record Format Specifications and Record Layouts; (4) Extension of Time; and (5) Exhibits.

Generally, boxes on paper forms correspond with fields used for the electronic file; however, if the form and field instructions do not match, the guidance in IRS Publication 1220 supersedes the form instructions.

New for 2022.

Observation: Publication 1220 does not reference the IRS's new 1099 filing platform, Information Return Intake System (IRIS). The IRS is to launch this platform in January 2023 as mandated by a provision of the Taxpayer First Act (TFA). The publication refers only to the FIRE system which the IRS has noted previously would remain available in tandem with the IRS in 2023.

  • References to Form 4419 (Application for Filing Information Returns Electronically) have been removed because the form is obsolete as of August 1, 2022. In September, the IRS transitioned transition filers who received their Transmitter Control Codes (TCCs) prior to September 26, 2021 to the online Information Returns Application for Transmitter Control Code (IR-TCC). As part of this transition, Form 4419 was phased out, effective August 1, 2022. TCCs will remain valid for use until August 1, 2023. However, after that date, any FIRE TCC that does not have a completed IR-TCC Application will be dropped and will not be available for e-file. Holders of FIRE TCCs who submitted their TCC Application prior to September 26, 2021, will need to submit and complete the IR-TCC Application. The IR-TCC application can be submitted any time between September 25, 2022, and August 1, 2023.
  • Filers may submit up to 125 test files per TCC in Trading Partner Test (TPT).

Combined Federal/State Filing Program (CF/SF). There are no changes for the 2022 tax year for participating states in the CF/SF program. The following states participate in CF/SF: Alabama, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Georgia, Hawaii, Idaho, Indiana, Kansas, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, New Jersey, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, South Carolina, and Wisconsin. 

Transmitter Control Code Application. New filers may obtain a TCC to file electronically by submitting an IR-TCC online by November 1. It can take up to 45 days for processing. The assigned TCC will be mailed by the U.S. Postal Service to the address provided on the IR-TCC. Alternatively, a new filer may review the TCC on the IR-TCC application. 

FIRE system. The FIRE test system is available on January 4, 2023. The FIRE system will be available on January 6, 2023 at 12 a.m. ET.

IRS Revises Central Withholding Agreement Application

The IRS has issued a September 2022 version of )Form 13930 (Application for Central Withholding Agreement).

Background. Code Sec. 1441(a) requires withholding to be deducted at a 30% rate on the gross amount of interest, dividends, rent, salaries, wages, compensation, remuneration, and emoluments that nonresident alien (NRA) entertainers and athletes receive from sources within the United States. However, under a central withholding agreement (CWA), withholding is computed on estimated net income, rather than gross income, and at graduated tax rates afforded to U.S. resident aliens and U.S. citizens, rather than at a 30% tax rate. The IRS will consider entering into a CWA with a nonresident entertainer or athlete if all of the requirements in Rev Proc 89-47, 1989-2 CB 598, are met. Accurately completing and timely submitting a CWA application will fulfill the requirements for consideration.

Form changes. The form is substantially the same. The mailing address for the form has changed. The form may be mailed to: Central Withholding Agreement Program, Internal Revenue Service, 24000 Avila Road, MS 6040, Laguna Niguel, CA 92677.

Minimum Wage for Federal Contractors for 2023 Increased

The Department of Labor's Wage and Hour Division (WHD) has released two Notices regarding the 2023 minimum wage rates for federal contractors [DOL, Executive Order 13658, Establishing a Minimum Wage for Contractors: Annual Update; DOL, Final Rule: Increasing the Minimum Wage for Federal Contractors (Executive Order 14026)]. 

Background. On Feb. 12, 2014, President Barack Obama signed Executive Order (EO) 13658, which established a minimum wage rate for federal contractors. The executive order required parties who contract with the federal government to pay workers performing work on or in connection with covered federal contracts at least: (1) $10.10 per hour beginning Jan. 1, 2015 and (2) an amount determined by the Secretary of Labor in accordance with the methodology in the executive order, beginning Jan. 1, 2016 and annually thereafter.

In 2021, President Biden signed EO 14026, which raised the hourly minimum wage for certain federal contract workers. It established an initial minimum wage of $15.00 ($10.50 for tipped workers) as of January 30, 2022, to be increased annually.

EO 13658 and EO 14026 applies to: 

  • Procurement contracts for construction covered by the Davis-Bacon Act (DBA);
  • Service contracts covered by the Service Contract Act (SCA);
  • Concessions contracts, including any concessions contract excluded from the SCA by the DOL's regulations at 29 CFR 4.133(b); and
  • Contracts in connection with federal property or lands and related to offering services for federal employees, their dependents, or the general public.

Executive Order 14026: Contracts entered into, renewed, or extended on or after January 30, 2022

The DOL's Notice provides that the minimum wage for federal contractors will increase from $15 per hour to $16.20 per hour, effective Jan. 1, 2023. The executive order also requires annual adjustments to the minimum cash wage for tipped employees. The WHD has announced that the minimum cash wage for tipped employees performing work on or in connection with a federal contract will increase from $10.50 per hour to $13.75 per hour, effective January 1, 2023. The contractor must increase the cash wage paid to a tipped employee to make up the difference if a worker's tips combined with the required cash wage of at least $13.75 per hour do not equal the hourly minimum wage rate for contractors as noted above. Certain other conditions must also be met. EO 14026 applies only to contracts entered into, renewed, or extended on or after January 30, 2022 [87 FR 59464, DOL, Minimum Wage for Federal Contracts Covered by Executive Order 14026, Notice of Rate Change in Effect as of January 1, 2023, 9/30/2022]

Executive Order 13658: Contracts prior to January 30, 2022

In a separate Notice, the DOL announced the minimum wage rates for federal contracts entered into, renewed, or extended prior to January 30, 2022, as established by Executive Order 13658. The minimum wage is increased from $11.25 per hour to $12.50 per hour, effective January 1, 2023. The minimum wage for tipped worker under these contracts is increased from $7.90 per hour to $8.50 per hour [87 FR 59468, DOL, Minimum Wage for Federal Contracts Covered by Executive Order 13658, Notice of Rate Change in Effect as of January 1, 2023, 09/30/2022].

Side-by-Side Comparison of EO 13658 and EO 14026

The DOL offers a side-by-side comparison between the two EOs and how they are each applied. EO 14026 applies to contracts in connection with seasonal recreational services and seasonal recreational equipment rental offered for public use on Federal lands that are exempted from coverage under EO 13658. EO 14026 generally applies to independent agencies, such as the Bureau of Consumer Financial Protection, National Labor Relations Board, Office of the Comptroller of the Currency, Securities and Exchange Commission, etc. but is only "strongly encouraged" under EO 13658. Finally, EO 13658 applies to all 50 states and the District of Columbia while EO 14026 also applies to specified U.S. territories, including Guam and Puerto Rico. 

The comparison does not currently reflect the 2023 rates.

Legal Challenges to EO 14026

President Biden's EO 14026 has been met with legal challenges. An outdoor adventure company operating on federal lands representing other river rafting outfitters filed suit challenging the EO. The U.S. Court of Appeals for the Tenth Circuit granted a preliminary injunction postponing implementation of EO 14026 for “contracts... in connection with seasonal recreational services or seasonal recreational equipment rental for the general public on federal lands” [Bradford, et al v. U.S. Department of Labor, et al, CA10, Dkt. No. 22-1023, 02/01/2022].

Also eight state attorneys general filed suit in response to EO 14026.

CRS: Congress May Want to Reconsider Traditional Tax Extenders

Lawmakers may want to consider policy options for temporary tax policies that extend beyond the scope of what might be generally regarded as traditional tax extenders, the Congressional Research Service said in a recent report.

Congress has frequently chosen to lengthen most, if not all, recently expired or soon-to-expire provisions as part of so-called tax extender legislation, although lawmakers have been silent on whether there will be further tax extender legislation this year. An omnibus spending bill expected in December is considered the most likely vehicle for any extender legislation. However, the CRS report said Congress may also choose to evaluate the extension of selected expiring provisions instead of considering an extenders package that addresses most or all expiring provisions.

The report suggests several options for legislators to consider with regard to temporary tax provisions. Those that ran out in 2021 or are scheduled to expire in coming years could be extended. For expired provisions, the extension could be retroactive, and short-term, long-term, or permanent. Another option would be to let expired provisions remain expired and allow others to run out as scheduled.

Provisions of interest to payroll professionals that are scheduled to expire at the end of 2022 include the temporary allowance of a 100% deduction for business meals. The report also cites provisions that are expiring at the end of 2025, including two provisions of the Tax Cuts and Jobs Act (the individual income tax provisions and the paid family leave credit), as well as the CARES Act employer-paid student loan income tax exclusion. 

The report concluded that extending the expired individual and business provisions would likely have a minimal effect on federal income tax revenues. Permanently extending these provisions would reduce federal revenue by an estimated $16 billion from fiscal year 2023 through 2032. 

The CRS noted, however, that modifying the tax code to continue to allow expensing of research and experimentation expenditures or 100% first-year bonus depreciation would have a much larger effect on revenues. Over the 2023-2032 period, extending these provisions beyond 2021 for research-and-experimentation expensing would reduce revenues by an estimated $153.2 billion; extending them beyond 2022, in the case of 100% bonus depreciation, would cut revenues by about $250.3 billion.

Consent Order Requires Company to Pay $575K to Resolve Misclassification Case

An investigation by the Department of Labor's (DOL) Wage and Hour Division (WHD) found that a courier service misclassified drivers as independent contractors in violation of the Fair Labor Standards Act. The company will pay a total of $575,000 in back wages and liquidated damages to the 62 drivers, and ensure future FLSA compliance at all its U.S. locations under a consent judgment the DOL obtained.

The consent judgment was the end result of a lawsuit filed by the DOL in January 2020 against USPack Logistics LLC and its chief operating officer, Frank Powell, after the WHD investigation. The DOL alleged in the case that the company and Powell paid courier drivers per delivery rather than an hourly wage, required drivers to pay for gasoline and vehicle upkeep and deducted various fees and insurance costs from drivers' pay. These practices allegedly resulted in the company and Powell paying drivers less than the federal minimum wage of $7.25 per hour.

Additionally, the company and Powell also allegedly violated the FLSA's overtime requirements when they failed to compensate drivers at one and one-half times their regular pay rates for hours over 40 in a workweek. The DOL also alleged the employers did not maintain accurate records of the hours worked by the affected employees.

In the consent judgment, entered by the U.S. District Court for the District of Massachusetts, the company and Powell agree that they understand the FLSA's requirements and will continue to make reasonable, good faith efforts to comply with its applicable provisions at all USPack locations. These efforts include ongoing reviews of the FLSA and the company's practices to ensure that courier drivers are properly classified under the FLSA.

WHD District Director Carlos Matos remarked that: "Employers must properly classify their employees to ensure that those workers receive all the wages and protection to which they are legally entitled. We encourage employers to take the time to understand the difference between employees and independent contractors under the Fair Labor Standards Act, and to contact the Wage and Hour Division with their questions" [Wage and Hour Division News Release, No. 22-1740-BOS, 9/30/2022].

Employers in Five Tax Jurisdictions Face a FUTA Credit Reduction for 2022

According to the U.S. Department of Labor's (DOL) website, there are five tax jurisdictions with outstanding federal unemployment trust fund loans. These jurisdictions must repay these loans by November 10, 2022 to avoid employers in these states from paying more in FUTA taxes for tax year 2022.

COVID-19 caused states to borrow. During the height of the COVID-19 health emergency, several states needed to borrow money from the federal government in order to keep their unemployment trust funds solvent. States that have outstanding balances of these advances 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.

FUTA credit reduction. These credit reductions are made from the regular FUTA credit reduction of 5.4%. So, while, employers in states without a further credit reduction will have a FUTA tax rate of 0.6% (on the first $7,000 of wages paid) for the year, employers in states with a further credit reduction due to an outstanding balance of advances will incur a FUTA tax rate of 0.6% plus a FUTA credit reduction.

The DOL's list. The DOL has a list of potential FUTA credit reduction states for tax year 2022. The list was last updated on June 21, 2022. It includes 10 states and territories with a Social Security Act (SSA) Title XII loan on January 1, 2022. The list is as follows: California, Colorado, Connecticut, Illinois, Massachusetts, Minnesota, New Jersey, New York, Pennsylvania, and the Virgin Islands. In June 2022, the DOL noted that Minnesota, New Jersey, and Pennsylvania had taken steps to repay their loans and if they remain loan-free on November 10, 2022, they will not become FUTA credit reduction states for tax year

Most recent loan status. As of September 27, 2022, the DOL shows the following five states and territories with outstanding Title XII loans: California, Colorado, Connecticut, Illinois, New York, and the Virgin Islands. These states and the Virgin Islands must repay their outstanding loans by November 10, 2022 to avoid employers in these tax jurisdictions from paying more in FUTA tax when they file their 2022 Form 940 (Employer's Annual Federal Unemployment (FUTA) Tax Return) by January 31, 2023.

Possible reduction by percentage. The IRS updates Schedule A (Form 940) (Multi-State Employer and Credit Reduction Information) each year. This form is used by employers in FUTA credit reduction states to determine the amount of additional tax to be paid. The instructions for this form indicate the amount of the FUTA credit reduction for each tax jurisdiction. For tax year 2021, employers in the Virgin Islands paid FUTA taxes at a 3.3% higher rate, due to the territory's Title XII loan remaining outstanding for several years.

California, Colorado, Connecticut, Illinois, and New York all face a FUTA credit reduction of 0.3% for tax year 2022. The Virgin Islands faces a potential 3.9% FUTA credit reduction.

DOL announcement. The DOL typically updates its website for the final list of FUTA credit reduction states shortly after November 10. Once that list is finalized, the IRS is able to complete the final versions of Form 940 and Schedule A (Form 940) for the 2022 tax year. Employers doing business in any of these states should estimate what the additional FUTA taxes will be for 2022.

IRS Releases Updated Version of Affordable Care Act Information Returns Submission Guide for 2023 Processing Year

The IRS has released an October 2022 version of Publication 5258 (Affordable Care Act (ACA) Information Returns (AIR) Submission Composition and Reference Guide) for the 2023 processing year. 

IRS Publication 5258 provides technical information to issuers, transmitters, and software developers so that they are able to compose and submit valid submissions of Forms 1094/1095-B and Forms 1094/1095-C. AIR has two transmission methods: (1) an Application-to-Application (A2A) channel and (2) a Web Browser-based User Interface (UI) channel. The publication includes AIR Transmission Checklists for A2A and UI.

The publication notes that each entity should obtain one valid digital certificate issued by an approved certificate authority (CA). Automated Enrollment only recognizes and accepts digital certificates issued by IRS approved certificate authorities.

Latest updates. The October 2022 version contains updated Transport Layer Security (TLS) information throughout the publication, new updated Digital Certificate information, and formatting issues have been corrected. 

IRS Issues ACA Information Return Electronic Filing Publication for 2023 Processing Year

The IRS has updated Publication 5164 (Test Package for Electronic Filers of Affordable Care Act (ACA) Information Returns (AIR)). The publication is to be used in the 2023 processing year.

Background. Code Sec. 6055 requires certain health insurance issuers, sponsors of a self-insured health plan, government agencies that administer government-sponsored health insurance programs, and other entities that provide minimum essential health insurance coverage to employees to file Form 1094-B, Transmittal of Health Coverage Information Returns, and Form 1095-B, Health Coverage.

Code Sec. 6056 requires applicable large employers (ALEs), generally, employers with at least 50 full-time employees, to report to the IRS on Forms 1094-C, Transmittal of Employer-Provided Health Insurance Offer and Coverage Information Returns, and 1095-C, Employer-Provided Health Insurance Offer and Coverage, offers of health coverage to, and enrollment in health coverage by their full-time employees (i.e., an employee who is employed on average for at least 30 hours of service per week).

The transmittal Forms 1094-B and Forms 1094-C provide information about the issuer of the ACA information returns and the Forms 1095-B and 1095-C provide information about the covered individuals.

Electronic filing threshold. A provision in the Taxpayer First Act (TFA, P.L. 116-25) reduces the electronic filing threshold for information returns from the 250 returns threshold, however, the IRS has stated, absent the release of final regulations, the threshold will remain 250 information returns.  

Electronic filing is done on the IRS system called the “Affordable Care Act Information Return” (AIR) program.

All filing requirements apply individually to each reporting entity as defined by its separate tax identification number (TIN). For example, if a corporation with several branches or locations uses the same EIN, the corporation must aggregate the total volume of returns to be submitted for that EIN and apply the filing requirements to each type of return accordingly.

IRS Publication 5164. The publication contains general and program specific testing information for use with the ACA Assurance Testing System (AATS). AATS refers to both the process and the system used to test software and electronic transmissions prior to accepting software developers, transmitters, and issuers into the AIR system. Software developers are required annually to pass AATS submissions and test scenarios for the forms that they will support. Transmitters and issuers are required to pass communication tests for the forms they will file. Publication 5164 covers all of the forms noted above. AATS testing typically begins in early November for first-time software developers and transmitters.

Software developers need a new Software ID for each tax year and each ACA information return type that they support. The software information must be updated yearly on the “ACA Application for TCC” available on the "Affordable Care Act (ACA) Services" webpage.

Post Cereal Wins Lawsuit by Workers Claiming They Were Not Paid for the Time Taken To Don/Doff Uniforms

A federal district court has granted summary judgment to Post Foods LLC on claims by factory workers that they were not paid for the time it took them to don/doff required uniforms [Howard v. Post Foods, LLC, DC MI, Dkt. No 1:19-cv-570, 9/14/2022, 2022 WL 4233221].

The facts. Manufacturing employees at a Post Cereal plant in Michigan were required to wear uniforms. Originally, employees could change into their uniforms at the plant, but they were not required to do so. Some employees put their uniforms on at home before traveling to the plant. Post has never paid its employees for time spent changing into or out of their uniforms and shoes. Pre-2016, these uniforms consisted of khaki pants, a Post tshirt, and safety shoes.

In negotiating a 2016 collective bargaining agreement (CBA) with the workers, Post proposed a new uniform policy, which the parties refer to as the "captive uniform policy" or "CUP." That policy would require employees to wear uniforms supplied by Post, and to don and doff those uniforms while at the plant. The new policy was meant to help stop the spread of microcontaminants.

Employees would no longer be allowed to wear their uniforms or safety shoes outside the plant. The time spent changing into the uniforms would remain unpaid. The company also imposed COVID-19 screening tests as part of the process.

The workers allege that the new uniform policy significantly increased the time they spent on the work premises, and that the mandatory COVID-19 screenings also increased their pre-shift time at the plant. They asserted that they should be paid for complying with the CUP before and after their shifts and for time spent undergoing the pre-shift COVID-19 screenings.

The law. Post argues that the pre-shift and post-shift activities are not compensable under the Portal-to-Portal Act (PPA), (29 U.S.C. § 254(a)). The PPA exempts work-related activities that are "preliminary" or "postliminary" to the "principal activity or activities" which the employee is "employed to perform.”

The ruling. The court determined that the workers failed to show that the uniform changes and coronavirus screenings were “principal activities entitled to compensation,” Additionally, federal law excludes some of those activities from compensation requirements. 

State Payroll Tax News

Arizona—Governor Announces State Flat Tax Taking Effect in 2023

Arizona Governor Ducey has announced that a 2.5% flat income tax rate will take effect on January 1, 2023. This income tax change is taking effect one-year ahead of schedule due to an economic threshold that Arizona has met. Arizona's flat income tax rate will be the lowest in the U.S. next year. The flat tax rate is part of state legislation that  Ducey signed into law last year.  Ducey directed the Arizona Department of Revenue Director Robert Woods to implement the next phase of the flat tax package one-year ahead of schedule  in a letter on September 29, 2022.

California—Payroll Tax Relief for Employers Affected by Fires

The California Employment Development Department (EDD) has announced that employers in Madera County, Modoc County, and Siskiyou County directly affected by the Fork Fire, Barnes Fire, and Mountain Fire may request up to a two month extension of time from the EDD to file their state payroll reports and/or deposit payroll taxes without penalty or interest. A written request for extension must be received within two months from the original delinquent date of the payment or return [EDD Tax Branch News #499].

California—Paycheck Protection Conformity and Employee Credits

Recent legislation excludes from gross income any covered loan amount forgiven pursuant to the federal Paycheck Protection Program (PPP) Extension Act of 2021 (Public Law 117-6), and amends and creates employee-related tax credits. The exclusion is applicable to taxable years on or after January 1, 2019. Technical corrections were made to the small business hiring credit. For taxable years beginning on or after January 1, 2024, a credit against net tax is created for dues paid by an individual to a bona fide labor organization [L. 2022, A158 (c. 737), effective 09/29/2022].

California—Palo Alto Minimum Wage Increasing to $17.25 Per Hour in 2023

Effective January 1, 2023, the minimum wage rate for the City of Palo Alto is $17.25 per hour. The minimum wage rate is adjusted each January. Covered employers must pay the hourly minimum wage rate to each employee who performs two hours or more of work per week in Palo Alto.

California—New Legislation Amends State WARN Act to Establish Call Center Specific Provisions

New legislation (Assembly Bill 1601) establishes provisions for call centers under the California Worker Adjustment and Retraining Act (WARN) Act. Effective January 1, 2023, a call center employer is prohibited from ordering the relocation of a call center, or one or more of its facilities or operating units within a call center, unless notice of the relocation is provided to the affected employees and the Employment Development Department (EDD), local workforce investment board, and the chief elected official of each city and county government within which the termination, relocation, or mass layoff occurs 60 days before the order takes effect. The bill establishes that if a call center employer fails to provide notice of relocation, the employer will be found to be  ineligible to be awarded or have renewed state grants or state-guaranteed loans for five years or claim a tax credit for five taxable years [L. 2022, A1601].

California—Governor Signs Legislation Making It Unlawful for Employers Not to Grant Bereavement Leave to Employees

California Governor Newsom has signed legislation, effective January 1, 2023, into law that makes it an unlawful employment practice for an employer to refuse to grant a request by an eligible employee to take up to five days of bereavement leave upon the death of a family member. The leave must be completed within three months of the date of death. Assembly Bill 1949 requires that leave be taken pursuant to any existing bereavement leave policy of the employer. Under the bill, in the absence of an existing policy, the bereavement leave may be unpaid. However, the bill would authorize an employee to use certain other leave balances otherwise available to the employee, including accrued and available paid sick leave. The bill does not apply to an employee who is covered by a valid collective bargaining agreement that provides for prescribed bereavement leave and other specified working conditions [L. 2022, A1949].

California—Governor Signs Bill that Modifies Maximum Withholding Amount from Garnishment

California Governor Newsom has signed legislation into law providing that the maximum amount of disposable earnings of a judgment debtor for any workweek that is subject to levy must not exceed the lesser of 20% of the individual’s disposable earnings for that week or 40% of the amount by which the individual’s disposable earnings for that week exceed 48 times the state minimum hourly wage. Senate Bill 1477 also reduces the multipliers used to determine the maximum amount of earnings subject to levy for any pay period other than a weekly pay period. The effective date for the provisions in this bill is September 1, 2023 [L. 2022, S1477].

California—Long Beach 2023 Minimum Wage Announced

The California City of Long Beach has announced, beginning January 1, 2023, the local minimum wage will increase to $15.50 per hour for employers of all sizes. In 2022, there were two minimum wage rates in effect for employers with 26 or fewer employees and those with more than 26 employees. There is a minimum wage rate in effect for hotel workers of $16.73 per hour and concessionaire workers of $16.55 per hour, effective July 1, 2022. Increases to these rates will be announced in 2023. 

California—Governor Signs Two COVID-19 Bills Extending Paid Supplemental Leave, Providing for Grants, and Requiring Notice of Exposure

California Gov. Gavin Newsom has signed Assembly Bill 152 and Assembly Bill 2693 related to COVID-19 measures. A152 extends the expiration date for the 2022 COVID-19 Supplemental Paid Sick Leave program from September 30, 2022 to December 31, 2022. The bill allows an employer to require additional diagnostic test results and if such results are not submitted, the employer is not required to provide additional COVID-19 supplemental paid sick leave. The bill also establishes a grant of up to $50,000 for qualified small businesses and nonprofits with 26 to 49 employees, to cover the costs of the COVID-19 supplemental paid sick leave requirements incurred between January 1, 2022 and December 31, 2022. A2693 modifies the employee notice requirements for potential COVID-19 exposure. The bill requires, until January 1, 2024, employers to notify employees of potential COVID-19 exposure and display a notice at the workplace of case-related information for at least 15 calendar days [L. 2022, A152; L. 2022, A2693].

California—Legislation Prohibits Employee Retaliation for Refusing to Report to Work During Emergency Conditions

California Governor Newsom has signed legislation into law that prohibits an employer, in the event of an emergency condition, from taking or threatening adverse action against any employee for refusing to report to, or leaving, a workplace or worksite within the affected area because the employee has a reasonable belief that the workplace or work site is unsafe, except as specified. Senate Bill 1044 also prohibits an employer from preventing any employee, including employees of public entities, as specified, from accessing the employee’s mobile device or other communications device for seeking emergency assistance, assessing the safety of the situation, or communicating with a person to confirm their safety. In addition, the bill requires an employee to notify the employer of the emergency condition requiring the employee to leave or refuse to report to the workplace or worksite, as specified. The provisions are not intended to apply when emergency conditions that pose an imminent and ongoing risk of harm to the workplace, the worksite, the worker, or the worker’s home have ceased [L. 2022, S1044].

California—New Legislation Amends Disability and Paid Family Leave Benefit Amounts

New legislation (Senate Bill 951) extends increased wage replacement rates for State Disability Insurance (SDI) and Paid Family Leave (PFL) that were set to sunset at the end of the year. The wage replacement rates were to end on January 1, 2023. The legislation extends this date to January 1, 2025. For claims beginning on or after January 1, 2025, the formulas for determining benefits under both programs are revised to provide an increased wage replacement rate ranging from 70 to 90% based on the individual’s wages earned. In addition, the legislation removes the limitation for the taxable wage ceiling to be four times the maximum weekly benefit amount multiplied by 13 and divided by 55%, effective January 1, 2024 [L. 2022, S951].

California—Multiple Localities Announce Minimum Wage Increases in 2023

A number of California localities have announced that their minimum wage rate is increasing on January 1, 2023. California has dozens of local tax jurisdictions with their own minimum wage rate ordinances. The latest announcements for 2023 minimum wage rate increases include: Belmont ($16.75 per hour); El Cerrito ($17.35 per hour); Hayward ($15.50 per hour for small employers with 25 or fewer employees and $16.34 per hour for large employers); San Diego ($16.30 per hour); and San Mateo ($16.75 per hour).

Colorado—State Allows Subtraction of Taxpayer Wages Disallowed for Federal Tax Purposes Under Certain Circumstances

A recent Colorado Department of Revenue private letter ruling says that under the specific circumstances at issue, Colorado allows a subtraction of taxpayer wages that were disallowed for federal tax purposes under Code Sec. 3134(e). The company in question is a Colorado S corporation that owns and operates two restaurants in the state. In 2021, the company claimed the employee retention credit (ERC) for employers subject to closure due to COVID-19 under Code Sec. 3134(e). Company reduced its federal deduction for wages and salaries. This reduction increased the company’s federal taxable income. Under the specific circumstances at issue here, Colorado allowed a subtraction for the wages. This ruling cannot be relied upon by any other taxpayer [Colorado Private Letter Ruling No. PLR-22-006, 09/30/2022].

Colorado—State Labor Department Files Four Proposed Rules Including Minimum Wage Increase for 2023

The Colorado Department of Labor and Employment's (CDLE) Division of Labor Standards and Statistics (DLSS) has filed four sets of proposed rules that would amend wage protection rules, whistleblower ("WARNING") rules, adjusted labor compensation ("2023 PAY CALC") order, and the prevailing wage and residency rules. Gov. Polis previously announced a minimum wage increase to $13.65 per hour, beginning January 1, 2023. The proposed 2023 PAY CALC reiterates that increase and includes proposed salary threshold for various overtime exemptions. The hearing takes place on November 1, 2022 from 3:00 pm until at least 6:00 pm MST. Written comments are due by November 3, 2022 at 5:00 pm MST. Written comments may be submitted by: (1) the CDLE's online rulemaking comment form; (2) mail to Division of Labor Standards and Statistics, 633 17th Street, Denver, Colorado 80202; (3) fax to (303) 318-8400; or (4) email to

District of Columbia—Employers to Use New Income Tax Rates for Withholding

The District of Columbia's Office of Tax and Revenue (OTR) expects employers to use the increased rate of 10.75% to calculate withholding on single earners making $250,000 or more beginning in January 2022. The Income Tax Fairness Amendment Act of 2021 passed in August of that year, but was not effective until 2022. The OTR has not yet released supporting documentation for this calculation, such as withholding methods or tables.

Florida—IRS Adjusts Disaster Tax Relief Date for Payroll Tax Deposits for Holiday

The IRS has corrected its prior disaster relief announcement. The tax relief postpones various tax filing and payment deadlines that occurred starting on September 23, 2022. Taxpayers will have until February 15, 2023 to file quarterly payroll tax returns that are normally due on October 31, 2022 and January 31, 2023. Penalties on payroll and excise tax deposits due on or after September 23, 2022, and before October 11, 2022, will be abated as long as the tax deposits are made by October 11, 2022. The date has been adjusted from October 10 to October 11 due to a federal holiday observance [FL-2022-19, updated 10/5/2022].

Florida—Governor Waives Work Search and Other Unemployment Requirements for Persons Affected by Hurricane Ian

On October 1, 2022, Florida Governor Ron DeSantis announced that the work search reporting, waiting week, and Employ Florida registration requirements for Reemployment Assistance claims have been temporarily waived for Floridians impacted by Hurricane Ian in FEMA disaster-declared counties. 

Florida—State Issues Minimum Wage Rate Poster for September 30 Increase

Effective September 30, 2022, Florida's minimum wage rate increased to $11.00 per hour (minimum wage of at least $7.98 per hour for tipped employees). On November 3, 2020, Florida voters approved a constitutional amendment to gradually increase the state's minimum wage each year until reaching $15.00 per hour in September 2026. The 2022 to 2023 minimum wage rate poster must be posted where it can be easily viewed by employees. An employer found liable for intentionally violating minimum wage requirements is subject to a fine of $1,000 per violation.

Hawaii—Bulk Filing and Form W-2 Handbooks Updated

The Hawaii Department of Taxation (DOTAX) has issued updated versions of Publication EF-10 (EFW2 and EFW2C Format Forms W-2 and W-2C Electronic Filing Specifications Handbook) and Publication EF-9 (Bulk Filing System Reporting Agents and Transmitters Handbook). These versions are revised as of October 2022. Employers that are required by the federal government to electronically file Form W-2 or Form W-2C must also electronically transmit these informational returns to DOTAX. The EFW2 and EFW2C files may be transmitted to DOTAX using the two transmission methods outlined in Publication EF-10. The DOTAX Hawaii Bulk Filing System (HBFS) is a system of hardware, software, and procedures that allows transmitters and reporting agents to file electronically by transmitting a ZIP and PGP encrypted file containing multiple tax returns via Secure File Transfer Protocol (SFTP). Bulk filing eliminates the requirement to submit hardcopy documents, reduces administrative cost, and is free. 

Iowa—DOR Adopts Several Regulations

The Iowa Department of Revenue (DOR) has adopted several regulations pertaining to income tax withholding and reporting. First, an amendment to Iowa Admin. Code § 701—8.5(2)(a) (Electronic Filing of Returns), effective November 9, 2022, to reflects a recent law change that eliminates the use of whole dollars when filing certain business income and franchise tax returns. Also, new Iowa Admin. Code § 701—10.9 (Failure To File Penalty), effective November 9, 2022, reflects law changes to the penalty imposed on a taxpayer for failure to file a tax return within 90 days of written notice from the DOR. The new rule describes the demand letter that will be sent to a taxpayer to start the 90-day period and explains what constitutes a showing of "good reason" for which the penalty may be waived. , Effective November 9, 2022, amendments to various regulations (Iowa Admin. Code § 701—7.3; —7.19(8)(d); —39.2(1); —48.9(1); —52.2(1); —58.2(1); —70.2; —70.6(1)(b); —70.15; —78.2; —78.6(1)(b); —78.14; —87.3(7); and —89.4(8)) reflect recent law changes relating to due dates for submissions to the DOR that fall on Saturdays, Sundays, and holidays. When the due date for filing a return or other document with the DOR or the due date for the DOR to take any action falls on a Saturday, Sunday, or any holiday, the act is considered to be performed timely if the act is performed on or before the first business day following the Saturday, Sunday, or holiday. Finally, effective November 14, 2022, amendments to Iowa Admin. Code § 701—7.33 on personal service and paperless delivery of notices, correspondence, and other communication from the DOR to taxpayers and their authorized representatives. A taxpayer's authorized representative is responsible for keeping the representative's address updated with the DOR. When such a notice is sent to a representative's last-known address, the notice is legally effective even if the representative never receives it. The rule also describes the functionality of the DOR’s e-services portal, GovConnectIowa, regarding paperless delivery.

Missouri—Governor Signs Legislation Reducing Income Taxes

Missouri Governor Michael L. Parson has signed legislation that reduces the top rate of individual income tax with the possibility of further reductions if state revenues meet or exceed certain thresholds and exempts taxpayers’ first $1,000 of income from taxation. (L. 2022, S3 (1st Extra. Sess.), applicable to tax years beginning on or after 01/01/2023.) For the 2023 calendar year, the bill repeals all currently scheduled rate reductions and, applicable to tax years beginning on or after Jan. 1, 2023, reduces the top rate of individual income tax from 5.3% to 4.95% (note that this also means that the supplemental tax rate will be reduced to 4.95%, beginning Jan. 1, 2023). Beginning with the 2024 calendar year, the top rate of tax may be reduced by 0.15% to 4.8% if the amount of net general revenue collected in the previous fiscal year exceeds the highest amount of net general revenue collected in any of the three fiscal years prior to such fiscal year by at least $175 million. The legislation provides for three additional potential 0.1% reductions in the top rate of tax, for an eventual rate of 4.5%.  The bill also provides additional reductions only will be effective if the amount of net general revenue collected in the previous fiscal year exceeds the highest amount of net general revenue collected in any of the three fiscal years prior to such fiscal year by at least $200 million and exceeds the amount of net general revenue collected in the fiscal year five years prior, adjusted annually by the percentage increase in inflation over the preceding five fiscal years. The amount of net general revenue collected required to reduce the top rate of tax from 4.8% to 4.5% will be adjusted annually by the percent increase in inflation. Any modification of tax rates will only apply to tax years that begin on or after a modification takes effect.

Missouri—General Assembly Approves Legislation Cutting Income Taxes

The Missouri General Assembly has passed S3 (1st Extra. Sess.), which would, for tax years beginning on or after January 1, 2023, reduce the top rate of individual income tax from the current rate of 5.3% to 4.95% with the possibility of further reductions if state revenues meet or exceed certain thresholds. The legislation allows for an additional 0.15% general revenue-growth-dependent reduction in calendar year 2024 to 4.8% and three additional 0.1% general revenue-growth-dependent reductions until the rate reaches 4.5%. The additional cuts would be dependent upon revenue growth benchmarks tied to inflation. Additionally, for all tax years beginning on or after January 1, 2023, the legislation would exempt the first $1,000 of income from taxation. Currently, the law exempts the first $100 of a taxpayer's income from taxation. The legislation has now gone to Governor Mike Parson for his signature.

Montana—Minimum Wage Increasing to $9.95 Per Hour in 2023

The Montana Department of Labor and Industry (DLI) has issued its 2023 minimum wage announcement. The Montana minimum wage is adjusted annually in accordance with the Consumer Price Index (CPI), and effective Jan. 1, 2023 the minimum wage will increase from $9.20 per hour to $9.95 per hour. However, businesses not covered by the Fair Labor Standards Act (FLSA) whose gross annual sales are $110,000 or less may pay $4.00 per hour. But if an individual employee is producing or moving goods between states or otherwise covered by the FLSA, that employee must be paid the greater of either the federal minimum wage or Montana's minimum wage. The DLI has also released 2023 minimum wage posters in English and Spanish. Minimum wage postings are optional, but employers should consider displaying them alongside the required labor postings. Additionally, Montana has no tip credit, meal credit, or training wage provisions in its wage and hour laws. 

New York—Overtime Threshold for Farm Workers Will be Lowered Over 10 Years

The New York Department of Labor (DOL) Commissioner Roberta Reardon has issued an order accepting the recommendation of the Farm Laborers Wage Board to lower the overtime threshold for farm laborers to 40 hours per week (currently, 60 hours per week) by January 1, 2032. The Board's recommendation following a two-year process and 14 public meetings and hearings. The proposed rule would set forth the following schedule for lowering the overtime threshold, requiring overtime to be paid to farm laborers at: (a) 60 hours per week on or after January 1, 2020; (b) 56 hours per week on or after January 1, 2024; (c) 52 hours per week on or after January 1, 2026; (d) 48 hours per week on or after January 1, 2028; (e) 44 hours per week on or after January 1, 2030; and, (f) 40 hours per week on or after January 1, 2032.

New York—Minimum Wage Increase Announced

New York has released its official minimum wage rates as of December 31, 2022. The minimum wage for New York City, as well as Long Island and Westchester County, will remain at $15.00 per hour. For the remainder of the state, the minimum wage will increase to $14.20 per hour (currently, $13.20 per hour). The minimum wage for tipped service workers will remain at $12.50 per hour for New York City, Long Island, and Westchester County with a $2.50 per hour tip credit. However, for the remainder of the state, the minimum cash wage will rise to $11.85 with a $2.35 per hour tip credit (currently $11.00 minimum cash wage with a $2.20 per hour tip credit). For tipped food service workers, the minimum cash wage will remain at $10.00 per hour in New York City, Long Island and Westchester County with a $5.00 per hour tip credit. But for the remainder of the state, the minimum cash wage will increase $9.45 per hour with a $4.75 per hour tip credit (currently, $8.80 per hour with a $4.40 per hour tip credit). 

North Carolina—IRS Announces Disaster Tax Relief for Hurricane Ian Victims

The IRS has announced payroll tax relief for victims of Hurricane Ian throughout North Carolina. The tax relief postpones various tax filing and payment deadlines that occurred starting on September 28, 2022. Taxpayers will have until February 15, 2023 to file quarterly payroll tax returns that are normally due on October 31, 2022 and January 31, 2023. Penalties on payroll and excise tax deposits due on or after September 28, 2022, and before October 13, 2022, will be abated as long as the tax deposits are made by October 13, 2022 [IR 2022-173, 10/05/2022].

Ohio—2023 Minimum Wage Increases to $10.10 Per Hour

The Ohio Department of Commerce has announced that the state minimum wage will increase from $9.30 per hour to $10.10 per hour, beginning January 1, 2023. The cash minimum wage for tipped workers will increase from $4.65 per hour to $5.05 per hour in 2023. The state minimum wage wage rate applies to employees of business with annual gross receipts of $371,000 or more per year (previously, $342,000 or more per year). The minimum wage is tied to the Consumer Price Index (CPI-W) which increased by 8.7% during the relevant period. The minimum wage for workers aged 14 and 15 and employers with annual gross receipts of less than $371,00 per year is $7.25 per hour in 2023. The Department has released the 2023 minimum wage poster.

Ohio—Trial Court Rules in Favor of Nonresident Remote Worker in Municipal Income Tax Case

The Cuyahoga County Court of Common Pleas held that Cleveland was prohibited from collecting municipal income taxes from a Pennsylvania resident on income she earned outside of the city while working remotely for her Ohio employer during the COVID-19 pandemic, and she was entitled to a refund of all withholding or payments that had been collected on such income. Before the pandemic, the taxpayer commuted to her office in Cleveland and stayed there during the week, returning home on the weekends. Up until 2020, she successfully filed for income tax refunds from Cleveland for the days she worked outside of the city. In response to COVID-19, the Ohio governor declared a state of emergency and a stay-at-home order was issued. Therefore, to comply with the order, the taxpayer began remotely working exclusively from her Pennsylvania home. On March 27, 2020, L. 2020, H197 was enacted. Section 29 of the legislation provided that, for the period of emergency declared by the governor in response to the COVID-19 pandemic and up to 30 days after that period, "any day on which an employee performs personal services at a location, including the employee's home, to which the employee is required to report for employment duties because of the declaration shall be deemed to be a day performing personal services at the employee's principal place of work." The taxpayer's Ohio employer, therefore, continued to withhold municipal income tax from her wages. For the period March 13, 2020 through December 31, 2020, when she had worked full-time from Pennsylvania, her refund request was denied by Cleveland. The taxpayer filed this lawsuit, arguing that the legislature through Section 29 could not expand a municipality's jurisdiction to tax non-residents of Ohio on work performed outside of the state and that the section was unconstitutional. The court concluded, in pertinent part, that Section 29 was constitutional on its face, but it was not constitutional as applied to the taxpayer, i.eSection 29 cannot be applied to assess income tax against a nonresident for wages earned on work performed outside of Ohio. Further, the court distinguished from its holding a line of recent cases specific to the constitutional authority to levy municipal income taxes that held against the taxpayers, because in those cases the taxpayers were Ohio residents [Morsy v. Dumas, Ohio Ct. of Common Pleas, Cuyahoga County, Case No. CV 21 946057, 09/26/2022]. 

Oregon—Oregon Taxpayer Advocate Highlights Taxpayer Bill of Rights

The Oregon Taxpayer Advocate has announced a new initiative to educate Oregon taxpayers about the state's Taxpayer Bill of Rights. While the rights themselves have not changed, taxpayers can now visit a webpage dedicated to providing an easy-to-understand summary of their rights. In addition to the new website, the agency has begun a social media campaign highlighting the Taxpayer Bill of Rights, and it created a new, easier to understand version of its "Your Rights as an Oregon Taxpayer" document [Taxpayer Advocate Highlights Oregon's Taxpayer Bill of Rights, Or. Dept. Rev., 10/05/2022].

Oregon—DOR Proposes Regulations for Interest on Deficient and Delinquent Taxes

The Oregon Department of Labor proposed regulations for interest on deficient and delinquent taxes. The proposed regulations would set the interest rate to 6%, beginning January 1, 2023. A public hearing has been scheduled for November 17, 2022 and may be accessed through Zoom (Meeting ID: 160 267 3854, Passcode: 030839) [DOR Proposed Regulations, 150-305-0140, 150-305-0142, 9/30/2022].

Oregon—BOLI Updates FAQs on Employer Tax Credit for Agriculture Worker Overtime Pay

The Oregon Bureau of Labor & Industries (BOLI) has updated its FAQs regarding the Employer Tax Credit for Agriculture Worker Overtime Pay. Legislation (L. 2022, H4002) eliminates the exemption from overtime requirements for agricultural workers with a six-year phase-in period (2023 through 2028) by implementing a maximum number of hours worked. In 2023, the overtime threshold is 55 hours.  To ease the transition, the legislation also provides an employer overtime tax credit. The available tax credit is a percentage of overtime costs based on the number of employees. The updated FAQs explain when a refund will be made to the taxpayer and who is an eligible employer for the credit.

Pennsylvania—Holders of Unclaimed Property Warned of Phishing Scam

The Pennsylvania State Treasurer is alerting unclaimed property holders of a phishing scam. An entity is sending an email thanking the recipient for attending an unclaimed property event and indicates that a "certificate" is ready for download. The Treasurer's office is warning that the email does not originate from them and recipients should not download the certificate. Any questions regarding the email may be directed to Pennsylvania Treasury Department’s Bureau of Unclaimed Property at or (800) 379-3999.

Puerto Rico—PRDOT Provides Guidance on Qualified Disaster Relief Payments and Loans

The Puerto Rico Department of the Treasury (PRDOT) released Circular Letter No. 22-14 that provides guidance on qualified disaster relief payments and loans to employees and independent contractors in response to Hurricane Fiona. For a payment to be deemed a qualified disaster relief payment: (1) the payment must be made during September 19 to December 31, 2022 (eligibility period); (2) the total amount paid must be in addition to compensation or payment ordinarily required; (3) payments are not made in favor of highly paid employees; and (4) payments are limited to $2,000 per month for each employee or independent contractor and may not exceed $4,000 during the eligibility period. Qualified disaster relief payments must be reported as exempt payments on Form 499R-2/W-2PR, (Withholding Statement "W-2PR"), of each employee using Part 16 , 17 or 18, and Code "G." For payments made to an independent contractor, they must be reported on line 20, "Other payments not subject to Alternate Basic Tax" of Form 480.6D (Informative Return - Exempt and Excluded Income and Exempt Income Subject to Alternate Basic Tax). Employers will not need to recognize the amount of interest that would have been applied to interest-free loans of up to $20,000 given to employees or independent contractors during the eligibility period [PRDOT, Internal Revenue Circular Letter No. 22-14, 10/04/2022].

Puerto Rico—DTRH Postpones Expiration Dates of Administration Procedures for Hurricane Fiona

The Puerto Rico Departamento del Trabajo y Recursos Humanos (DTRH) has announced in Secretary Memorandum No. 2022-08 that due to the state of emergency caused by Hurricane Fiona, administrative procedures and terms that were due to expire on September 18, 2022 will be suspended until otherwise arranged. After restoration of utilities and drinking water in DTRH facilities, any expiration dates between September 19 and October 14 will run until October 17, 2022 [DTRH Secretary's Memorandum No. 2022-08, 9/30/2022].

South Carolina—IRS Announces Disaster Tax Relief for Hurricane Ian Victims

The IRS has announced payroll tax relief for victims of Hurricane Ian throughout South Carolina. The tax relief postpones various tax filing and payment deadlines that occurred starting on September 25, 2022. Taxpayers will have until February 15, 2023 to file quarterly payroll tax returns that are normally due on October 31, 2022 and January 31, 2023. Penalties on payroll and excise tax deposits due on or after September 25, 2022, and before October 11, 2022, will be abated as long as the tax deposits are made by October 11, 2022 [IR 2022-173, 10/05/2022].

Washington—Seattle Announces 2023 Minimum Wage Rates

The Seattle Office of Labor Standards has announced the 2023 minimum wage rates. For large employers (501 or more employees), the minimum wage rate will increase from $17.27 per hour to $18.69 per hour. For small employers (500 or fewer employees) who do pay at least $2.19 per hour toward the employee’s medical benefits and/or where the employee does earn at least $2.19 per hour tips is increased from $15.75 per hour to $16.50 per hour, otherwise the minimum wage rate of $18.69 per hour would apply.

Washington—New WA Cares Rules Adopted

The Washington Employment Security Department (ESD) has announced that final rules have been adopted, effective October 29, 2022, to implement legislative changes to the state's long-term care supports program (WA CARES) under H1732 and H1733. Specifically, these legislative changes delayed the implementation of WA CARES and provided additional exemptions from program participation. The final rules: (1) add three voluntary exemptions and provide deadlines for applying for exemptions; (2) clarify notification requirements and penalties for failure to furnish notices; (3) clarify employer responsibilities for exempt employees and for employees who provide notification they are no longer exempt; (4) delay the date self‐employed individuals may elect program coverage; (5) provide process for determining the hours worked and the wages of individuals who elect program coverage; and (6) provide employer audit procedures. 

Washington—2023 Minimum Wage Rate and Overtime Salary Threshold Announced

The Washington Department of Labor & Industries has announced that the state minimum wage will increase from $14.49 per hour to $15.74 per hour, beginning January 1, 2023. The state does not permit the use of a tip credit toward the state minimum wage rate. The minimum wage for workers aged 14-15 is 85% of the state minimum wage ($13.38 per hour in 2023). Beginning January 1, 2023, the salary threshold for the overtime exemption for executive, administrative, and professional workers has increased to $1,101.80 a week ($57,293.60 a year) for small employers (up to 50 employees) and to $1,259.20 a week ($65,478.40 a year) for large employers (over 50 employees). The salary threshold for the exemption for computer professionals is $55.09 per hour for employers of all sizes. Uber, Lyft, and other rideshare drivers must earn 64¢ per passenger minute and $1.50 per passenger mile, or $5.62, whichever is greater in Seattle. Outside of Seattle, drivers must earn 37¢ per passenger minute and $1.27 per passenger mile, or $3.26, whichever is greater. The overtime exemption for agricultural workers continues to be phased out. Effective January 1, 2023, overtime pay is required for hours worked in excess of 48 hours in any one workweek by agricultural workers.

West Virginia—Guidance Issued on Audits

The West Virginia State Tax Department has issued guidance related to audits. The audit selection, entrance interview, records, exit conference, and appeals are covered [West Virginia Taxpayer Services Division Publications No. TSD-450, 09/01/2022].

Wisconsin—Unclaimed Property Voluntary Disclosure Program Applications Accepted February

The Wisconsin Department of Revenue has announced that applications will be accepted from February 1, 2023 to February 28, 2023 for the Unclaimed Property Voluntary Disclosure program. The program allows a holder to remit unclaimed property from the past five years without the assessment of penalties. Once an application is approved, holders will have 120 days to complete the due diligence process and submit the holder report and payment.