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APA Asks Congress to Act on COVID-19-Related UI Taxes

BY: Alice P. Jacobsohn, Esq. | 11/13/20

The APA asked Congress in October to consider new measures to provide relief from substantial increases in unemployment insurance (UI) taxes forecast to begin in 2021 “to avoid impeding economic recovery and discouraging hiring and employment growth.”

According to the U.S. Department of Labor, regular UI benefits (excluding federally reimbursed programs) chargeable to employers increased from $25.5 billion in 2019 to nearly $80 billion in the first seven months of 2020. “The possibility of unemployment tax increases well over 100% in many states could discourage employers from hiring and retaining employees, adding to the burden of this economically fragile time,” APA said.

At issue are requirements under the Federal Unemployment Tax Act (FUTA) and states’ use of taxes collected under the State Unemployment Tax Act. These UI taxes are predominantly paid by employers. The money an unemployed individual receives comes from a state UI program, which is funded by payroll taxes.

Employers should not be responsible for the full cost of unemployment because of COVID-19 government orders, APA said. Business closures and layoffs due to COVID-19 were in response to state and federal government decisions, rather than the normal functioning of the labor market or the actions of employers.

Among other requests, the APA asked Congress to consider contributing to state UI trust fund accounts to pay for increases in unemployment benefits associated with COVID-19 and to delay the application of the FUTA offset credit reduction for one year.

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Alice P. Jacobsohn, Esq., is Director of Government Relations for APA.