Coverage of Wendy Patton’s Testimony on SUTA Dumping – April 2005

Gongwer News Service - April 5, 2005

SB81 Unemployment Compensation

Gongwer News Service

SB81 – To conform state law to federal requirements in the establishment of civil and criminal penalties for manipulating payroll and business transfer information to obtain lower contribution rates in the treatment of Indian tribes as employers; to establish a state disaster unemployment benefit to pay the first week of an individual’s unemployment caused by a major disaster; to make changes involving the appeal process for claims under the unemployment compensation law and to make various changes in the administration of the unemployment compensation law.

Wendy Patton, policy liaison for Policy Matters Ohio, said the scope of the SUTA dumping problem in Ohio has not been precisely measured. However, she said Michigan recently recovered $2.4 million in its first anti-SUTA complaint against a corporation. The term SUTA dumping refers to companies that shift payroll responsibility to others that enjoy a lower level of unemployment taxation. As a result, they pay less into the state unemployment fund.

Policy Matters Ohio recommended two changes in the bill to increase safeguards. One would extend SUTA dumping prevention to Professional Employee Organizations that allow companies to move all or part of their regular workforce onto the payroll of the PEO which handles benefits and taxes. Policy Matters Ohio also proposed tougher penalties on tax advisors. “SUTA dumping is a tax avoidance scheme invented by tax advisors, among them some of the biggest accounting firms in the country,” Ms. Patton said. The current maximum penalty in the bill is $5,000; Policy matters suggested a civil penalty of $5,000 or 50% of the amount of any taxes underpaid, whichever is greater.

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