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PAG LIN 1 1 Section 1. Section 96.3, Code Supplement 1995, is amended 1 2 by adding the following new subsection: 1 3 NEW SUBSECTION. 10. VOLUNTARY INCOME TAX WITHHOLDING. 1 4 All payments of benefits made after December 31, 1996, are 1 5 subject to the following: 1 6 a. An individual filing a new application for benefits 1 7 shall, at the time of filing the application, be advised of 1 8 the following: 1 9 (1) Benefits paid under this chapter are subject to 1 10 federal and state income tax. 1 11 (2) Legal requirements exist pertaining to estimated tax 1 12 payments. 1 13 (3) The individual may elect to have federal income tax 1 14 deducted and withheld from the individual's payment of 1 15 benefits at the amount specified in the Internal Revenue Code 1 16 as defined in section 422.3. 1 17 (4) The individual may elect to have Iowa state income tax 1 18 deducted and withheld from the individual's payment of 1 19 benefits at the rate of five percent. 1 20 (5) The individual shall be permitted to change the 1 21 individual's previously elected withholding status. 1 22 b. Amounts deducted and withheld from benefits shall 1 23 remain in the unemployment compensation fund until transferred 1 24 to the appropriate taxing authority as a payment of income 1 25 tax. 1 26 c. The commissioner shall follow all procedures specified 1 27 by the United States department of labor, the federal internal 1 28 revenue service, and the department of revenue and finance 1 29 pertaining to the deducting and withholding of income tax. 1 30 d. Amounts shall be deducted and withheld under this 1 31 subsection only after amounts are deducted and withheld for 1 32 any overpayment of benefits, child support obligations, and 1 33 any other amounts authorized to be deducted and withheld under 1 34 federal or state law. 1 35 Sec. 2. Section 96.5, subsection 1, paragraph i, Code 2 1 Supplement 1995, is amended to read as follows: 2 2 i. The individual is unemployed as a result of the 2 3 individual's employer selling or otherwise transferring a 2 4 clearly segregable and identifiable part of the employer's 2 5 business or enterprise to another employer which does not make 2 6 an offer of suitable work to the individual as provided under 2 7 subsection 3; however. However, if the individual does 2 8 accept, and works in and is paid wages for, suitable work with 2 9 the acquiring employer, theacquiring employer immediately2 10becomes chargeable for thebenefits paid which are based on 2 11 the wages paid by the transferring employer shall be charged 2 12 to the unemployment compensation fund provided that the 2 13 acquiring employer has not received, or will not receive, a 2 14 partial transfer of experience under the provisions of section 2 15 96.7, subsection 2, paragraph "b". Relief of charges under 2 16 this paragraph applies to both contributory and reimbursable 2 17 employers, notwithstanding section 96.8, subsection 5. 2 18 Sec. 3. Section 96.11, subsection 5, Code 1995, is amended 2 19 by striking the subsection. 2 20 Sec. 4. Section 96.11, subsection 6, Code 1995, is amended 2 21 to read as follows: 2 22 6. EMPLOYMENT STABILIZATION. The commissioner, with the 2 23 advice and aid ofthe advisory council, and throughthe 2 24 appropriate bureaus of the division, shall take all 2 25 appropriate steps to reduce and prevent unemployment; to 2 26 encourage and assist in the adoption of practical methods of 2 27 vocational training, retraining and vocational guidance; to 2 28 investigate, recommend, advise, and assist in the 2 29 establishment and operation, by municipalities, counties, 2 30 school districts, and the state, of reserves for public works 2 31 to be used in times of business depression and unemployment; 2 32 to promote there-employmentreemployment of unemployed 2 33 workers throughout the state in every other way that may be 2 34 feasible; and to these ends to carry on and publish the 2 35 results of investigations and research studies. 3 1 Sec. 5. Section 96.13, subsection 3, paragraph a, 3 2 unnumbered paragraph 1, Code 1995, is amended to read as 3 3 follows: 3 4 There is created in the state treasury a special fund to be 3 5 known as the special employment security contingency fund. 3 6 All interest, fines, and penalties, regardless of when they 3 7 become payable, collectedfrom employersunder section 96.14 3 8 and section 96.16, subsection 4, shall be paid into the fund. 3 9 The moneys shall not be expended or available for expenditure 3 10 in any manner which would permit their substitution for 3 11 federal funds which would in the absence of the moneys be 3 12 available to finance expenditures for the administration of 3 13 the department. However, the moneys may be used as a 3 14 revolving fund to cover expenditures for which federal funds 3 15 have been duly requested but not yet received, subject to the 3 16 charging of the expenditures against the funds when received. 3 17 The moneys may be used for the payment of costs of 3 18 administration which are found not to have been properly and 3 19 validly chargeable against federal grants or other funds, 3 20 received for the department. The moneys in the fund are 3 21 specifically made available to replace, within a reasonable 3 22 time, any moneys received by this state in the form of grants 3 23 from the federal government for administrative expenses which 3 24 because of any action or contingency have been expended for 3 25 purposes other than, or in excess of, those necessary for the 3 26 proper administration of the department. All moneys in the 3 27 fund shall be deposited, administered, and disbursed in the 3 28 same manner and under the same conditions and requirements as 3 29 are provided by law for other special funds in the state 3 30 treasury. Interest earned upon moneys in the fund shall be 3 31 deposited in and credited to the fund. 3 32 Sec. 6. Section 96.16, subsection 4, Code 1995, is amended 3 33 to read as follows: 3 34 4. MISREPRESENTATION. An individual who, by reason of the 3 35 nondisclosure or misrepresentationby the individual or by4 1anotherof a material fact, has receivedany sum asan amount 4 2 of benefits under this chapter while any conditions for the 4 3 receipt of benefitsimposed by this chapterwere not fulfilled 4 4in the individual's case, or while the individual was4 5disqualified from receiving benefits, shall, in the discretion 4 6 of the divisionof job service, either be liable to have the 4 7sumamount deducted from any future benefits payable to the 4 8 individualunder this chapteror shall be liable to repay to 4 9 the division for the unemployment compensation fund,a suman 4 10 amount equal to the amountsoreceived by the individual. If 4 11 the individual fails to repay the overpayment in full within 4 12 ninety days from the date the overpayment becomes final, or 4 13 within ninety days after the date of sentencing in a 4 14 prosecution concerning the overpayment, the individual shall 4 15 also pay a penalty equal to thirty percent of the overpayment 4 16 amount. If the division seeks to recover the amount of the 4 17 benefits or penalty by having the individualpay torepay the 4 18 divisiona sum equal to that amount, the division may file a 4 19 lien with the county recorder in favor of the state on the 4 20 individual's property and rights to property, whether real or 4 21 personal. The amount of the lien shall be collected in a 4 22 manner similar to the provisions for the collection of past- 4 23 due contributions in section 96.14, subsection 3. All 4 24 penalties on overpayments of benefits collected under this 4 25 chapter shall be deposited in the special employment security 4 26 fund created pursuant to section 96.13, subsection 3. 4 27 Sec. 7. Section 96.19, subsection 18, paragraph a, Code 4 28 Supplement 1995, is amended by adding the following new 4 29 subparagraph: 4 30 NEW SUBPARAGRAPH. (9) A member of a limited liability 4 31 company. For such a member, the term "employment" shall not 4 32 include any portion of such service that is performed in lieu 4 33 of making a contribution of cash or property to acquire a 4 34 membership interest in the limited liability company. 4 35 Sec. 8. Section 96.19, subsection 18, paragraph f, Code 5 1 Supplement 1995, is amended to read as follows: 5 2 f. (1) Services performed by an individual for wages 5 3 shall be deemed to be employment subject to this chapter 5 4 unless and until it is shown to the satisfaction of the 5 5 divisionof job servicethat such individual has been and will 5 6 continue to be free from control or direction over the 5 7 performance of such services, both under the individual's 5 8 contract of service and in fact. 5 9 (2) Services performed by an individual for two or more 5 10 employing units shall be deemed to be employment to each 5 11 employing unit for which the services are performed. However, 5 12 an individual who concurrently performs services as a 5 13 corporate officer for two or more related corporations and who 5 14 is paid through a common paymaster that is one of the related 5 15 corporations may, at the discretion of such related 5 16 corporations, be considered to be in the employment of only 5 17 the common paymaster. 5 18 Sec. 9. Section 96.19, subsection 41, Code Supplement 5 19 1995, is amended by adding the following new paragraph: 5 20 NEW PARAGRAPH. e. Any portion of the remuneration to a 5 21 member of a limited liability company based on a membership 5 22 interest in the company provided that the remuneration is 5 23 allocated among members, and among classes of members, in 5 24 proportion to their respective investments in the company. If 5 25 the amount of remuneration attributable to a membership 5 26 interest cannot be determined, the entire amount of 5 27 remuneration shall be deemed to be based on services 5 28 performed. 5 29 Sec. 10. EFFECTIVE AND APPLICABILITY DATE. Section 1 of 5 30 this Act takes effect on January 1, 1997, and is applicable to 5 31 unemployment compensation benefits paid on or after that date. 5 32 EXPLANATION 5 33 Section 1 permits the department of employment services to 5 34 deduct and withhold federal and state income tax from 5 35 unemployment compensation benefits if the claimant chooses. 6 1 This section takes effect January 1, 1997, and applies to 6 2 unemployment compensation benefits paid on or after that date. 6 3 Section 2 allows employers who purchase part of a business 6 4 to be relieved of unemployment insurance charges unless the 6 5 acquiring employer requests and is granted a partial transfer 6 6 of experience. This section of the bill also treats 6 7 reimbursable and contributory employers the same. 6 8 Sections 3 and 4 eliminate the job service advisory 6 9 council. 6 10 Section 6 establishes a 30 percent penalty for an 6 11 individual who is determined to have collected unemployment 6 12 compensation benefits through misrepresentation or 6 13 nondisclosure of a material fact and who has not repaid the 6 14 overpayment within 90 days. Sections 5 and 6 provide that the 6 15 amount of penalty collected will be deposited in the special 6 16 employment security contingency fund. 6 17 Section 7 defines services performed by a member of a 6 18 limited liability company, beyond services performed in making 6 19 a contribution to the membership interest in the company, as 6 20 employment. 6 21 Section 8 allows an individual who is concurrently a 6 22 corporate officer of two or more related corporations, and who 6 23 is paid through only one of those corporations, to be reported 6 24 as an employee of only the corporation that issues the 6 25 paycheck. 6 26 Section 9 limits the definition of wages for purposes of 6 27 unemployment compensation to only the remuneration received by 6 28 limited liability company members above their contributions to 6 29 their membership interest in the company. 6 30 BACKGROUND STATEMENT 6 31 SUBMITTED BY THE AGENCY 6 32 Sections 1 and 10 respond to the General Agreement on 6 33 Tariffs and Trade (GATT) federal law which requires states to 6 34 deduct and withhold federal income tax from unemployment 6 35 compensation benefits if the claimant chooses. The states 7 1 must adopt this legislation by January 1997. This bill also 7 2 authorizes the deduction and withholding of state income taxes 7 3 at the same time as the federal income taxes. This will 7 4 provide a consistent deduction and will ensure state and 7 5 federal income taxes are paid. 7 6 Section 2 relates to legislation passed in 1995 that 7 7 eliminated wage credit liability transfers. The legislation 7 8 inadvertently did not address employers who purchase part of a 7 9 business. This was unintentional and is corrected in this 7 10 bill. One exception continues to exist which is when the 7 11 acquiring employer requests and is allowed a partial transfer 7 12 of experience. An acquiring employer chooses partial 7 13 transfers to reduce its rate and should continue to be charged 7 14 since it was a free choice. 7 15 Sections 5 and 6. Currently, individuals who are 7 16 determined to have collected unemployment benefits through 7 17 misrepresentation as provided in section 96.16 lose the 7 18 ability to collect benefits for up to one year. Those who do 7 19 not file for benefits within three years are not penalized at 7 20 all and those who do file can be heavily penalized. This 7 21 proposal eliminates inconsistencies, is more equitable, and 7 22 will be a greater deterrent for persons who might make a 7 23 misrepresentation because people will know a penalty exists. 7 24 If 100 percent of the penalties are collected, the revenue 7 25 could be up to $465,000 annually, but only a 30 percent 7 26 collection rate is expected. Twenty-five states have a 7 27 similar penalty or interest provision. The penalty for fraud 7 28 in the income tax statues is 75 percent of the tax owed. 7 29 Approximately 70 percent of overpayments due to a 7 30 misrepresentation involve one to four weeks of overpayments; a 7 31 typical example of this is when a person is working and 7 32 collecting unemployment benefits. During 1994, DES set up 7 33 3,761 fraud overpayments of $1,466,150. 7 34 Section 8. Currently, if a corporate officer works for two 7 35 or more related companies and is paid by only one company, 8 1 each company must report and pay unemployment insurance taxes 8 2 on the individuals. This allows one company (the common 8 3 paymaster) to report and pay taxes on the corporate officer 8 4 only once rather than two or more times. 8 5 Sections 7 and 9. The use of limited liability companies 8 6 has increased since their authorization in Iowa in 1992. The 8 7 unemployment insurance tax liability and eligibility for 8 8 benefits is not addressed in Iowa law. The department needs 8 9 direction in the Code on how to deal with limited liability 8 10 company members. 8 11 These sections require the member to be considered employed 8 12 and earning wages if the member is working for the limited 8 13 liability company above the member's contribution to the 8 14 business. The limited liability company is required to pay 8 15 unemployment taxes based on the wages the member earned. 8 16 LSB 3284DP 76 8 17 ec/cf/24.2
Text: SSB02216 Text: SSB02218 Text: SSB02200 - SSB02299 Text: SSB Index Bills and Amendments: General Index Bill History: General Index
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