SENATE BILL REPORT

SB 5581

BYSenators McCaslin, DeJarnatt and Rasmussen; by request of Office of Financial Management

Establishing liability for state trust funds.

Senate Committee on Governmental Operations

Senate Hearing Date(s):February 14, 1989; February 20, 1989

Majority Report:  That Substitute Senate Bill No. 5581 be substituted therefor, and the substitute bill do pass.

      Signed by Senators McCaslin, Chairman; Pullen, Sutherland.

Senate Staff:Barbara Howard (786-7410)

                  February 20, 1989

AS REPORTED BY COMMITTEE ON GOVERNMENTAL OPERATIONS, FEBRUARY 20, 1989

BACKGROUND:

There are a number of state trust funds for which corporations collect fees or contributions on behalf of the state.  The Department of Revenue has had authority since 1987 to hold corporations accountable for trust fund amounts due the state for withholding of retail sales taxes.  Two other trust funds -- affecting the employee's share of workers' compensation contributions (Department of Labor and Industries) and fees collected from motor vehicle owners for emissions testing (Department of Ecology) -- are not similarly protected.

Since such liability does not exist, the state has lost considerable amounts each year when corporations go out of business or otherwise fail to remit these funds to the state.  The Department of Revenue (DOR) has had this authority since 1987.  In its first full year of operation, assessments have recovered $1.1 million.

SUMMARY:

Any officer of a corporation which is terminated or dissolved is personally liable for any unpaid trust funds due the state, if the officer or other responsible individual has wilfully failed to make such payments.  "Trust fund" is defined as all moneys collected from another on behalf of the state, including but not limited to workers' compensation contributions collected from employees and the state share of vehicle emission testing fees collected from vehicle owners.

Liability extends only to the period during which the officer had responsibility for funds which became due, plus interest and penalties.  Corporate officers are not subject to liability in situations beyond their control.  Provisions are made for appeals and collections procedures.

EFFECT OF PROPOSED SUBSTITUTE:

The Department of Revenue may not act as agent for other departments in pursuing trust fund payments unless an interagency agreement is established.

Appropriation:    none

Revenue:    none

Fiscal Note:      available

Senate Committee - Testified: Bob Jacobs, OFM (pro)