PROPOSED RULES
Original Notice.
Preproposal statement of inquiry was filed as WSR 10-16-036.
Title of Rule and Other Identifying Information: Amending WAC 192-320-035 and adopting new WAC 192-320-036 How are unemployment insurance tax rates determined for employers who are delinquent on taxes or reports (through rate year 2010/beginning in rate year 2011)?
Hearing Location(s): Employment Security Department, Maple Leaf Conference Room, 2nd Floor, 212 Maple Park Drive, Olympia, WA, on November 9, 2010, at 10:30 a.m.
Date of Intended Adoption: November 12, 2010.
Submit Written Comments to: Pamela Ames, P.O. Box 9046, Olympia, WA 98507-9046, e-mail pames@esd.wa.gov, fax (360) 902-9799, by November 8, 2010.
Assistance for Persons with Disabilities: Contact Tammy Crawford by November 7, 2010, TTY (360) 902-9569 or (360) 902-9577.
Purpose of the Proposal and Its Anticipated Effects, Including Any Changes in Existing Rules: Implements section 1, chapter 72, Laws of 2010 (SSB 6524), by limiting WAC 192-320-035 through rate year 2010 and adopting WAC 192-320-036 for rate years beginning in 2011. The new WAC implements the law restructuring the unemployment insurance tax rate for employers who are delinquent in paying their taxes and filing reports.
Reasons Supporting Proposal: The rule alters the formula for calculating unemployment insurance tax rates for delinquent employers consistent with SSB 6524.
Statutory Authority for Adoption: RCW 50.12.010, 50.12.040.
Statute Being Implemented: RCW 50.29.025.
Rule is not necessitated by federal law, federal or state court decision.
Name of Proponent: Employment security department, governmental.
Name of Agency Personnel Responsible for Drafting: Art Wang, 212 Maple Park Drive, Olympia, WA, (360) 902-9587; Implementation and Enforcement: Nan Thomas, 212 Maple Park Drive, Olympia, WA, (360) 902-9303.
No small business economic impact statement has been prepared under chapter 19.85 RCW. The proposed rule will not impose more than minor costs on businesses, nor will there be a disproportionate impact on small business. Any business costs associated with the rule are the result of the underlying legislation.
A cost-benefit analysis is required under RCW 34.05.328. A preliminary cost-benefit analysis may be obtained by contacting Juanita Myers, Employment Security Department, P.O. Box 9046, Olympia, WA 98507-9046, phone (360) 902-9665, fax (360) 902-9799, e-mail jmyers@esd.wa.gov.
October 5, 2010
Paul Trause
Commissioner
OTS-3581.1
AMENDATORY SECTION(Amending WSR 09-24-009, filed 11/20/09,
effective 12/21/09)
WAC 192-320-035
How are unemployment insurance tax rates
determined for employers who are delinquent on taxes or
reports through rate year 2010?
For rate years through 2010:
(1) An employer that has not submitted by September 30 all reports, taxes, interest, and penalties required under Title 50 RCW for the period preceding July 1 of any year is not a "qualified employer."
(2) For purposes of this section, the department will disregard unpaid taxes, interest, and penalties if they constitute less than either one hundred dollars or one-half of one percent of the employer's total tax reported for the twelve-month period immediately preceding July 1. These minimum amounts only apply to taxes, interest, and penalties, not to failure to submit required reports.
(3)(a) This section does not apply if the otherwise qualified employer shows to the satisfaction of the commissioner that he or she acted in good faith and that application of the rate for delinquent taxes would be inequitable. This exception is to be narrowly construed to apply at the sole discretion of the commissioner, recognizing that the delinquent tax rate only applies after the employer has already received a grace period of not less than two months beyond the normal due date for reports and taxes due. The commissioner's decision shall be subject to review only under the arbitrary and capricious standard and shall be reversed in administrative proceedings only for manifest injustice based on clear and convincing evidence.
(b) Except for services under RCW 50.04.160 performed in domestic service in a private home, local college club, or local chapter of a college fraternity or sorority, the commissioner will not find in the usual course of business that application of the rate for delinquent taxes would be inequitable:
(i) If the employer has been late with filing or with payment in more than one of the last eight consecutive quarters immediately preceding the applicable period;
(ii) If the delinquency was due to absences of key personnel and the absences were because of business trips, vacations, personnel turnover, or terminations;
(iii) If the delinquency was due to adjusting by more than two quarters the liable date when the employer first had employees; or
(iv) If the employer is a successor, the rate for delinquent taxes is based on the predecessor, and the successor could or should have determined the predecessor's tax status at the time of the transfer.
(c) Examples of when the commissioner may find that application of the rate for delinquent taxes would be inequitable include if the delinquency results from:
(i) An employer reducing its tax payment by the amount specified as a credit on the most recent account statement from the department, when the credit amount is later determined to be inaccurate;
(ii) Taxes due which are determined as the result of a voluntary audit;
(iii) Resolution of a pending appeal and any amounts due are paid within thirty days of the final resolution of the amount due or the department approves a deferred payment contract within thirty days of the final resolution of the amount due;
(iv) The serious illness or death of key personnel or their family that extends throughout the period in which the tax could have been paid prior to September 30 and no reasonable alternative personnel were available and any amounts due are paid no later than December 31 of such year; or
(v) An employee or other contracted person committing fraud, embezzlement, theft, or conversion, the employer could not immediately detect or prevent the wrongful act, the employer had reasonable safeguards or internal controls in place, the employer filed a police report, and any amounts due are paid within thirty days of when the employer could reasonably have discovered the illegal act.
(d) When determining whether an employer acted in good faith and that application of the rate for delinquent taxes would be inequitable, the following factors are considered neutral and neither support nor preclude waiver of the rate for delinquent taxes:
(i) The harshness of the burden on the employer caused by application of the rate for delinquent taxes;
(ii) Lack of knowledge by the employer, bookkeepers, accountants, or other financial advisors about application of the law or the potential harshness of the rate;
(iii) Delay by the employer or its representative in opening mail or receiving other notice from the department; or
(iv) Error by a payroll, bookkeeping, or accounting service on behalf of an employer.
(4) The department shall provide notice to the employer or employer's agent that the employer may be subject to the higher rate for delinquent taxes if the employer does not comply with this section. Notice may be in the form of an insert or statement in July, August, or September billing statements or in a letter or notice of assessment. Evidence of the routine practice of the department in mailing notice in billing statements or in a notice of assessment shall be sufficient to establish that the department provided this notice. No notice need be provided to an employer that is not currently registered and active.
(5) An employer that is not a "qualified employer" because of failure to pay contributions when due shall be assigned an array calculation factor rate two-tenths higher than that in rate class 40, unless the department approves a deferred payment contract with the employer by September 30 of the previous rate year. If an employer with an approved deferred payment contract fails to make any one of the payments or fails to submit any tax report and payment in a timely manner, the employer's tax rate shall immediately revert to an array calculation factor rate two-tenths higher than in rate class 40.
(6) An employer that is not a "qualified employer" because of failure to pay contributions when due shall be assigned a social cost factor rate in rate class 40.
(7) Assignment of the rate for delinquent taxes is not considered a penalty which is subject to waiver under WAC 192-310-030.
(8) The amendments to this section effective July 26, 2009, apply only to tax rates assigned after that date.
[Statutory Authority: RCW 50.12.010, 50.12.040, and 50.29.010. 09-24-009, § 192-320-035, filed 11/20/09, effective 12/21/09. Statutory Authority: RCW 50.12.010 and 50.12.040. 07-23-127, § 192-320-035, filed 11/21/07, effective 1/1/08.]
(2) For purposes of this section, the department will disregard unpaid taxes, interest, and penalties if they constitute less than either one hundred dollars or one-half of one percent of the employer's total tax reported for the twelve-month period immediately preceding July 1st. These minimum amounts only apply to taxes, interest, and penalties, not failure to submit required reports.
(3)(a) This section does not apply if the otherwise qualified employer shows to the satisfaction of the commissioner that he or she acted in good faith and that application of the rate for delinquent taxes would be inequitable. This exception is to be narrowly construed to apply at the sole discretion of the commissioner, recognizing that the delinquent tax rate only applies after the employer has already received a grace period of not less than two months beyond the normal due date for reports and taxes due. The commissioner's decision shall be subject to review only under the arbitrary and capricious standard and shall be reversed in administrative proceedings only for manifest injustice based on clear and convincing evidence.
(b) The commissioner will not find in the usual course of business that application of the rate for delinquent taxes would be inequitable:
(i) If the employer has been late with filing or with payment in more than one of the last eight consecutive quarters immediately preceding the applicable period;
(ii) If the delinquency was due to absences of key personnel and the absences were because of business trips, vacations, personnel turnover, or terminations;
(iii) If the delinquency was due to adjusting by more than two quarters the liable date when the employer first had employees; or
(iv) If the employer is a successor, the rate for delinquent taxes is based on the predecessor, and the successor could or should have determined the predecessor's tax status at the time of the transfer.
The limitations in (b) of this subsection do not apply to services under RCW 50.04.160 performed in domestic service in a private home, local college club, or local chapter of a college fraternity or sorority.
(c) Examples of when the commissioner may find that application of the rate for delinquent taxes would be inequitable include if the delinquency results from:
(i) An employer reducing its tax payment by the amount specified as a credit on the most recent account statement from the department, when the credit amount is later determined to be inaccurate;
(ii) Taxes due which are determined as the result of a voluntary audit;
(iii) Resolution of a pending appeal and any amounts due are paid within thirty days of the final resolution of the amount due or the department approves a deferred payment contract within thirty days of the final resolution of the amount due;
(iv) The serious illness or death of key personnel or their family that extends throughout the period in which the tax could have been paid prior to September 30th and no reasonable alternative personnel were available and any amounts due are paid no later than December 31st of such year; or
(v) An employee or other contracted person committing fraud, embezzlement, theft, or conversion, the employer could not immediately detect or prevent the wrongful act, the employer had reasonable safeguards or internal controls in place, the employer filed a police report, and any amounts due are paid within thirty days of when the employer could reasonably have discovered the illegal act.
(d) When determining whether an employer acted in good faith and that application of the rate for delinquent taxes would be inequitable, the following factors are considered neutral and neither support nor preclude waiver of the rate for delinquent taxes:
(i) The harshness of the burden on the employer caused by application of the rate for delinquent taxes;
(ii) Lack of knowledge by the employer, bookkeepers, accountants, or other financial advisors about application of the law or the potential harshness of the rate;
(iii) Delay by the employer or its representative in opening mail or receiving other notice from the department; or
(iv) Error by a payroll, bookkeeping, or accounting service on behalf of an employer.
(4) The department shall provide notice to the employer or employer's agent that the employer may be subject to the higher rate for delinquent taxes if the employer does not comply with this section. Notice may be in the form of an insert or statement in July, August, or September billing statements or in a letter or notice of assessment. Evidence of the routine practice of the department in mailing notice in billing statements or in a notice of assessment shall be sufficient to establish that the department provided this notice. No notice need be provided to an employer that is not currently registered and active.
(5)(a) An employer that is not a "qualified employer" because of failure to pay contributions when due shall be assigned the array calculation factor rate it would otherwise have had if it had not been delinquent, plus an additional one percent. If the employer fails to pay contributions when due for a second or more consecutive year, it shall be assigned the array calculation factor rate it would otherwise have had if it had not been delinquent, plus an additional two percent.
(b) If the employer fails to provide quarterly tax reports and the department cannot otherwise calculate what tax rate the employer would otherwise have had if it had not been delinquent, the department shall use the higher of the rate calculated under RCW 50.29.025 (2)(d) (NAICS rate with one percent minimum) or the last annual rate assigned to the employer.
(c) The higher rate for an employer in (a) of this subsection shall not apply if the employer enters a deferred payment contract approved by the agency by September 30th of the previous rate year.
(d) If, after September 30th of the previous rate year and within thirty days after the date the department sent its first subsequent tax rate notice to the employer, an employer in (a) of this subsection pays all amounts owed or enters a deferred payment contract approved by the agency, the additional rate shall be one-half percent less than it would otherwise have been in (a) of this subsection. "First subsequent tax rate notice to the employer" means the first notice to the employer assigning that specific delinquent tax rate, regardless of whether the notice is part of the department's annual tax rate run.
(e) If an employer with an approved deferred payment contract fails to make any one of the payments or fails to submit any tax report and payment in a timely manner, the employer's tax rate shall immediately revert to the rate in (a) of this subsection.
(6) An employer that is not a "qualified employer" because of failure to pay contributions when due shall be assigned a social cost factor rate in rate class 40. The tax rate caps for "qualified employers" in RCW 50.29.025 shall not apply either to the calculation of the social cost factor rate in rate class 40 or to the sum of the array calculation factor rate and the graduated social cost factor rate for employers that are not "qualified employers."
(7) An employer that is not a "qualified employer" because it is a successor and its predecessor was not a "qualified employer" shall be assigned rates based on its successor status.
(8) Assignment of the rate for delinquent taxes is not considered a penalty that is subject to waiver under WAC 192-310-030.
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