On July 27, Governor Kate Brown signed House Bill 3389, which provides unemployment insurance (UI) tax relief and a 2021 payroll tax deferral for skilled businesses. The tax break program was jointly developed by the Oregon Employment Department, Brown, and the Oregon State Legislature in response to the ongoing COVID-19 pandemic, which has had a significant impact on many businesses.
“There’s no question that Oregon’s economic backbone, our small businesses – as well as the hardworking Oregoners who work in those businesses – have been hit hard by the pandemic,” Brown said. “But in these challenging times, we’ve seen the Oregonians react with creativity and resilience. As we have entered the next chapter of the pandemic and looking to recover, HB 3389 should take some of the pressure off businesses while making sure we can continue to provide unemployment insurance benefits to all of the Oregonians who need them. “
The UI Payroll Tax Relief Plan offers three things:
1. For the UI tax year 2021, eligible employers can defer a third of their UI tax liability until June 30, 2022 and avoid all related interest and penalties
2. Up to 100% of deferred UI taxes 2021 can be waived, depending on how much an employer’s UI tax rate has increased from 2020 to 2021
3. An employer’s tax experience rating from 2022 to 2024 will be reset to the employer’s UI experience rate prior to the 2020 pandemic. Tax rates may fluctuate from 2022 to 2024 due to changes in the tax plan, but the employer’s rate is based on their pre-pandemic experience assessment
The amount of UI tax in 2021 that employers can postpone or waive depends on how much their UI tax rate has increased from 2020 to 2021:
• An increase in the UI tax rates by 0.5% to 1% can only be postponed
• The tax rate has been increased by more than 1.0 percentage point and no more than 1.5 percentage points are entitled to 50% of the deferred UI tax waivers
• Tax rate increased by more than 1.5 percentage points and no more than 2.0 percentage points are entitled to 75% of their deferred UI taxes waived
• Tax rate increased by more than 2.0 descent points will be waived at 100% of deferred UI taxes
Employers must meet all of the following conditions to be eligible for UI tax deferral and remission:
1. By January 1, 2021, have paid all outstanding UI tax contributions and related liabilities, including those set out in a payment schedule approved by the Oregon Employment Department director
2. Submit all required pay slips for 2021 on time AND
3. Pay on time all tax liabilities for 2021 that have not been postponed or waived
There is no application for the UI Payroll Tax Relief Plan. The Department of Labor will automatically include eligible employers in the plan and will contact employers with updates or changes to the entitlement status or requirements throughout the UI tax year 2021.
Participation in the deferment portion of this relief plan could adversely affect an employer’s federal unemployment tax credit. Some employers may not be able to access the full state unemployment tax credit paid on their Federal Unemployment Tax Return (IRS) Form 940 if they pay state unemployment tax after the Federal Form 940 due date. For more information, see irs.gov/instructions/i940.