State business employee taxes remain low
For the third consecutive year South Carolina businesses will only pay the minimum 0 .6 percent per employee for federal unemployment taxes (FUTA) because the Palmetto State once again successfully obtained the maximum 5.4 percent credit for 2013 FUTA.
The South Carolina Department of Employment and Workforce (DEW) announced the news last week in a release.
“Thanks to the great work from our state’s governor, business community and legislators, South Carolina employers will reap the maximum benefits of FUTA cost savings for the third year in a row,” said Cheryl M. Stanton, executive director of SCDEW. “The FUTA credit also reflects the positive overall trend for the state as our unemployment trust fund continues to reach solvency.”
Federal law requires a reduction in the FUTA tax credit (i.e. that the FUTA rate for a state’s employers will increase) when a state has outstanding federal unemployment loans for two consecutive Januarys and has not made sufficient voluntary payments towards the loan and other solvency improvement measures.
Additionally, the reduction in the FUTA tax credit is higher when a state has outstanding federal unemployment loans for five consecutive Januarys—which is the case in South Carolina. However, borrowing states like South Carolina can formally ask the U.S. Department of Labor for the credit reduction to be avoided if they meet certain criteria.
One of the requirements was that South Carolina make a voluntary payment toward the outstanding loan balance before Nov. 10. The state made a $144 million payment in May and a $75 million payment in September.
To date, South Carolina has repaid more than $520 million of the $977 million borrowed from the federal government. The outstanding balance is approximately $455 million, and the state is scheduled to repay the entire loan amount by the end of 2015.