Honorable Robert Bunda

President of the Senate

Twenty-Third State Legislature

Regular Session of 2005

State of Hawaii

Sir:

Your Committee on Labor, to which was referred S.B. No. 817 entitled:

begs leave to report as follows:

The purpose of this measure is to improve the administration of unemployment taxes and eliminate the practice of "dumping" whereby some employers and financial advisors use acquisitions or restructuring schemes, including shifting of workforce and payroll, to pay lower state unemployment taxes.

Testimony in support of this measure was submitted by the Department of Labor and Industrial Relations.

Your Committee finds that pursuant to the State Unemployment Taxes Act (SUTA) Dumping Prevention Act of 2004, P.L. 108-295, the Social Security Act was amended with respect to the administration of unemployment taxes and benefits. The Act requires, as a condition of state eligibility for grants for unemployment compensation administration, changes to state unemployment compensation laws to prevent SUTA dumping. SUTA dumping involves employers and financial advisors using acquisitions or restructuring schemes, including shifting of workforce and payroll, in order to pay lower state unemployment taxes than their unemployment experience would normally allow. Therefore, in order to maintain federal certification to enjoy the benefits of the Federal Unemployment Tax Act tax offset credit and federal administrative grants for the state unemployment insurance program, changes in the current law must be made.

Your Committee has amended this measure by making technical, nonsubstantive amendments for purposes of clarity and style.

As affirmed by the record of votes of the members of your Committee on Labor that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 817, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 817, S.D. 1, and be referred to the Committee on Ways and Means.