SB1471

SECTION 1. This Act is aimed at providing sustainability to Hawaii's economy by offering Hawaii employers significant tax relief during the next five years. The legislature recognizes that those receiving benefits from Hawaii's unemployment insurance system receive some of the richest benefits in the nation. The legislature also recognizes that while Hawaii maintains the lowest unemployment rate in the nation and strong job growth, Hawaii's employers pay the highest unemployment insurance taxes in the nation.

Further, the legislature recognizes that the current unemployment insurance law benefits claimants in that the maximum benefit level awarded to the unemployed is increased automatically each year. Concurrently, the maximum taxable wage base, the maximum dollar amount of wages that is subject to unemployment insurance taxes imposed upon employers, also automatically increases each year, ensuring that unemployment insurance taxes also increase each year.

In 2006, Hawaii's employers were taxed at the highest maximum taxable wage base in the nation at $34,000. In 2007, Hawaii employers will continue to be taxed at the highest maximum taxable wage base in the nation at $35,300, with an automatic increase to an estimated $36,500 for 2008.

The purpose of this Act is to assist in providing economic sustainability to Hawaii by providing long needed tax relief, though temporary, to Hawaii's employers for calendar years 2008, 2009, 2010, 2011, and 2012. This tax relief will help to sustain Hawaii's economy by assisting with small business growth and provide immediate economic prosperity that will give Hawaii's employers more money to create new jobs, expand benefits, or provide overdue pay increases to their employees.

SECTION 2. Section 383-61, Hawaii Revised Statutes, is amended to read as follows:

"§383-61 Payment of contributions; wages not included. (a) Contributions with respect to wages for employment shall accrue and become payable by each employer for each calendar year in which the employer is subject to this chapter. The contributions shall become due and be paid by each employer to the director of labor and industrial relations for the fund in accordance with such rules as the department of labor and industrial relations may prescribe, and shall not be deducted, in whole or in part, from the wages of individuals in the employer's employ.

(b) Except as provided in subsections (c) [~~and~~], (d), and (e), the term "wages" does not include remuneration paid with respect to employment to an individual by an employer during any calendar year which exceeds the average annual wage, rounded to the nearest hundred dollars, for the four calendar quarter period ending on June 30 of the preceding year.

The average annual wage shall be computed as follows: on or before November 30 of each year the total remuneration paid by employers, as reported on contribution reports on or before such date, with respect to all employment during the four consecutive calendar quarters ending on June 30 of such year shall be divided by the average monthly number of individuals performing services in such employment during the same four calendar quarters as reported on such contribution reports and rounded to the nearest hundred dollars.

(c) For calendar years 2008, 2009, 2010, 2011, and 2012 only, the term "wages" as used in this part does not include remuneration in excess of $13,000 paid with respect to employment to an individual by an employer so long as the balance of the unemployment trust fund does not fall below the adequate reserve fund as specified by section 383-63. This subsection shall apply only to the contribution rate paid into the unemployment insurance trust fund.

[~~(c)~~] (d) For the calendar year 1991 only, the term "wages" does not include remuneration in excess of $7,000 paid with respect to employment to an individual by an employer.

[~~(d)~~] (e) For calendar year 1988 only, the term "wages" as used in this part does not include remuneration paid with respect to employment to an individual by an employer during the calendar year which exceeds:

(1) One hundred per cent of the average annual wage if the most recently computed ratio of the current reserve fund to the adequate reserve fund prior to that calendar year is equal to or less than .80; or

(2) Seventy-five per cent of the average annual wage if the most recently computed ratio of the current reserve fund to the adequate reserve fund prior to that calendar year is greater than .80 but less than 1.2; or

(3) Fifty per cent of the average annual wage if the most recently computed ratio of the current reserve fund to the adequate reserve fund prior to that calendar year is equal to or more than 1.2;

provided that "wages" with respect to which contributions are paid are not less than that part of the remuneration which is subject to tax in accordance with section 3306(b) of the Internal Revenue Code of 1986, as amended.

[~~(e)~~] (f) If an employer during any calendar year acquires substantially all the property used in a trade or business, or in a separate unit of a trade or business, of another employer, and after the acquisition employs an individual who prior to the acquisition was employed by the predecessor, then for the purpose of determining whether remuneration in excess of the average annual wages has been paid to the individual for employment, remuneration paid to the individual by the predecessor during the calendar year shall be considered as having been paid by the successor employer. For the purposes of this subsection, the term "employment" includes services constituting employment under any employment security law of another state or of the federal government.

[~~(f)~~] (g) Subsections (b) through [~~(e)~~] (f) notwithstanding, for the purposes of this part the term "wages" shall include at least that amount of remuneration paid in a calendar year to an individual by an employer or the employer's predecessor with respect to employment during any calendar year which is subject to a tax under a federal law imposing a tax against which credit may be taken for contributions required to be paid into a state unemployment fund.

[~~(g)~~] (h) In accordance with section 303(a)(5) of the Social Security Act, as amended, and section 3304(a)(4) of the Internal Revenue Code of 1986, as amended, any contributions overpaid due to a retroactive reduction in the taxable wage base may be credited against the employer's future contributions upon request by the employer; provided that no employer shall be given a cash refund."

SECTION 3. Section 383-63, Hawaii Revised Statutes, is amended by amending the definition of “adequate reserve fund” to read as follows:

""Adequate reserve fund" means an amount that is equal to the amount derived by multiplying the benefit cost rate that is the highest during the ten-year period ending on November 30 of each year by the total remuneration paid by all employers, with respect to all employment for which contributions are payable during the last four calendar quarters ending on June 30 of the same year, as reported on contribution reports filed on or before October 31 of the same year. "Remuneration", as used in this definition, means wages as defined in section 383-10. For the purpose of determining the highest benefit cost rate, the benefit cost rate for the first twelve-consecutive-calendar-month period beginning with the first day of the first month of the ten-year period and for each succeeding twelve-consecutive-calendar-month period beginning with the first day of each subsequent month shall be computed.

[Effective for the calendar year 1992 and thereafter, "adequate reserve fund" means an amount that is equal to one and one-half times the amount derived by multiplying the benefit cost rate that is the highest during the ten-year period ending on November 30 of each year by the total remuneration paid by all employers, with respect to all employment for which contributions are payable during the last four calendar quarters ending on June 30 of the same year, as reported on contribution reports filed on or before October 31 of the same year. "Remuneration", as used in this definition, means wages as defined in section 383-10. For the purpose of determining the highest benefit cost rate, the benefit cost rate for the first twelve-consecutive-calendar-month period beginning with the first day of the first month of the ten-year period and for each succeeding twelve-consecutive-calendar-month period beginning with the first day of each subsequent month shall be computed.]"

SECTION 4. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 5. This Act shall take effect on January 1, 2008.

INTRODUCED BY:

_____________________________

BY REQUEST

THE SENATE	S.B. NO.	1471
TWENTY-FOURTH LEGISLATURE, 2007
STATE OF HAWAII