California Legislature—2015–16 Regular Session

Assembly Bill No. 1245

Introduced by Assembly Member Cooley

February 27, 2015

An act to amend Sections 1088, 1110, 1112, 1114, and 13021 of the Unemployment Insurance Code, relating to unemployment insurance.

LEGISLATIVE COUNSEL’S DIGEST

AB 1245, as introduced, Cooley. Unemployment insurance: electronic reporting and funds transfers.

(1) Existing law provides for unemployment compensation benefits for eligible individuals in the state who are unemployed through no fault of their own. Existing law requires an employer, as defined, to file a report of contributions, a quarterly return, a report of wages paid, and an annual reconciliation return, as specified, to the Director of Employment Development and to make contributions for unemployment insurance premiums. Existing law provides that an electronic funds transfer of contributions satisfies the report of contributions filing requirements.

This bill would, beginning on January 1, 2016, and except as provided, require an employer with 10 or more employees to file all reports and returns electronically and remit all contributions for unemployment insurance premiums by electronic funds transfer. The bill would extend the application of these electronic filing and transfer requirements to all employers beginning on January 1, 2017. The bill would authorize the granting of a waiver from these requirements, as specified.

(2) Existing law imposes a 15% penalty on an employer who fails to timely pay its contributions and imposes a $20 penalty for each unreported wage item.

This bill would extend those penalties to an employer, subject to the above-described electronic filing requirements, who fails to file the required reports electronically or contributions by electronic funds transfer.

(3) Existing law requires employers to withhold income taxes each calendar quarter, file a withholding report, a quarterly return, a report of wages, and pay over the taxes required to be withheld.

This bill, beginning on January 1, 2016, would require an employer who is subject to the above-described electronic filing requirements to remit the withheld taxes by electronic funds transfer. The bill would authorize a waiver from these requirements, as specified. The bill would require the Department of Employment Development to notify certain employers of these requirements, as specified.

The bill would also make related conforming changes.

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

SECTION 1.  

Section 1088 of the Unemployment Insurance
Code is amended to read:

1088.  

(a) (1) Each employer shall file with the director within
the time required by subdivision (a) or (d) of Section 1110 for
payment of employer contributions, a report of contributions, a
quarterly return, and a report of wages paid to his or her workers
in the form and containing any information as the director
prescribes. An electronic funds transfer of contributions pursuant
to subdivision (f) of Section 1110 shall satisfy the requirement for
a report of contributions. The quarterly return shall include the
total amount of wages, employer contributions required under
Sections 976 and 976.6, worker contributions required under
Section 984, the amounts required to be withheld under Section
13020, or withheld under Section 13028, and any other information
as the director shall prescribe. The report of wages shall include
individual amounts required to be withheld under Section 13020
or withheld under Section 13028.

(2) (A) In order to enhance efforts to reduce tax fraud and to
reduce the personal income tax reporting burden, effective January
1, 1997, the report of wages shall also include the full first name
of the employee and total wages, as defined in Section 13009, paid
to each employee. This paragraph shall apply to reports of wages
for all periods ending on or before December 31, 1999.

(B) For all periods beginning on or after January 1, 2000, the
report of wages shall also include total wages subject to personal
income tax, as defined in Section 13009.5, paid to each employee.

(b) Each employer shall file with the director within the time
required by subdivision (b) or (d) of Section 1110 for payment of
worker contributions, a report of contributions containing the
employer’s business name, address, and account number, the total
amount of worker contributions due, and any other information as
the director shall prescribe. The director shall prescribe the form
for the report of contributions. An electronic funds transfer of
contributions pursuant to subdivision (f) of Section 1110 shall
satisfy the requirement for a report of contributions.

(c) In addition to the report of contributions, quarterly return,
and report of wages required by employers under subdivision (a),
an individual who has elected coverage under subdivision (a) of
Section 708 is also required to file a separate report of
contributions, and quarterly return, subject to Part 2 (commencing
with Section 2601).

(d) Any employer making an election under subdivision (d) of
Section 1110 shall submit the report of wages described in
subdivision (a), within the time required for submitting employer
contributions under subdivision (a) of Section 1110.

(e) (1) In addition to the report of contributions, quarterly return,
and report of wages described in subdivision (a), each employer
shall file with the director an annual reconciliation return showing
the total amount of wages, employer contributions required under
Sections 976 and 976.6, worker contributions required under
Section 984, the amounts required to be withheld under Section
13020 or withheld under Section 13028, and any other information
as the director shall prescribe. This annual reconciliation return
shall be due on the first day of January following the close of the
prior calendar year and shall become delinquent if not filed on or
before the last day of that month.

(2) This subdivision shall not apply to individuals electing
coverage under Section 708 or 708.5 or employers electing
financing under Section 821.

(3) The requirement to file the annual reconciliation return for
the prior calendar year under this subdivision shall not apply to
the 2012 calendar year and thereafter.

(f)  begin delete For end delete begin insert (1) end insert begin insert   end insert begin insert Except as provided in paragraph (2), for end insert purposes
of making a report of wages under subdivision (a), employers who
are required under Section 6011 of the Internal Revenue Code and
authorized regulations thereunder to file magnetic media returns,
shall, within 90 days of becoming subject to this requirement, do
one of the following:

begin delete

(1)

end delete

begin insert (A) end insert   begin delete Submit a magnetic media format to the department for
approval, and upon receiving approval from the department,
submit end delete begin insert File end insert any subsequent reports of wages begin delete on magnetic media. end delete
begin insert electronically. end insert

begin delete

(2)

end delete

begin insert ( end insert begin insert B) end insert  Establish to the satisfaction of the director that there is a
lack of automation, a severe economic hardship, a current
exemption from submitting magnetic media begin insert or electronic end insert
information returns for federal purposes, or other good cause for
not complying with begin delete the provisions of end delete this subdivision. Approved
waivers shall be valid for six months or longer, at the discretion
of the director.

begin insert

(2) The requirement to file the report of wages pursuant to this
subdivision shall not apply to an employer who is required to file
electronically pursuant to subdivision (i).

end insert

(g) The Franchise Tax Board shall be allowed access to the
information filed with the department pursuant to this section.

(h) The requirement in subdivision (a) to file a quarterly return
shall begin with the first calendar quarter of the 2011 calendar
year.

begin insert

(i) (1) Effective January 1, 2016, except as provided in
subdivision (f), an employer with 10 or more employees shall file
the quarterly return, report of wages paid, and annual
reconciliation return electronically.

end insert begin insert

(2) Effective January 1, 2017, except as provided in subdivision
(f), all employers shall file the quarterly return, report of wages
paid, and annual reconciliation return electronically.

end insert begin insert

(4) Notwithstanding paragraphs (1) and (2), an employer may
request a waiver from the electronic filing requirements of this
subdivision. The department may grant the waiver when the
employer has established to the satisfaction of the director that
the there is a lack of automation, a severe economic hardship, a
current exemption from filing electronically for federal purposes,
or for good cause. An approved waiver shall be valid for six months
or longer, at the discretion of the director.

end insert

SEC. 2.  

Section 1110 of the Unemployment Insurance Code
is amended to read:

1110.  

(a) Employer contributions required under Sections 976
and 976.6, the amount of benefits received by any individual
pursuant to this part that is deducted from an award or settlement
made by the employer under the provisions of Section 1382, and,
except as provided by subdivision (b) of this section, worker
contributions required under Section 984 are due and payable on
the first day of the calendar month following the close of each
calendar quarter and shall become delinquent if not paid on or
before the last day of that month.

(b) Worker contributions required under Section 984 are due
and payable at the same time and by the same method as amounts
required to be withheld under Section 13020 are paid to the
department pursuant to Section 13021, regardless of the amount
of accumulated unpaid liability for worker contributions.

(c) Employer contributions submitted pursuant to Section 976.5
shall be paid on or before the last working day of March of the
calendar year to which the reduced contribution rate would be
applicable. Any employer whose eligibility for an unemployment
insurance contribution rate determination is redetermined to make
that employer eligible to submit voluntary unemployment insurance
contributions in accordance with Section 976.5, may submit a
voluntary unemployment insurance contribution within 30 days
of the date of notification of the redetermination.

(d) Except as provided in subdivision (e), any employer
described in Sections 682 and 684 may elect to report and pay
employer contributions required under Sections 976 and 976.6,
and worker contributions required under Section 984, annually.
All contributions are due and payable on the first day of January
following the close of the prior calendar year and shall become
delinquent if not paid on or before the last day of that month. An
election under this subdivision shall be effective the first day of
the calendar year in which it is approved by the department. An
election under this subdivision begin delete may end delete begin insert shall end insert not be approved if the
employer has an outstanding return or report delinquency on the
records of the department, or an unpaid amount owed to the
department, that is not the subject of a timely petition for
reassessment pending before the appeals board at the time the
election is filed.

(e)  begin delete Any end delete begin insert An end insert employer described in Sections 682 and 684 who
pays more than twenty thousand dollars ($20,000) in wages
annually, shall not be entitled to the election allowed in subdivision
(d). If at any time during the year the total wages paid by an
employer electing to file under subdivision (d) exceeds twenty
thousand dollars ($20,000), the election shall be terminated at the
close of that calendar quarter. In addition to the report of wages
due for that quarter, the employer shall file a return and pay any
contributions due for that portion of the year during which the
election was in effect, and shall pay contributions in accordance
with subdivisions (a), (b), and (c) for the remainder of that year.

(f)  begin delete Contributions end delete begin insert Except as required in subdivision (g),
contributions end insert due pursuant to this section may be submitted by
electronic funds transfer begin delete , as defined in Section 13021.5 end delete .
Contributions submitted by electronic funds transfer shall be
deemed complete in accordance with paragraph (4) of subdivision
(e) of Section 13021.

begin insert

(g) (1) Effective January 1, 2016, an employer with 10 or more
employees shall remit the contributions and benefit amounts by
electronic funds transfer.

end insert begin insert

(2) Beginning on January 1, 2017, all employers shall remit the
contributions and benefit amounts by electronic funds transfer.

end insert begin insert

(3) Notwithstanding paragraphs (1) and (2), an employer may
request a temporary waiver from the electronic funds transfer
requirement of this subdivision. The department may grant the
waiver when the employer has established to the satisfaction of
the director that the there is a lack of automation, a severe
economic hardship, a current exemption from filing electronically
for federal purposes, or for good cause. An approved waiver shall
be valid for six months or longer, at the discretion of the director.

end insert begin insert

(h) For purposes of this section, “electronic funds transfer”
shall have the same meaning as in Section 13021.5.

end insert

SEC. 3.  

Section 1112 of the Unemployment Insurance Code
is amended to read:

1112.  

(a) Any employer who without good cause fails to pay
any contributions required of him or her or of his or her workers,
except amounts assessed under Article 8 begin delete of this chapter, end delete
begin insert (commencing with Section 1126), end insert within the time required shall
pay a penalty of 15 percent of the amount of those contributions.

(b) Any employer required to remit payments begin insert electronically
pursuant to paragraph (2) of subdivision (d) of Section 13021 or end insert
by electronic funds transfer pursuant to begin insert paragraph (1) of
subdivision (d) of end insert Section 13021, who without good cause remits
those amounts by means other than electronic funds transfer shall
pay a penalty of 15 percent of the amount of those contributions.

(c) The changes made to this section by begin delete the act adding this
subdivision end delete begin insert Chapter 28 of the Statutes of 2014 end insert shall apply on and
after July 1, 2014.

SEC. 4.  

Section 1114 of the Unemployment Insurance Code
is amended to read:

1114.  

(a) Any employer who, without good cause, fails to file
within 15 days after service by the director of notice pursuant to
Section 1206 of a specific written demand therefor, a report of
wages of each of his or her workers required by this division, shall
pay in addition to other amounts required, for each unreported
wage item a penalty of twenty dollars ($20).

(b) Any employer required by this division to file a report of
wages of each of his or her workers on magnetic media begin insert or other
electronic means end insert as prescribed by subdivision (f) begin insert or (g) end insert of Section
1088, who, without good cause, instead files a report of wages begin delete on
paper or in another form, end delete begin insert by means that are not electronic, end insert shall
pay in addition to other amounts required, for each wage item a
penalty of twenty dollars ($20).

(c) The changes made to this section by begin delete the act adding this
subdivision end delete begin insert Chapter 28 of the Statutes of 2014 end insert shall apply on and
after July 1, 2014.

SEC. 5.  

Section 13021 of the Unemployment Insurance Code
is amended to read:

13021.  

(a) Every employer required to withhold any tax under
Section 13020 shall for each calendar quarter, whether or not wages
or payments are paid in the quarter, file a withholding report, a
quarterly return, as begin delete prescribed end delete begin insert described end insert in subdivision (a) of
Section 1088, and a report of wages in a form prescribed by the
department, and pay over the taxes so required to be withheld. The
report of wages shall include individual amounts required to be
withheld under Section 13020 or withheld under Section 13028.
Except as provided in subdivisions (c) and (d), the employer shall
file a withholding report, a quarterly return, as begin delete prescribed end delete begin insert described end insert
in subdivision (a) of Section 1088, and a report of wages, and remit
the total amount of income taxes withheld during the calendar
quarter on or before the last day of the month following the close
of the calendar quarter.

(b) Every employer electing to file a single annual return under
subdivision (d) of Section 1110 shall report and pay any taxes
withheld under Section 13020 on an annual basis within the time
specified in subdivision (d) of Section 1110.

(c) (1) Effective January 1, 1995, whenever an employer is
required, for federal income tax purposes, to remit the total amount
of withheld federal income tax in accordance with Section 6302
of the Internal Revenue Code and regulations thereunder, and the
accumulated amount of state income tax withheld is more than
five hundred dollars ($500), the employer shall remit the total
amount of income tax withheld for state income tax purposes within
the number of business days as specified for withheld federal
income taxes by Section 6302 of the Internal Revenue Code, and
regulations thereunder.

(2) Effective January 1, 1996, the five hundred dollar ($500)
amount referred to in paragraph (1) shall be adjusted annually as
follows, based on the annual average rate of interest earned on the
Pooled Money Investment Account as of June 30 in the prior fiscal
year:

 

Average Rate of Interest
Greater than or equal to 9 percent:	$ 75
Less than 9 percent, but greater than or equal to  7 percent:	250
Less than 7 percent, but greater than or equal to  4 percent:	400
Less than 4 percent:	500

 

begin delete

(d) (1) Notwithstanding subdivisions (a) and (c), for calendar
years beginning prior to January 1, 1995, if in the 12-month period
ending June 30 of the prior year the cumulative average payment
made pursuant to this division or Section 1110, for eight-month
periods, as defined under Section 6302 of the Internal Revenue
Code and regulations thereunder, was fifty thousand dollars
($50,000) or more, the employer shall remit the total amount of
income tax withheld within three banking days following the close
of each eight-month period, as described by Section 6302 of the
Internal Revenue Code and regulations thereunder. For purposes
of this subdivision, payment shall be made by electronic funds
transfer in accordance with Section 13021.5, for one calendar year
beginning on January 1. Payment is deemed complete on the date
the electronic funds transfer is initiated if settlement to the state’s
demand account occurs on or before the banking day following
the date the transfer is initiated. If settlement to the state’s demand
account does not occur on or before the banking day following the
date the transfer is initiated, payment is deemed complete on the
date settlement occurs. The department shall, on or before October
31 of the prior year, notify all employers required to make payment
by electronic funds transfer of these requirements.

(2)

end delete

begin insert (d) end insert begin insert   end insert begin insert (1) end insert  Notwithstanding subdivisions (a) and (c), for calendar
years beginning on or after January 1, 1995, if in the 12-month
period ending June 30 of the prior year, the cumulative average
payment made pursuant to this division or Section 1110 for any
deposit periods, as described under Section 6302 of the Internal
Revenue Code and regulations thereunder, was twenty thousand
dollars ($20,000) or more, the employer shall remit the total amount
of income tax withheld within the number of business days as
specified for federal income taxes by Section 6302 of the Internal
Revenue Code and regulations thereunder. For purposes of this
subdivision, payment shall be made by electronic funds transfer
in accordance with Section 13021.5, for one calendar year
beginning on January 1. Payment is deemed complete on the date
the electronic funds transfer is initiated if settlement to the state’s
demand account occurs on or before the business day following
the date the transfer is initiated. If settlement to the state’s demand
account does not occur on or before the business day following
the date the transfer is initiated, payment is deemed complete on
the date settlement occurs. The department shall, on or before
October 31 of the prior year, notify all employers required by this
paragraph to make payments by electronic funds transfer of these
requirements.

begin delete

(3)

end delete begin insert

(2) Effective January 1, 2016, paragraph (1) shall not apply to
an employer who is subject to the electronic filing requirements
of Section 1088. Effective January 1, 2016, an employer who is
subject to the electronic filing requirements of Section 1088 shall
remit the total amount of income tax withheld within the number
of business days specified in Section 6302 of the Internal Revenue
Code and the regulations adopted thereunder for filing federal
income taxes. Payment shall be deemed complete on the date the
electronic funds transfer is initiated if settlement to the state’s
demand account occurs on or before the business day following
the date the transfer is initiated. If settlement to the state’s demand
account does not occur on or before the business day following
the date the transfer is initiated, payment is deemed complete on
the date settlement occurs. The department shall, on or before
each October 31, beginning October 31, 2016, notify employers
who will be subject to the requirements of this paragraph.

end insert

begin insert ( end insert begin insert 3) end insert  Notwithstanding begin delete paragraph (2), end delete begin insert paragraphs (1) and (2), end insert
effective January 1, 1995, electronic funds transfer payments that
are subject to the one-day deposit rule, as described by Section
6302 of the Internal Revenue Code and regulations thereunder,
shall be deemed timely if the payment settles to the state’s demand
account within three business days after the date the employer
meets the threshold for the one-day deposit rule.

(4) Any taxpayer required to remit payments pursuant to
paragraphs (1) and (2) may request from the department a waiver
of those requirements. The department may grant a waiver only if
it determines that the particular begin delete amounts end delete begin insert amount end insert paid in excess of
begin delete fifty thousand dollars ($50,000) or end delete twenty thousand dollars
($20,000), as stated in begin delete paragraphs end delete begin insert paragraph end insert (1) begin delete and (2),
respectively, were end delete begin insert was end insert the result of an unprecedented occurrence
for that employer, and begin delete were end delete begin insert was end insert not representative of the
employer’s cumulative average payment in prior years.

(5)  A state agency required to remit payments pursuant to
paragraphs (1) and (2) may request a waiver of those requirements
from the department. The department may grant a waiver if it
determines that there will not be a negative impact on the interest
earnings of the General Fund. If there is a negative impact to the
General Fund, the department may grant a waiver if the requesting
state agency follows procedures designated by the department to
mitigate the impact to the General Fund.

(e) An employer not required to make payment pursuant to
subdivision (d) may elect to make payment by electronic funds
transfer in accordance with Section 13021.5 under the following
conditions:

(1) The election shall be made in a form, and shall contain
information, as prescribed by the director, and shall be subject to
approval by the department.

(2) If approved, the election shall be effective on the date
specified in the notification to the employer of approval.

(3) The election shall be operative from the date specified in
the notification of approval, and shall continue in effect until
terminated by the employer or the department.

(4) Funds remitted by electronic funds transfer pursuant to this
subdivision shall be deemed complete in accordance with
subdivision (d) or as deemed appropriate by the director to
encourage use of this payment method.

(f) Notwithstanding Section 1112, interest and penalties shall
not be assessed against an employer that remits at least 95 percent
of the amount required by subdivision (c) or (d) if the failure to
remit the full amount is not willful and any remaining amount due
is paid with the next payment. The director may allow any
employer to submit the amounts due from multiple locations upon
a showing that those submissions are necessary to comply with
subdivision (c) or (d).

(g) The department may, if it believes that action is necessary,
require any employer to make the report or return required by this
section and pay to it the tax deducted and withheld at any time, or
from time to time but no less frequently than provided for in
subdivision (a).

(h) An employer required to withhold any tax and that is not
required to make payment under subdivision (c) shall remit the
total amount of income tax withheld during each month of each
calendar quarter, on or before the 15th day of the subsequent month
if the income tax withheld for any of the three months or,
cumulatively for two or more months, is three hundred fifty dollars
($350) or more.

(i) For purposes of subdivisions (a), (c), and (h), payment begin insert that
is not required to be made by electronic funds transfer end insert is deemed
complete when it is placed in a properly addressed envelope,
bearing the correct postage, and it is deposited in the United States
mail.

(j) (1) In addition to the withholding report, quarterly return,
and report of wages described in subdivision (a), each employer
shall file with the director an annual reconciliation return showing
the amount required to be withheld under Section 13020, and any
other information the director shall prescribe. This annual
reconciliation return shall be due on the first day of January
following the close of the prior calendar year and shall become
delinquent if not filed on or before the last day of that month.

(2) The requirement to file the annual reconciliation return for
the prior calendar year under this subdivision shall not apply to
the 2012 calendar year and thereafter.

(k) The requirement in subdivision (a) to file a quarterly return
shall begin with the first calendar quarter of the 2011 calendar
year.

(l) The changes made to this section by begin delete the act adding this
subdivision end delete begin insert Chapter 783 of the Statutes of 2012 end insert shall apply on and
after January 1, 2013.