BILL ANALYSIS Ó
AB 1245
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ASSEMBLY THIRD READING
AB
1245 (Cooley)
As Amended May 11, 2015
Majority vote
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|Committee |Votes |Ayes |Noes |
| | | | |
| | | | |
|----------------+------+---------------------+--------------------|
|Insurance |11-1 |Daly, Travis Allen, |Beth Gaines |
| | |Calderon, Cooley, | |
| | |Cooper, Dababneh, | |
| | |Frazier, Gatto, | |
| | |Grove, Mayes, | |
| | |Rodriguez | |
| | | | |
|----------------+------+---------------------+--------------------|
|Appropriations |15-1 |Gomez, Bigelow, |Gallagher |
| | |Bonta, Calderon, | |
| | |Chang, Daly, Eggman, | |
| | |Eduardo Garcia, | |
| | |Holden, Jones, | |
| | |Quirk, Rendon, | |
| | |Wagner, Weber, Wood | |
| | | | |
| | | | |
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SUMMARY: Requires, subject to exceptions, all employers to file
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their unemployment insurance (UI) related data and taxes
electronically. Specifically, this bill:
1)Requires employers with 10 or more employees to file UI taxes
and related data requirements electronically, commencing January
1, 2016.
2)Requires employers with less than 10 employees to file UI taxes
and related data requirements electronically, commencing January
1, 2017.
3)Authorizes an employer to seek, and the Director of the
Employment Development Department (EDD) to grant, a waiver of up
to one year of the requirement to file electronically if the
employer establishes it has a lack of automation to comply with
electronic filing, there is a severe economic hardship, there is
a current federal exemption from electronic filing, or if there
is some other good cause to waive the requirement.
4)Applies the existing penalties for failure to make
non-electronic filings to a failure to comply with the new
electronic filing requirements, but delays, until January 1,
2019, imposition of penalties for failure to file electronically
if the employer timely filed the return and paid the taxes.
5)Deletes a requirement that quarterly filers must file an annual
reconciliation of the four quarterly filings.
EXISTING LAW:
1)Establishes a UI program designed to provide unemployment
insurance benefits to employees who lose their jobs through no
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fault of their own. The UI program is a joint federal/state
mandatory program.
2)Requires employers to pay UI taxes based on a statutory formula,
and to provide detailed wage information on a schedule specified
in statute.
3)Allows "hard copy" filing and paper check tax remittance, but
authorizes on a permissive basis electronic filing of the taxes
and data.
FISCAL EFFECT: According to the Assembly Appropriations
Committee, savings of several million dollars annually once the
program is fully implemented.
COMMENTS:
1)Purpose. According to the author, this bill would phase in over
a two-year period the required use of electronic filing for all
California employers to submit returns and remit payments to the
EDD. Electronic filing for employers would increase
efficiencies for both EDD and the employer community. Once
fully implemented, this legislation would result in many
millions in savings to the state in paper, postage and staff
time.
2)Background. The UI program is a long-standing state/federal
insurance program that predates any form of e-commerce. The
realities of paper filings have created outdated laws which have
been subject to modernization efforts over the years. For
example, benefits have been paid based on a "base period" of
earnings, which discounts the previous quarter of earning in
favor of the four quarters prior to the most recently completed
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quarter. Because data has historically been filed in hard copy
format, it was impossible to use the most recent, relevant,
data. In this respect, federally mandated "UI Modernization"
requirements have been established that incentivized states (to
the tune of nearly $850 million of federal money for California)
to find ways to look at the most recent quarter of earnings -
the so-called "alternative base period" calculation. Many
employers now use electronic filing for both data and tax
remittances, because it is cheaper and more efficient. Moving
forward to reflect the realities of modern electronic commerce
makes sense from both a governmental and private sector
efficiency perspective.
3)EDD Web site. The requirement that employers must file
electronically would not result in employers being forced to
purchase specialized software. All that will be necessary is
that the employers have internet access, because the EDD's Web
site will enable employers to file anything necessary merely by
logging on to www.edd.ca.gov .
Analysis Prepared by:
Mark Rakich / INS. / (916) 319-2086 FN: 0000351