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14 May 2020

North Carolina employers to receive SUI tax credit in second quarter 2020; law codifies COVID-19 UI benefit provisions

Recently enacted legislation provides North Carolina employers with a state unemployment insurance (SUI) tax credit if they paid their first-quarter 2020 SUI contributions on or before April 30, 2020. The amount of the credit is equal to the amount of the first-quarter 2020 contributions paid by the employer and is applicable to the-second quarter 2020 SUI contributions due on or before July 31, 2020. (SB 704, signed into law on May 4, 2020; governor's news release.)

If the tax credit exceeds the amount of SUI contributions due on the second-quarter 2020 return, the amount of the credit that exceeds the second-quarter contributions will be refunded to the employer in accordance with state UI law. (N.C.G.S. 96-9.15(b).)

Bill codifies COVID-19 UI benefit provisions ordered by the governor

As previously reported, Governor Cooper ordered that UI benefit eligibility be expanded for individuals affected by COVID-19 and that individuals filing for and receiving these UI benefits not serve a waiting week or be required to search for work. The governor also ordered that COVID-19 UI benefits not be charged directly against employer SUI tax accounts. Employers are instructed to indicate that the employee separation was due to COVID-19 when responding to requests for separation information.UI benefits paid for non-COVID-19 reasons will be charged to the employer's UI account.

SB 704 codifies these COVID-19 UI benefit provisions.

Ernst & Young LLP insights

It may be that employers will have lower than usual second-quarter 2020 SUI contributions as a result of business shut- and slowdowns due to COVID-19. Second-quarter SUI contribution payments are typically lower than those paid for the first quarter due to employee wages reaching the wage limit early in the year.

It is uncertain if employers unable to file and pay for the 2020 first quarter due to COVID-19 will be able to receive this SUI tax credit. The bill language suggests that they will not be eligible. Although the Department did not provide an extension for the first-quarter SUI filing (as was provided for first-quarter 2020 withholding), employers could request an extension due to extenuating circumstances.

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Contact Information
For additional information concerning this Alert, please contact:
 
Workforce Tax Services - Employment Tax Advisory Services
   • Kenneth Hausser (kenneth.hausser@ey.com)
   • Debera Salam (debera.salam@ey.com)
   • Kristie Lowery (kristie.lowery@ey.com)
   • Peter Berard (peter.berard@ey.com)

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EY Payroll News Flash

Document ID: 2020-1295

 

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