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Recently enacted SB 50 reduces the 2021 state unemployment insurance (SUI) tax rates by recalculating experience rates without applying the fund balance adjustment factor that was triggered initially due to the effect COVID-19 UI benefits had on the state's unemployment insurance (UI) trust fund balance.

As a result of SB 50, the Florida Department of Revenue (DOR) announced that the revised 2021 SUI tax rates, also referred to as "reemployment tax," range from 0.1% to 5.4%, down from the originally assigned 0.29% to 5.4%. The SUI new employer rate remains at 2.7% for 2021. (DOR website; EY Tax Alert 2021-0790)

Because of the change in Florida's 2021 SUI tax rates, the DOR posted revised SUI tax rate notices to its electronic reporting system and plans to mail paper revised tax rate notices to employers in batches by mid-May 2021. (Florida Department of Revenue (DOR) Tax Information Publication (TIP) #2173B-01; telephone conversation, DOR customer service representative.)

Tax rate information is available online over the employer's reemployment tax website account.

2021 SUI wage base

The 2021 SUI taxable wage base continues at $7,000.

Other changes under SB 50

Following are other changes under SB 50 that affect 2021 and future SUI tax rates.

• Adjustments to 2021 SUI rate calculation. SB 50 reduces the 2021 SUI tax rates by recalculating experience rates without applying the fund balance adjustment factor that was triggered initially due to the impact COVID-19 UI benefits had on the state's UI trust fund balance. The new rate calculation also excludes all UI benefit charges from the second quarter 2020 (as we reported, employers were not charged with COVID-19 UI benefits in 2020). (EY Tax Alert 2020-1475, 6-4-2020; Florida Department of Economic Opportunity fact sheet.)
  

  According to the DOR, employers that were initially assigned an earned (experience) tax rate (Reason Code G) or were at the minimum tax rate (Reason Code D) were given a reduced 2021 SUI tax rate. Employers at the maximum tax rate of 5.4% (Reason Code E) may or may not have a decreased 2021 SUI tax rate, depending on their benefit ratio. Employers at the new employer tax rate (Reason Code F), the penalty tax rate (Reason Code A), the standard rate (due to audit noncompliance, Reason Code I or outstanding indebtedness, Reason Code B) or the SUTA rate (Reason Code H) did not have any change in their 2021 SUI tax rate.

• Adjustments to 2022 SUI rate calculation. SB 50 directs that the 2022 SUI tax rates be calculated without applying the fund balance adjustment factor. The rate calculation will also exclude UI benefit charges from the second, third and fourth quarters of 2020 and all benefit charges paid as a direct result of a government order to close or reduce capacity of a business due to COVID-19, as determined by the Department of Economic Opportunity (DEO). UI benefit charges from the first and second quarters of 2021 may be decreased if the Office of Economic and Demographic Research (EDR) estimates total tax collection for rate year 2022 will exceed $475.5 million. Since EDR has until January 1, 2022, to advise the DOR on the decrease to UI benefit charges, it has until March 1, 2022 to release SUI tax rates for calendar year 2022.
• Adjustments to 2023—2025 SUI rate calculation. SB 50 directs that the 2023—2025 SUI tax rates be calculated without applying the fund balance adjustment factor. SUI tax rate calculations for 2023—2025 will also exclude UI benefit charges from the second, third and fourth quarters of 2020 and all benefit charges paid as a direct result of a government order to close or reduce capacity of a business due to COVID-19, as determined by the DEO. Also, UI benefit charges from the first and second quarters of 2021 may be decreased if EDR estimates total tax collection for rate year 2022 will exceed $475.5 million. Changes to the 2023—2025 SUI tax rate calculation are repealed if the trust fund reaches $4,071,519,600 on June 1.

SB 50 also requires the state make three deposits during 2021 to the UI trust fund balance. The funding comes from online sales tax collected from out-of-state e-commerce companies as required under SB 50. In addition, beginning July 2022, and on or before the 25th day of each of the following months, the DOR will distribute $90 million monthly to the state's UI trust fund. The Department is required to end monthly distributions when the DOR receives certification from EDR that the ending balance of the UI trust fund exceeds $4,071,519,600 or on December 31, 2025, whichever is earlier.

Governor orders deadline to pay the first quarter 2021 SUI taxes extended; return must still be filed by April 30, 2021

Because of the retroactive change to the 2021 SUI tax rates, Florida Governor Ron DeSantis issued Executive Order 21-80, which extended the deadline to pay the first-quarter 2021 SUI tax to May 31, 2021. This extension applied only to the first-quarter SUI tax payment; employers continued to be required to file their Form RT-6, Employer's Quarterly Report, no later than April 30, 2021. (EY Tax Alert 2021-0790, 4-16-2021; DOR website.)

Employers that paid their first-quarter 2021 SUI taxes using the originally issued SUI tax rate notice will be issued a refund. Employers that filed their first-quarter 2021 return by April 30, 2021, but did not make a SUI payment, will receive a bill from the DOR reflecting the amount due.

For more information on Florida SUI taxes, call +1 850 488 6800 or see the Florida Department of Revenue's website.

For information on Florida UI benefits and the state's response to COVID-19 unemployment, see the DEO's website.

Ernst & Young LLP insights

Prior to the passage of SB 50, employers saw an almost 200% increase in 2021 employers' SUI tax rates. Florida joins several states that have enacted legislation to reduce the 2021 SUI tax rates.

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