With $1 billion unemployment fund deadline passed, businesses and state face headaches – Reuters

ST. PAUL — Thousands of businesses filing taxes in the coming weeks will pay higher rates after Minnesota lawmakers missed a deadline to repay more than $1 billion the state owes from its tax coffers. unemployment insurance.

But while the Tuesday, March 15 deadline isn’t a specific date set by law, state officials warn it will cause headaches for businesses and bureaucracy as many start filing taxes. . The problem extends from moms and pops to Fortune 500 companies.

Southeast Minnesota truck stop owner Mike Flynn, whose 30-employee business on Interstate 90 near Rochester weathered the pandemic and is now struggling to attract more workers, said that he had been considering the prospect of a tax hike since the start of the year. He typically files at the end of March, and even if the legislature decides to act later, he’ll have to seek a refund or credit after he pays.

“It complicates the accounting a lot. As an employer you have to match a lot of things,” he said. “That’s just part of the complexity of our lives, and how do you plan for that? As a business owner we try to plan ahead and we are always recovering and desperately trying to hire.

Flynn’s Truck Stop has a restaurant that had to close due to statewide shutdown orders at the start of the pandemic. Companies like his have had to lay off many employees, leading to historic levels of jobless claims. The state’s unemployment fund was at $1.7 billion in January 2020 and now has over $1 billion left in the hole.

Now Flynn’s company and 130,000 others across Minnesota face an average of a 30% increase in unemployment insurance tax rates, and while the legislature may still intervene, the issue will become more complicated every day after March 15 as more companies file taxes, according to the Department of Employment and Economic Development (DEED). Without action, tariffs will result in an increase of $250 to $850 per worker.

The issue stems in part from a fight between the Republican-controlled Senate and the Democratic-farmer-labor-controlled House over how best to use the state’s historic $9.25 billion budget surplus. .

The Minnesota Unemployment Insurance Trust Fund owes the federal government more than $1.3 billion after the COVID-19 pandemic pushed unemployment claims to record highs. Governor Tim Walz and the Senate back a $2.7 billion plan to offset debt and replenish the fund, but House Democrats say they won’t back it unless the Senate approves a bounty $1 billion to frontline workers in the event of a pandemic. Senate Republicans have said they won’t go above $250 million.

Republicans and 20 DFL senators have passed a bill to replenish the fund, but the DFL-controlled House has so far not taken up the issue for a vote on the floor.

It’s a disagreement that has frustrated state business groups, who say the issue should not be used as a political football.

“It should be non-partisan, there are adequate resources available, there are federal dollars available,” Minnesota Chamber of Commerce President Doug Loon said. .”

Companies didn’t think they would have to foot the bill for an unexpected increase in jobless claims due to the pandemic, Loon said. The unexpected tax bill means business owners have less to spend on payroll and less to spend on benefits and other assets.

Doug Loon

John Reynolds, state director of the Minnesota National Federation of Independent Business, echoed Loon’s concerns. Some companies could pay five times the amount they paid in previous years, he said. That includes Flynn’s truck stop in southern Minnesota, where the rate rose from 0.1% to 0.54% this year.

“What could a lot of small businesses be using right now?” More money to raise wages, more money to deal with inflation, more money to try to recruit and train badly needed new workers,” Reynolds said.

The state business community is less than happy to pay more taxes to the unemployment insurance trust fund. But the Minnesota Department of Jobs and Economic Development also warns of trouble ahead.

Employers have already started paying the higher taxes, which will increase significantly after the March 15 deadline, according to DEED Commissioner Steve Grove. Taxes are complex, he said, and the delay isn’t just confusing businesses — it can also take months to recalculate bills and reimburse businesses that overpay.

Technically, companies can file until April 30, but many are already ready to do so before then.

“People are starting to pay their bills, they’re not waiting until April Fools Day,” Reynolds said. “Not everyone waits until the last day and it’s just not good advice for businesses not to tell them to pay their tax bills until they know what the legislator is doing about it. made.

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