LAW TO CRACKDOWN ON ILLEGAL TAX SCHEME (pdf)
Raymond Filippone (401) 462-8415
Assistant Director, Income Support
November 29, 2005
On January 1, 2006, a new Rhode Island law will close a loophole where employers avoid paying their fair share of the RI Unemployment Insurance (UI) tax. RI Public Law 05-290 eliminates the practice of "SUTA (State Unemployment Tax Act) Dumping," a tax evasion scheme involving the manipulation of an employer's UI tax rate to reduce their UI taxes. Typically, SUTA Dumping occurs when a business transfers payroll out of an existing company or organization to a new or different organization that has a lower UI tax rate solely or primarily to reduce their UI taxes.
Adelita S. Orefice, Director of the Rhode Island Department of Labor and Training, stated "SUTA Dumping is a national issue and our law was changed to conform to the requirements of federal Public Law 108-295, the SUTA Dumping Prevention Act of 2004, passed by the U.S. Congress in August 2004." Rhode Island joins many other states that are taking action to close similar loopholes in their laws to prevent SUTA Dumping.
Ray Filippone, Assistant Director of Income Support, summarized the main provisions of the new federal law:
1. It requires
a transfer of the UI tax rate when employees are shifted from one employer to
another, if the two companies have common ownership, management or control;
2. It requires that meaningful, civil, and criminal penalties be imposed against persons that knowingly violate the provisions of this legislation, or who advise others to do so; and
3. It requires that procedures be established to identify potential violators.
"Only a small percentage of employers are involved in SUTA Dumping," stated Director Orefice. "However, if left unchecked, the actions of those few could result in higher UI taxes for all employers. We are determined to do whatever it takes to prevent that from happening."
Please direct questions regarding this law change or any other Rhode Island UI tax issue to the Division of Taxation's Employer Tax Unit at (401) 222-3696, or visit their web sites at: www.uitax.ri.gov or www.tax.state.ri.us.
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The Rhode Island Department of Labor and Training offers a wide array of employment and training services to both the general public and to individuals with unusual barriers to employment. DLT is ready to assist any job seeker, whether the goal is a first job, a better job, or a career change. Rhode Island's work force is protected through the enforcement of labor laws, prevailing wage rates, and work place health and safety standards. Temporary income support is available to unemployed, sick, or injured workers and a comprehensive rehabilitation program is available to those injured on the job.DLT is dedicated to the growth and competitiveness of Rhode Island industry, administering a variety of training grants, tax credits, and apprenticeship programs to help employers. Economic indicators and labor market information are available for long-range planning. The Agency engages in active outreach, helping large and small employers retain their best workers or retrain their existing work force. At no cost to the employer, DLT will also screen job applicants, post job vacancies, and help businesses institute cost-sharing programs that can avert layoffs.For more information on the innovative programs and services available to all Rhode Islanders at the Department of Labor and Training, please call (401) 462-8000 or visit our web site at www.dlt.ri.gov
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