Thursday, April 28, 2016


The state Unemployment Insurance Agency is pursuing nearly 300 open fraud cases involving either employer tax evasion, fictitious business schemes or identity theft, according to a December 6, 2015 Crain’s Detroit Business article.

About three-quarters of those cases as of mid-November 2015 involved what is known as State Unemployment Tax Act or "SUTA" Dumping — when an employer shifts payroll from one company to another business entity, or subsidiary, to artificially reduce the state unemployment tax the company pays. 

Starting in October, the Michigan Taxable Wage Base used to compute businesses' state unemployment or SUTA tax decreased from $9,500 to $9,000 per employee, which could save businesses about $57 million in taxes next year. 

The rollback reverses a 2011 increase to shore up the then debt-strapped Michigan Unemployment Trust Fund, since it was the first time since then that the fund balance exceeded $2.5 billion and was projected to remain that way for two quarters. 

Businesses compute their SUTA tax quarterly, based largely on the first $9,000 each employee earns multiplied by a percentage or tax rate based largely on how much the company has used the fund via layoffs or restructuring over the past three years. That can range from 0.6 percent to more than 10 percent, which is ostensibly the motivation for employers to "dump" employees to another entity with a lower experience-based rate or a 2.7 percent tax rate upon new businesses. 

A new bill pending in the state Senate could change the employer SUTA tax reporting requirement from quarterly to annually. The state fund is paying more than $1 billion less per year in total benefits than it did two or three years ago, as federal assistance for extended benefits and other expenses began winding down. 

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