SALEM, Ore. — Oregon businesses will now be able to seek relief or defer some payments on their 2021 unemployment insurance payroll taxes, the Oregon Employment Department says. Governor Kate Brown signed House Bill 3389 into law on Tuesday, which brought these additional options to bear.
“There is no question that Oregon’s economic backbone, our small businesses—as well as the hardworking Oregonians employed at those businesses — were deeply impacted by the pandemic,” said Governor Brown. “But through these challenging times, we’ve seen Oregonians respond with creativity and resilience. As we’ve entered the next chapter of the pandemic and look to economic recovery, HB 3389 should provide some relief for businesses, while at the same time ensuring we can continue to provide unemployment insurance benefits to all Oregonians who need them.”
The amount of 2021 UI taxes that employers are eligible to defer or have forgiven depends on how much their UI tax rate increased from 2020 to 2021:
- 0.5% to 1% increase in UI tax rates will be eligible for deferral only
- Tax rate increased more than 1.0 percentage point and not more than 1.5 percentage points will be eligible for 50% of their deferrable UI taxes forgiven
- Tax rate increased more than 1.5 percentage points and not more than 2.0 percentage points will be eligible for 75% of their deferrable UI taxes forgiven
- Tax rate increased more than 2.0 parentage points will be eligible for 100% of their deferrable UI taxes forgiven
The payroll tax relief plan allows for three benefits. For the 2021 tax year, employers can defer one-third of their unemployment tax liability until June 30 without interest or penalties. Those deferred taxes may be forgiven, depending on how much an employer's UI tax rate increase from 2020 to 2021.
Also, an employer's "tax experience rating" from 2022 through 2024 will be rolled back to the employer's pre-pandemic experience rate. Tax rates are likely to fluctuate over the next several years due to schedule changes, but the employer's rate will be locked to their rating before the pandemic.
“Oregon’s small businesses urgently needed this legislation,” said Anthony Smith, Oregon state director of the National Federation of Independent Business. “With the state now open for businesses again, HB 3389 will aid in the state’s economic recovery from the crippling consequences of the COVID-19 pandemic by allowing employers to invest in their business operations, their employees, and their communities. Its significance cannot be overstated.”
Employers must meet several following conditions to be eligible for UI tax deferral and forgiveness. As of January 1 of this year, they must have paid all outstanding UI tax contributions and related liabilities, including those determined in a payment plan accepted by the director of the Oregon Employment Department. They must also file all required payroll reports for 2021 on time, and pay all tax liabilities on time for 2021 that are not deferred or forgiven.
Businesses do not need to apply for this tax relief — OED says that it will automatically enroll eligible employers, and will contact them throughout the tax year with updates or changes to their status or requirements.
OED also included one caveat: participation in the deferral portion of this relief plan could negatively affect an employers’ Federal Unemployment Tax credit. Some employers may be unable to access the full credit for state unemployment tax paid on their IRS Form 940 (Federal Unemployment Tax Return) if they pay state unemployment taxes after the Federal Form 940 due date.