The state of Wisconsin has released their unemployment insurance tax rates for 2016. For the first time since 2010, the state will use Schedule B. This means that many employers will see a substantial cut in their unemployment insurance taxes rates – as much as 20 percent. The taxable wage base will remain $14,000 for 2016.
The tax reduction is good news for many state employers. However it is believed that the state’s UI Trust Fund does not yet have enough of a balance to survive an economic downturn.
According to the state Department of Workforce Development, the trust fund had a $1.8 billion surplus in 2000. That surplus became a $1.3 billion deficit in 2010 during the Great Recession. The deficit forced Wisconsin, like many states, to borrow money from the federal government so that it could meet its unemployment benefit liability. The trust fund now only has a $515 million surplus (as June 2015.)
With the large cut in the unemployment insurance tax, the Department of Workforce Development estimates that employers will pay $1.03 billion this year into the Trust Fund, and $214 million less—or $816 million—next year. In 2017, according to preliminary estimates, employers may pay only $753 million into the fund.
It is estimated that the fund needs a balance of $1.6 billion to avoid going into debt if the economy takes a tumble in the coming years.
According to the state Department of Workforce Development, “The UI Trust Fund, while positive over this period, is not expected to grow fast enough to prevent substantial borrowing in the case of an economic downturn.”
This all means that the tax deduction may be only temporary for Wisconsin employers.
Nonprofit employers in the state however have greater control over their unemployment tax rate and for-profit businesses. 501(c)(3)’s do not have to pay state unemployment taxes. This gives them more control over their tax liability and budgets. Choosing not to pay unemployment taxes allows Wisconsin nonprofits unique avenues to strategically handle unemployment claims administration and unemployment insurance taxes in ways that for-profits can only dream about.
Contact us today for more information concerning your nonprofit unemployment insurance tax advantages.
Hat-tip: Steven Walters