For the third consecutive year, South Carolina is cutting its unemployment insurance (UI) tax rate. The new 2017 tax rate represents an average reduction of 10 percent over last year’s rate.
The state is forecasting a unemployment fund surplus of about $120 million next year, adding to the $461 million unemployment pool it had gathered by mid-2016. But that’s still below the levels the U.S. Department of Labor (DOL) believes the state needs to make it through another economic downturn.
“Cutting the unemployment insurance tax rate for a third straight year reduces the cost of doing business in South Carolina,” said Gov Nikki Haley. “When costs are down, businesses can grow – that means more jobs for our citizens and continued progress for our entire state.”
During the Great Recession, South Carolina needed to borrow nearly $1 billion from the federal government in order to provide unemployment benefits. The state was able to pay off the loan early with the help of higher UI taxes and a stronger economy. After the loan payoff in 2015, the state passed a regulation to rebuild the UI fund within five years to a level state lawmakers believe will fund the potential benefit needs without borrowing from the federal government – which is lower than DOL recommendations.
South Carolina unemployment insurance tax rates apply to the first $14,000 earned by each employee.
Nonprofits Have Other Options
The above applies to all South Carolina employers except 501(c)(3) organizations. 501(c)(3)s do not have to pay state unemployment insurance taxes – high or low. Many nonprofits could save as much as 30 percent on their unemployment cost, even with the coming tax cuts, by opting out of the unemployment insurance tax system all together – an advantage provided to them by the IRS. Doing so affords nonprofits unique avenues that allow them to strategically handle unemployment claims administration and unemployment insurance taxes in ways that for-profits can only dream about. Nonprofits that opt out of the state unemployment insurance tax system don’t have to worry about the peaks and valleys of the trust fund and its taxes – a strategic budgeting tactic that allows for better management of resources.
Contact us today for more information concerning your nonprofit unemployment insurance tax advantages.