Amended in Assembly May 11, 2015

Amended in Assembly April 6, 2015

California Legislature—2015–16 Regular Session

Assembly BillNo. 1245


Introduced by Assembly Member Cooley

February 27, 2015


An act to amend Sections 1088, 1110, 1112, 1114,begin insert 13002,end insert and 13021begin delete ofend deletebegin insert of, and to add Section 1112.1 to,end insert the Unemployment Insurance Code, relating to unemployment insurance.

LEGISLATIVE COUNSEL’S DIGEST

AB 1245, as amended, Cooley. Unemployment insurance: electronic reporting and funds transfers.

(1) Existing law provides for unemployment compensation benefits for eligible individuals in the state who are unemployed through no fault of their own. Existing law requires an employer, as defined, to file a report of contributions, a quarterly return, a report of wages paid, and an annual reconciliation return, as specified, to the Director of Employment Development and to make contributions for unemployment insurance premiums. Existing law provides that an electronic funds transfer of contributions satisfies the report of contributions filing requirements.

This bill,begin delete wouldend delete beginning on January 1, 2017, would require an employer with 10 or more employees to file all reports and returns electronically and remit all contributions for unemployment insurance premiums by electronic funds transfer, except as provided. The bill, beginning on January 1, 2018, would extend the application of these electronic filing andbegin insert fundend insert transfer requirements to all employers. The bill would authorize the granting of a waiver from these requirements, as specified.begin insert The bill would impose a penalty of $50 on those employers who fail to file a quarterly return electronically without good cause, and would until January 1, 2019, exempt certain employerend insertbegin inserts’ timely nonelectronic filings from that penalty.end insert

(2) Existing law imposes a 15% penalty on an employer who fails to timely pay the contributions and imposes a $20 penalty for each unreported wage item.

This bill would extend those penalties to an employer, subject to the above-described electronic filing requirements, who fails to file the required reportsbegin delete electronically.end deletebegin insert electronically and would, on and after January 1, 2017, and until January 1, 2019, exempt certain employers from those penalties.end insert

(3) Existing law requires employers to withhold income taxes each calendar quarter, file a withholding report, a quarterly return, a report of wages, and pay over the taxes required to be withheld.

This bill, beginning on January 1, 2017, would require an employer subject to the above-described electronic filing requirements to remit the withheld taxes by electronic funds transfer. The bill would authorize a waiver from these requirements, as specified.

The bill would also make related conforming changes.

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

P2    1

SECTION 1.  

Section 1088 of the Unemployment Insurance
2Code
is amended to read:

3

1088.  

(a) (1) Each employer shall file with the director within
4the time required by subdivision (a) or (d) of Section 1110 for
5payment of employer contributions, a report of contributions, a
6quarterly return, and a report of wages paid to thebegin delete employee’send delete
7begin insert employer’send insert workers in the form and containing any information
8as the director prescribes. An electronic funds transfer of
9contributions pursuant to subdivision (f) of Section 1110 shall
10satisfy the requirement for a report of contributions. The quarterly
11return shall include the total amount of wages, employer
12 contributions required under Sections 976 and 976.6, worker
13contributions required under Section 984, the amounts required to
14be withheld under Section 13020, or withheld under Section 13028,
P3    1and any other information as the director shall prescribe. The report
2of wages shall include individual amounts required to be withheld
3under Section 13020 or withheld under Section 13028.

4(2) (A) In order to enhance efforts to reduce tax fraud and to
5reduce the personal income tax reporting burden, effective January
61, 1997, the report of wages shall also include the full first name
7of the employee and total wages, as defined in Section 13009, paid
8to each employee. This paragraph shall apply to reports of wages
9for all periods ending on or before December 31, 1999.

10(B) For all periods beginning on or after January 1, 2000, the
11report of wages shall also include total wages subject to personal
12income tax, as defined in Section 13009.5, paid to each employee.

13(b) Each employer shall file with the director within the time
14required by subdivision (b) or (d) of Section 1110 for payment of
15worker contributions, a report of contributions containing the
16employer’s business name, address, and account number, the total
17amount of worker contributions due, and any other information as
18the director shall prescribe. The director shall prescribe the form
19for the report of contributions. An electronic funds transfer of
20contributions pursuant to subdivision (f) of Section 1110 shall
21satisfy the requirement for a report of contributions.

22(c) In addition to the report of contributions, quarterly return,
23and report of wages required by employers under subdivision (a),
24an individual who has elected coverage under subdivision (a) of
25Section 708 is also required to file a separate report of
26contributions, and quarterly return, subject to Part 2 (commencing
27with Section 2601).

28(d) Any employer making an election under subdivision (d) of
29Section 1110 shall submit the report of wages described in
30subdivision (a), within the time required for submitting employer
31contributions under subdivision (a) of Section 1110.

begin delete

32(e) (1) In addition to the report of contributions, quarterly return,
33and report of wages described in subdivision (a), each employer
34shall file with the director an annual reconciliation return showing
35the total amount of wages, employer contributions required under
36Sections 976 and 976.6, worker contributions required under
37Section 984, the amounts required to be withheld under Section
3813020 or withheld under Section 13028, and any other information
39as the director shall prescribe. This annual reconciliation return
40shall be due on the first day of January following the close of the
P4    1prior calendar year and shall become delinquent if not filed on or
2before the last day of that month.

3(2) This subdivision shall not apply to individuals electing
4coverage under Section 708 or 708.5 or employers electing
5financing under Section 821.

6(3) The requirement to file the annual reconciliation return for
7the prior calendar year under this subdivision shall not apply to
8the 2012 calendar year and thereafter.

9(f) (1) Except as provided in paragraph (2), for

end delete

10begin insert(e)end insertbegin insertend insertbegin insertForend insert purposes of making a report of wages under subdivision
11(a), employers that are required under Section 6011 of the Internal
12Revenue Code and authorized regulations thereunder to file
13magnetic media returns, shall, within 90 days of becoming subject
14to this requirement, do one of the following:

begin delete

15(A)

end delete

16begin insert(1)end insert File any subsequent reports of wages electronically.

begin delete

17(B)

end delete

18begin insert(2)end insert Establish to the satisfaction of the director that there is a
19lack of automation, a severe economic hardship, a current
20exemption from submitting magnetic media or electronic
21information returns for federal purposes, or other good cause for
22not complying with this subdivision. Approved waivers shall be
23valid forbegin delete six monthsend deletebegin insert one yearend insert or longer, at the discretion of the
24director.

begin delete

25(2) The requirement to file the report of wages pursuant to this
26subdivision shall not apply to an employer that is required to file
27electronically pursuant to subdivision (i).

end delete
begin delete

28(g)

end delete

29begin insert(f)end insert The Franchise Tax Board shall be allowed access to the
30information filed with the department pursuant to this section.

begin delete

31(h)

end delete

32begin insert(g)end insert The requirement in subdivision (a) to file a quarterly return
33shall begin with the first calendar quarter of the 2011 calendar
34year.

begin delete

35(i)

end delete

36begin insert(h)end insert (1) begin deleteEffective end deletebegin insertNotwithstanding subdivision (e), effective end insert
37January 1,begin delete 2017, except as provided in subdivision (f),end deletebegin insert 2017,end insert an
38employer with 10 or more employees shall file the report of
39contributions, quarterly return, and report of wages electronically.

P5    1(2) begin deleteEffective end deletebegin insertNotwithstanding subdivision (end insertbegin inserte), effectiveend insertbegin insert end insertJanuary
21,begin delete 2018, except as provided in subdivision (f),end deletebegin insert 2018,end insert all employers
3shall file the report of contributions, quarterly return, and report
4of wages electronically.

5(3) Notwithstanding paragraphs (1) and (2), an employer may
6request a waiver from the electronic filing requirements of this
7subdivision. The department may grant the waiver when the
8employer has established to the satisfaction of the director that
9there is a lack of automation, a severe economic hardship, a current
10exemption from filing electronically for federal purposes, or other
11good cause. An approved waiver shall be valid forbegin delete six monthsend deletebegin insert one
12yearend insert
or longer, at the discretion of the director.

13

SEC. 2.  

Section 1110 of the Unemployment Insurance Code
14 is amended to read:

15

1110.  

(a) Employer contributions required under Sections 976
16and 976.6, the amount of benefits received by any individual
17pursuant to this part that is deducted from an award or settlement
18made by the employer under the provisions of Section 1382, and,
19except as provided by subdivision (b) of this section, worker
20contributions required under Section 984 are due and payable on
21the first day of the calendar month following the close of each
22calendar quarter and shall become delinquent if not paid on or
23before the last day of that month.

24(b) Worker contributions required under Section 984 are due
25and payable at the same time and by the same method as amounts
26required to be withheld under Section 13020 are paid to the
27department pursuant to Section 13021, regardless of the amount
28of accumulated unpaid liability for worker contributions.

29(c) Employer contributions submitted pursuant to Section 976.5
30shall be paid on or before the last working day of March of the
31calendar year to which the reduced contribution rate would be
32applicable. Any employer whose eligibility for an unemployment
33insurance contribution rate determination is redetermined to make
34that employer eligible to submit voluntary unemployment insurance
35contributions in accordance with Section 976.5, may submit a
36voluntary unemployment insurance contribution within 30 days
37of the date of notification of the redetermination.

38(d) Except as provided in subdivision (e), any employer
39described in Sections 682 and 684 may elect to report and pay
40employer contributions required under Sections 976 and 976.6,
P6    1and worker contributions required under Section 984, annually.
2All contributions are due and payable on the first day of January
3following the close of the prior calendar year and shall become
4delinquent if not paid on or before the last day of that month. An
5election under this subdivision shall be effective the first day of
6the calendar year in which it is approved by the department. An
7election under this subdivisionbegin delete shallend deletebegin insert mayend insert not be approved if the
8employer has an outstanding return or report delinquency on the
9records of the department, or an unpaid amount owed to the
10department, that is not the subject of a timely petition for
11reassessment pending before the appeals board at the time the
12election is filed.

13(e) An employer described in Sections 682 and 684 who pays
14more than twenty thousand dollars ($20,000) in wages annually,
15shall not be entitled to the election allowed in subdivision (d). If
16at any time during the year the total wages paid by an employer
17electing to file under subdivision (d) exceeds twenty thousand
18dollars ($20,000), the election shall be terminated at the close of
19that calendar quarter. In addition to the report of wages due for
20that quarter, the employer shall file a return and pay any
21contributions due for that portion of the year during which the
22election was in effect, and shall pay contributions in accordance
23with subdivisions (a), (b), and (c) for the remainder of that year.

24(f) begin deleteExcept as required in subdivision (g), contributions end delete
25begin insertContributionsend insertbegin insert end insertdue pursuant to this section may be submitted by
26electronic funds transfer. Contributions submitted by electronic
27funds transfer shall be deemed complete in accordance with
28paragraph (4) of subdivision (e) of Section 13021.

29(g) (1) begin deleteEffective end deletebegin insertNotwithstanding subdivision (f), effective on
30and after end insert
January 1, 2017, an employer with 10 or more employees
31shall remit the contributions and withholdings by electronic funds
32transfer.

33(2) begin deleteBeginning end deletebegin insertNotwithstanding subdivision (f), effectiveend insertbegin insert end insertonbegin insert and
34afterend insert
January 1, 2018, all employers shall remit the contributions
35and withholdings by electronic funds transfer.

36(3) Notwithstanding paragraphs (1) and (2), an employer may
37request a waiver from the electronic funds transfer requirement of
38 this subdivision. The department may grant the waiver when the
39employer has established to the satisfaction of the director that
40there is a lack of automation, a severe economic hardship, a current
P7    1exemption from filing electronically for federal purposes, or other
2good cause. An approved waiver shall be valid for six months or
3longer, at the discretion of the director.

4(h) For purposes of this section, “electronic funds transfer” shall
5have the same meaning as in Section 13021.5.

6

SEC. 3.  

Section 1112 of the Unemployment Insurance Code
7 is amended to read:

8

1112.  

(a) Any employer who without good cause fails to pay
9any contributions required of him or her or of his or her workers,
10except amounts assessed under Article 8 (commencing with Section
111126), within the time required shall pay a penalty of 15 percent
12of the amount of those contributions.

13(b) Any employer required to remit payments electronically
14who without good cause remits those amounts by means other than
15electronic shall pay a penalty of 15 percent of the amount of those
16contributions.

begin insert

17(c) Notwithstanding subdivision (b), on and after January 1,
182017, an employer required to remit payments electronically,
19excluding employers previously required to remit payments by
20electronic funds transfer under Section 13021, who remits those
21amounts within the time required by means that are not electronic
22shall not be subject to the penalty described in subdivision (b).
23This subdivision shall become inoperative on and after January
241, 2019.

end insert
begin delete

25(c)

end delete

26begin insert(d)end insert The changes made to this section by Chapter 28 of the
27Statutes of 2014 shall apply on and after July 1, 2014.

28begin insert

begin insertSEC. 4.end insert  

end insert

begin insertSection 1112.1 is added to the end insertbegin insertUnemployment
29Insurance Code
end insert
begin insert, to read:end insert

begin insert
30

begin insert1112.1.end insert  

(a) An employer who is required to file a quarterly
31return electronically pursuant to Section 1088 and without good
32cause fails to file a quarterly return electronically shall pay a
33penalty of fifty dollars ($50), in addition to any other penalties
34imposed by this code.

35(b) Notwithstanding subdivision (a), on and after January 1,
362017, an employer required to file a quarterly return electronically
37who files a quarterly return within the time required by means that
38are not electronic shall not be subject to the penalty described in
39subdivision (a). This subdivision shall become inoperative on and
40after January 1, 2019.

end insert
P8    1

begin deleteSEC. 4.end delete
2begin insertSEC. 5.end insert  

Section 1114 of the Unemployment Insurance Code
3 is amended to read:

4

1114.  

(a) Any employer who, without good cause, fails to file
5within 15 days after service by the director of notice pursuant to
6Section 1206 of a specific written demand therefor, a report of
7wages of each of his or her workers required by this division, shall
8pay in addition to other amounts required, for each unreported
9wage item a penalty of twenty dollars ($20).

10(b) Any employer required by this division to file a report of
11wages of each of his or her workers on magnetic media or other
12electronic means as prescribed by subdivision (f) or (i) of Section
131088, who, without good cause, instead files a report of wages by
14means other than electronic, shall pay, in addition to other amounts
15required, for each wage item a penalty of twenty dollars ($20).

begin insert

16(c) Notwithstanding subdivision (b), on and after January 1,
172017, an employer required to remit payments electronically,
18excluding employers previously required to remit payments by
19electronic funds transfer under subdivision (f) of Section 1088,
20who files a report of wages within the time required by means that
21are not electronic shall not be subject to the penalty described in
22subdivision (b). This subdivision shall become inoperative on and
23after January 1, 2019.

end insert
begin delete

24(c)

end delete

25begin insert(d)end insert The changes made to this section by Chapter 28 of the
26Statutes of 2014 shall apply on and after July 1, 2014.

27begin insert

begin insertSEC. 6.end insert  

end insert

begin insertSection 13002 of the end insertbegin insertUnemployment Insurance Codeend insert
28begin insert is amended to read:end insert

29

13002.  

The following provisions of this code shall apply to
30any amount required to be deducted, reported, and paid to the
31department under this division:

32(a) Sections 301, 305, 306, 310, 311, 312, 317, and 318, relating
33to general administrative powers of the department.

34(b) Sections 403 to 413, inclusive, Section 1336, and Chapter
358 (commencing with Section 1951) of Part 1 of Division 1, relating
36to appeals and hearing procedures.

37(c) Sections 1110.6, 1111, 1111.5, 1112,begin insert 1112.1,end insert 1113, 1113.1,
381114, 1115, 1116, and 1117, relating to the making of returns or
39the payment of reported contributions.

P9    1(d) Article 8 (commencing with Section 1126) of Chapter 4 of
2Part 1 of Division 1, relating to assessments.

3(e) Article 9 (commencing with Section 1176), except Section
41176, of Chapter 4 of Part 1 of Division 1, relating to refunds and
5overpayments.

6(f) Article 10 (commencing with Section 1206) of Chapter 4 of
7Part 1 of Division 1, relating to notice.

8(g) Article 11 (commencing with Section 1221) of Chapter 4
9of Part 1 of Division 1, relating to administrative appellate review.

10(h) Article 12 (commencing with Section 1241) of Chapter 4
11of Part 1 of Division 1, relating to judicial review.

12(i) Chapter 7 (commencing with Section 1701) of Part 1 of
13Division 1, relating to collections.

14(j) Chapter 10 (commencing with Section 2101) of Part 1 of
15Division 1, relating to violations.

16

begin deleteSEC. 5.end delete
17begin insertSEC. 7.end insert  

Section 13021 of the Unemployment Insurance Code
18 is amended to read:

19

13021.  

(a) Every employer required to withhold any tax under
20Section 13020 shall for each calendar quarter, whether or not wages
21or payments are paid in the quarter, file a withholding report, a
22quarterly return, as described in subdivision (a) of Section 1088,
23and a report of wages in a form prescribed by the department, and
24pay over the taxes so required to be withheld. The report of wages
25shall include individual amounts required to be withheld under
26Section 13020 or withheld under Section 13028. Except as provided
27in subdivisions (c) and (d), the employer shall file a withholding
28report, a quarterly return, as described in subdivision (a) of Section
291088, and a report of wages, and remit the total amount of income
30taxes withheld during the calendar quarter on or before the last
31day of the month following the close of the calendar quarter.

32(b) Every employer electing to file a single annual return under
33subdivision (d) of Section 1110 shall report and pay any taxes
34withheld under Section 13020 on an annual basis within the time
35specified in subdivision (d) of Section 1110.

36(c) (1) Effective January 1, 1995, whenever an employer is
37required, for federal income tax purposes, to remit the total amount
38of withheld federal income tax in accordance with Section 6302
39of the Internal Revenue Code and regulations thereunder, and the
40accumulated amount of state income tax withheld is more than
P10   1five hundred dollars ($500), the employer shall remit the total
2amount of income tax withheld for state income tax purposes within
3the number of business days as specified for withheld federal
4income taxes by Section 6302 of the Internal Revenue Code, and
5regulations thereunder.

6(2) Effective January 1, 1996, the five hundred dollar ($500)
7amount referred to in paragraph (1) shall be adjusted annually as
8follows, based on the annual average rate of interest earned on the
9Pooled Money Investment Account as of June 30 in the prior fiscal
10year:


11

 

Average Rate of Interest

Greater than or equal to 9 percent:

$ 75

Less than 9 percent, but greater than or equal to
 7 percent:


 250

Less than 7 percent, but greater than or equal to
 4 percent:


 400

Less than 4 percent:

 500

P10  19

 

20(d) (1) Notwithstanding subdivisions (a) and (c), for calendar
21years beginning onbegin delete orend deletebegin insert andend insert after January 1, 1995, if in the 12-month
22period ending June 30 of the prior year, the cumulative average
23payment made pursuant to this division or Section 1110 for any
24deposit periods, as described under Section 6302 of the Internal
25Revenue Code and regulations thereunder, was twenty thousand
26dollars ($20,000) or more, the employer shall remit the total amount
27of income tax withheld within the number of business days as
28specified forbegin insert filingend insert federal income taxes by Section 6302 of the
29Internal Revenuebegin delete Codeend deletebegin insert Code, relating to mode or time of collection,end insert
30 and regulations thereunder. For purposes of this subdivision,
31payment shall be made by electronic funds transfer in accordance
32with Section 13021.5, for one calendar year beginning on January
331. Payment is deemed complete on the date the electronic funds
34transfer is initiated if settlement to the state’s demand account
35occurs on or before the business day following the date the transfer
36is initiated. If settlement to the state’s demand account does not
37occur on or before the business day following the date the transfer
38is initiated, payment is deemed complete on the date settlement
39occurs. The department shall, on or before October 31 of the prior
P11   1year, notify all employers required by this paragraph to make
2payments by electronic funds transfer of these requirements.

3(2) Effective January 1, 2017, paragraph (1) shall not apply to
4an employer subject to the electronic filing requirements of Section
51088. Effective January 1, 2017, an employer subject to the
6electronic filing requirements of Section 1088 shall remit the total
7amount of income tax withheld within the number of business days
8specified in Section 6302 of the Internal Revenue Code and the
9regulations adopted thereunder for filing federal income taxes.
10Payment shall be deemed complete on the date the electronic funds
11transfer is initiated if settlement to the state’s demand account
12occurs on or before the business day following the date the transfer
13is initiated. If settlement to the state’s demand account does not
14occur on or before the business day following the date the transfer
15is initiated, payment is deemed complete on the date settlement
16occurs.

17(3) Notwithstanding paragraphs (1) and (2), effective January
181, 1995, electronic funds transfer payments that are subject to the
19one-day deposit rule, as described by Section 6302 of the Internal
20Revenue Code and regulations thereunder, shall be deemed timely
21if the payment settles to the state’s demand account within three
22business days after the date the employer meets the threshold for
23the one-day deposit rule.

24(4) Any taxpayer required to remit payments pursuant to
25 paragraphs (1) and (2) may request from the department a waiver
26of those requirements. The department may grant a waiver only if
27it determines that the particular amount paid in excess of twenty
28thousand dollars ($20,000), as stated in paragraph (1) was the result
29of an unprecedented occurrence for that employer, and was not
30representative of the employer’s cumulative average payment in
31prior years.

32(5)  A state agency required to remit payments pursuant to
33paragraphs (1) and (2) may request a waiver of those requirements
34from the department. The department may grant a waiver if it
35determines that there will not be a negative impact on the interest
36earnings of the General Fund. If there is a negative impact to the
37General Fund, the department may grant a waiver if the requesting
38state agency follows procedures designated by the department to
39mitigate the impact to the General Fund.

P12   1(e) An employer not required to make payment pursuant to
2subdivision (d) may elect to make payment by electronic funds
3transfer in accordance with Section 13021.5 under the following
4conditions:

5(1) The election shall be made in a form, and shall contain
6information, as prescribed by the director, and shall be subject to
7approval by the department.

8(2) If approved, the election shall be effective on the date
9specified in the notification to the employer of approval.

10(3) The election shall be operative from the date specified in
11the notification of approval, and shall continue in effect until
12terminated by the employer or the department.

13(4) Funds remitted by electronic funds transfer pursuant to this
14subdivision shall be deemed complete in accordance with
15subdivision (d) or as deemed appropriate by the director to
16encourage use of this payment method.

17(f) Notwithstanding Section 1112, interest and penalties shall
18not be assessed against an employer that remits at least 95 percent
19of the amount required by subdivision (c) or (d) if the failure to
20remit the full amount is not willful and any remaining amount due
21is paid with the next payment. The director may allow any
22employer to submit the amounts due from multiple locations upon
23a showing that those submissions are necessary to comply with
24subdivision (c) or (d).

25(g) The department may, if it believes that action is necessary,
26require any employer to make the report or return required by this
27section and pay to it the tax deducted and withheld at any time, or
28from time to time but no less frequently than provided for in
29subdivision (a).

30(h) An employer required to withhold any tax and that is not
31required to make payment under subdivision (c) shall remit the
32total amount of income tax withheld during each month of each
33calendar quarter, on or before the 15th day of the subsequent month
34if the income tax withheld for any of the three months or,
35cumulatively for two or more months, is three hundred fifty dollars
36($350) or more.

37(i) For purposes of subdivisions (a), (c), and (h), payment that
38is not required to be made by electronic funds transfer is deemed
39complete when it is placed in a properly addressed envelope,
P13   1bearing the correct postage, and it is deposited in the United States
2mail.

3(j) (1) In addition to the withholding report, quarterly return,
4and report of wages described in subdivision (a), each employer
5shall file with the director an annual reconciliation return showing
6the amount required to be withheld under Section 13020, and any
7other information the director shall prescribe. This annual
8reconciliation return shall be due on the first day of January
9following the close of the prior calendar year and shall become
10delinquent if not filed on or before the last day of that month.

11(2) The requirement to file the annual reconciliation return for
12the prior calendar year under this subdivision shall not apply to
13the 2012 calendar year and thereafter.

14(k) The requirement in subdivision (a) to file a quarterly return
15shall begin with the first calendar quarter of the 2011 calendar
16year.

17(l) The changes made to this section by Chapter 783 of the
18Statutes of 2012 shall apply on and after January 1, 2013.



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