BILL ANALYSIS Ó AB 1245 Page 1 CONCURRENCE IN SENATE AMENDMENTS AB 1245 (Cooley) As Amended July 7, 2015 Majority vote -------------------------------------------------------------------- |ASSEMBLY: |76-1 |(May 18, 2015) |SENATE: |36-3 |(July 13, 2015) | | | | | | | | | | | | | | | -------------------------------------------------------------------- Original Committee Reference: INS. SUMMARY: Requires, subject to exceptions, all employers to file their unemployment insurance (UI) related data and taxes electronically. The Senate amendments: 1)Extend, from six months to one year, the time period allowable for a business to be granted a waiver for good cause of the obligation to file electronically. 2)Make technical and conforming changes. EXISTING LAW: AB 1245 Page 2 1)Establishes a UI program designed to provide unemployment insurance benefits to employees who lose their jobs through no fault of their own. The UI program is a joint federal/state mandatory program. 2)Requires employers to pay UI taxes based on a statutory formula, and to provide detailed wage information on a schedule specified in statute. 3)Allows "hard copy" filing and paper check tax remittance, but authorizes on a permissive basis electronic filing of the taxes and data. FISCAL EFFECT: According to the Senate Appropriations Committee, pursuant to Senate Rule 28.8, negligible state costs. COMMENTS: 1)Purpose. According to the author, this bill would phase in over a two-year period the required use of electronic filing for all California employers to submit returns and remit payments to the Employment Development Department (EDD). Electronic filing for employers would increase efficiencies for both EDD and the employer community. Once fully implemented, this legislation would result in many millions in savings to the state in paper, postage and staff time. 2)Background. The UI program is a long-standing state/federal insurance program that predates any form of e-commerce. The realities of paper filings have created outdated laws which have been subject to modernization efforts over the years. For example, benefits have been paid based on a "base period" of earnings, which discounts the previous quarter of earning in favor of the four quarters prior to the most recently completed quarter. Because data has historically been filed in hard copy format, it was impossible to use the most recent, AB 1245 Page 3 relevant, data. In this respect, federally mandated "UI Modernization" requirements have been established that incentivized states (to the tune of nearly $850 million of federal money for California) to find ways to look at the most recent quarter of earnings - the so-called "alternative base period" calculation. Many employers now use electronic filing for both data and tax remittances, because it is cheaper and more efficient. Moving forward to reflect the realities of modern electronic commerce makes sense from both a governmental and private sector efficiency perspective. 3)EDD Web site. The requirement that employers must file electronically would not result in employers being forced to purchase specialized software. All that will be necessary is that the employers have internet access, because the EDD's Web site will enable employers to file anything necessary merely by logging on to www.edd.ca.gov . Analysis Prepared by: Mark Rakich / INS. / (916) 319-2086 FN: 0001234