Oregon businesses eligible for payroll tax forgiveness, deferral under new law

Oregon employers have more time to pay their insurance payroll taxes or get them forgiven altogether under a new bill signed into law by Gov. Kate Brown.

Like other states, Oregon employers contribute to the state unemployment trust fund through payroll taxes which fund unemployment benefits. Under House Bill 3389, businesses that saw their unemployment insurance (UI) tax rates shoot up the highest will be eligible for tax forgiveness.

Businesses that saw their UI rates rise by more than 2% will see 100% of their deferrable UI taxes forgiven. Others that saw their UI tax rates rise by 1.5% will be eligible for 75% tax forgiveness. A 1% bump equals 50% forgiveness. A 0.5% bump qualifies businesses for a tax deferral only. The Oregon Employment Department will automatically enroll employers for this relief and tax status.

According to a legislative analysis, HB 3389 is projected to save Oregon business owners $100 million in 2021 and $2.4 billion by 2031. Tax deferrals can be extended through 2024 at the latest.

Brown signed HB 3389 on Tuesday, describing it as a lifeline for businesses that saw their UI tax rates soar as the state paid out $1.8 billion in unprecedented UI benefits. 

“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,” Brown said. “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 new law allows employers to defer a third of their unemployment tax liability for 2021 through June 30 without interest or penalties. How much of those taxes can be forgiven depends on how much their UI tax rate rose from 2020 to 2021.

Eligible employers must have also paid all outstanding UI taxes owed by January 1, 2021, including other liabilities and penalties. 

Anthony Smith, Oregon state director of the National Federation of Independent Business, said the legislation was passed when businesses needed it most.

“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,” Smith said. “Its significance cannot be overstated.”

Oregon’s unemployment rate was 5.6% in June, according to the U.S. Bureau of Labor Statistics. It skyrocketed to 14.2% in April 2020 during the onset of the pandemic.

HB 3389’s provisions are set to take effect during the first week of September.

This article was originally posted on Oregon businesses eligible for payroll tax forgiveness, deferral under new law