Bill also gives small businesses tax exemption on federal relief funds
STATE HOUSE – The Mass. House and Senate have enacted comprehensive legislation to safeguard unemployment benefits, limit rate increases for employers, provide tax relief for lower income jobseekers, and exempt small businesses from state taxes on federal relief grants.
“These measures will offer much need relief to workers, employers and small businesses. At the same time, we’re also taking critical steps to help safeguard our unemployment insurance system for the long term,” said Rep. Josh S. Cutler (D-Pembroke), House Chair of the Joint Committee on Labor and Workforce Development.
The legislation, which is now on Governor Baker’s desk, prevents a sharp spike in unemployment insurance rates that was set to hit employers this quarter. Absent any legislative action, the typical small business would have seen their average annual UI cost rise from $539 to $866 per employee. In addition to freezing the rates, the bill protects extended benefits for workers struggling to reenter the workforce due to the pandemic and exempts the first $10,200 in UI benefits for individuals with a family income at or below 200% of the federal poverty line.
“This is a comprehensive bill to help our economy recover from the pandemic. I’m grateful to Speaker Mariano, Chair Michlewitz and my legislative colleagues for putting forth a strong, bipartisan piece of legislation,” Rep. Cutler added.
Here are some further details on the legislation’s key provisions:
Unemployment Insurance Provisions
- Freeze Employer Rates. Freezes unemployment rate schedule for 2021 and 2022, preventing an estimated 60% increase in average employer contributions. Creates a two-year excise charge to fund the Commonwealth’s required payments on interest accrued from Federal advances. This will result in a net reduction in employer UI costs.
- Protect extended benefits. Allows the Commonwealth to continue to provide extended unemployment benefits through federally-funded program by amending statutory trigger.
- Reduce financing costs. Authorizes the Commonwealth to issue up to $7 billion in special obligation bonds, over a maximum of 20 years, for the purposes of meeting unemployment insurance (UI) trust fund obligations. Bonding option offers more flexible terms and likely lower borrowing costs.
- Long-term solvency commission. Creates a special commission, co-led by Rep. Cutler, to study the long-term solvency of the UI trust fund and make recommendations to strengthen it. The commission, which will include a diverse array of employer and employee stakeholders, will report back by the end of this year.
Tax Relief Provisions
- Tax Day Delay. Delays state personal income tax filing deadline to May 17, 2021
- Tax Deductions. The following are deducted from Federal gross income for the purpose of determining Massachusetts gross income for tax year 2020:
- Loans forgiven through the paycheck protection program (PPP)
- Economic Injury Disaster Loan advances
- SBA loans paid off by the Small Business Administration under the CARES Act
- PPP second draw loans or Shuttered Venue Operator grants
- UI Benefits. People who received UI benefits during either 2020 or 2021 and whose family income is at or below 200% of the Federal poverty level can deduct up to the first $10,200 of their unemployment compensation from their state taxable income.
- Tax Forgiveness. Eliminates the penalty for individuals who omitted to correctly pay income taxes on their unemployment benefits paid out in 2020.