TAX FILE: States target SUTA dumping

The SUTA (State Unemployment Tax Act) Dumping Prevention Act, enacted a year ago, requires states to go after employer schemes that reduce unemployment insurance tax rates by hiding high rates of unemployment claims. Nearly every state has now enacted laws that ban employers from transferring workers to “shell” companies created to “dump” high SUTA rates. Witnesses testified to Congress in May that most states have done only the minimum required to comply with the federal law, which has not been sufficient to stop dumping. But North Carolina, Michigan and California have devoted “significant resources” to investigating suspicious business transfers and prosecuting employers that dump.