Mr. Speaker, I rise in strong support of the SUTA Dumping Prevention Act, HR 3463. This bipartisan bill will help ensure that all employers pay their fair share into our Nation’s unemployment compensation system, which provides benefits to laid-off workers.

I was pleased to work with Chairman Herger in crafting this legislation, as well as with many others, including Representatives Houghton, Pomeroy and Levin. The bill has support from organizations representing both workers and business.

Unemployment tax payments are determined in part by a company’s "experience rating"– meaning their experience with laying off workers. Companies whose employees receive fewer unemployment benefits have lower tax rates, while those employers whose workers receive benefits more frequently have higher tax rates.

To artificially reduce their unemployment taxes, some companies engage in a practice known as State Unemployment Tax Assessment or SUTA dumping, which allows them to lower their experience rating.

Examples of this practice include the transfer of a company’s employees to a fake shell company, which has a new and lower tax rate.

As a result of this practice, States lose millions of dollars in proper tax payments and therefore have to increase tax rates on the vast majority of employers who are playing by the rules. In fact, the Department of Labor has said SUTA dumping eliminates "the incentive for employers to keep employees working and returning claimants to work as soon as possible, and it unfairly shifts costs to other employers."

According to a General Accounting Office survey, three-fifths of States believe their laws are insufficient to prevent SUTA dumping. Fourteen States reported that they had identified specific SUTA dumping cases within the last 3 years, with losses from those cases exceeding $120 million.

HR 3463 would require States to impose "meaningful" penalties on employers that engage in SUTA dumping by shifting employees from one shell company to another. More specifically, the bill would require that a company’s experience rating for unemployment taxes follow that portion of the business that is transferred to another company if both corporate entities are "under substantially common ownership, management, or control." Additionally, the bill would require that penalties be imposed on financial consultants who market SUTA dumping as a tax shelter.

Finally, the bill includes a provision allowing State unemployment agencies access to the National Directory of New Hires – which is used to track employment for the purposes of collecting child support.

State agencies would use this information to prevent fraud, such as individuals both working and claiming unemployment benefits.

Mr. Speaker, I urge my colleagues to support this legislation designed to ensure fair and accurate payments into our Nation’s unemployment compensation system. I reserve the balance of my time.