Some businesses Texas will soon receive unemployment insurance tax breaks, and more will end up paying higher taxes as a result.

Gov. Greg Abbott on Saturday signed House Bill 3150, which will result in tax breaks for a number of businesses in the Lone Star State. The legislation, supported by Insperity, a politically-connected Texas company, would offer tax breaks for close to 150 businesses in the state. These companies are all licensed and specialize in human resources outsourcing services. The tax reductions for these professional employer organizations, or PEOs, will be covered by increases for many employers in Texas not considered PEOs.

New bill benefits PEOs, will result in slight tax increases for everyone else
The legislation made it easily through both the state House and Senate, and is said to eliminate so-called “double taxation.” In a press release, the National Association of Professional Employers Organizations showed its support for the bill.

“Tax breaks will be covered by increases for many employers.”

“We thank Governor Abbott for his support of this bill, which will enable PEOs to continue to help small businesses in Texas grow and thrive while eliminating what was essentially a double tax on small business and maintaining the integrity of the UI trust fund at the same time,” said Pat Cleary, president and CEO of the PEO group. “PEOs provide valuable services to the small business community and play a role in the creation of Texas jobs, so enactment of this legislation was critical to the continued strength of the small business sector in the state.”

What Cleary doesn’t mention in his supportive statement on the recently signed bill is the fact that, to cover the $84 million in unemployment insurance tax breaks it brings, employers across the state not covered by the legislation will see tax increases, the Texas Tribune reported. These businesses, many of which may not agree with Cleary’s applause of the legislation, don’t think it is fair that they’re left to cover the loss of revenue that comes with tax breaks for a small group of Texas companies.

‘Special interest’ bill considered unfair
Though the increased taxes amount to less than a dollar per Texas employee, business owners who won’t see unemployment insurance tax decreases wholeheartedly disagree with the legislation, considered a “special interest bill,” by some.

“No other state in the entire country does this, and they don’t do it for good reason – because they recognize that there is a significant impact to their own UI trust fund, and if they did this they’d be passing on those costs,” Todd Cohn, vice president of regulatory affairs for TriNet, told the Texas Tribune last month.

Though Cohn’s company would benefit from the bill, he doesn’t want to pass on tax increases to clients that TriNet serves, and believes that PEOs will be blamed for tax increases across the state. Though tax increases will be minimal, they are considered unfair, since Texas PEOs will become the only businesses in the nation to receive these kind of tax breaks.

At Corporate Cost Control, we work closely with employers across the country to better manage the nuances of unemployment insurance. Legislation changes on the state level could impact you today, and we welcome any questions or concerns you may have on a wide range of topics.


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