Senate panel approves bill to let state withhold income tax from unemployment benefits

The Senate Revenue & Tax Committee on Wednesday approved House Bill 1049, a measure intended to permit state income-tax withholding on unemployment benefits.

Senator Dismain, who presented the bill, said lawmakers exempted unemployment benefits from state income taxation for calendar years 2020 and 2021 but that the exemption created a challenge because state withholding had not been implemented. "We exempted unemployment benefits from state income taxation for the years 2020 or calendar years 2020 and 2021," he said, and the bill would "allow the state to establish and create withholding for unemployment." He added the federal government already allows withholding on state unemployment.

Paul Goering of DFA testified the bill is DFA agency legislation developed with the Department of Workforce Services and said, "There is no revenue impact." Goering also told the committee that the U.S. Department of Labor must approve the law and has provided authorization that the legislation meets federal requirements.

Committee members asked procedural questions about whether withholding would be mandatory or elective and how recipients would receive documentation for tax preparers. DFA and Workforce Services staff said the department issues a 1099-equivalent statement that would reflect benefit amounts and any elected withholding.

With no recorded roll-call vote, a committee member moved to pass the bill, a second was noted as Senator Johnson, and the chair announced that House Bill 1049 had passed the committee by voice vote.

The committee did not record a roll-call tally in the transcript; no opposition was announced and the chair characterized the bill as having no committee revenue impact. The next procedural step is the regular legislative process following committee passage.