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NC gets waiver to avoid more federal unemployment insurance taxes for employers due to debt

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RALEIGH, North Carolina — North Carolina businesses won't have to pay even higher unemployment insurance taxes beyond what's already required while the state still owes the federal government money used to pay jobless benefits during the Great Recession.

The U.S. Department of Labor told Gov. Pat McCrory this week that a waiver has been granted to the state, which McCrory's office announced Wednesday. It will cumulatively save North Carolina businesses $180 million in additional penalties.

Dale Folwell, assistant secretary for the Division of Employment Security, said the waiver means employers largely are avoiding an additional $55 to $65 paid on each employee on 2014 tax forms.

Employers already must pay an extra $84 per-year surcharge in federal tax for each employee due to the debt, which reached $2.8 billion in 2012 as benefits outstripped tax collections during a time of double-digit percentage unemployment in North Carolina.

The state was in line to pay the penalties because it's been in debt for so long. While waivers to other states are common, Folwell says it's still important because the burden without one would have been so high on employers.

The loan principal has dropped since the General Assembly and McCrory approved a law last year that cut the maximum number of benefit weeks and amounts while employer tax rates kept increasing. The loan balance is now $465 million. While the surcharge will increase another $21 per employee beginning Jan. 1 for the 2015 tax year, the entire surcharge will be eliminated once the loan is paid off, probably in May.

"By demonstrating to the federal government that we have cut up the federal unemployment insurance credit card, North Carolina employers will avoid paying penalties and be able to invest those funds in job creation," McCrory said in a release.

Employers who pay at the higher rate will be able to recoup surcharges they paid in 2015 once the debt is eliminated, the division said.

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