Granholm applauds state Legislature for quick action to help protect businesses

LANSING - Governor Jennifer M. Granholm today signed legislation that will protect some 34,000 Michigan businesses from having to pay as much as $43 million this year in the form of a "solvency tax." The tax was imposed by the Unemployment Insurance Agency (UIA) to cover interest payments on money the state has borrowed from the federal government to fund unemployment benefits.

"At a time when businesses are trying to navigate the waters of a rough economy, this tax added an unwanted burden on their bottom-line," Granholm said.  "I worked hard along with Michigan's congressional leaders to lift this burden for businesses, and I applaud state lawmakers for acting quickly to help protect them, too."

The bill signed today allows Michigan to take advantage of a waiver in the American Recovery and Reinvestment Act (ARRA) and thereby protect businesses from having to pay a state solvency tax.

Under the ARRA, states are granted a two-year waiver from having to pay the interest owed on money borrowed to fund unemployment benefits for workers.  For Michigan to take advantage of the waiver, lawmakers needed to amend the law requiring a "solvency tax" to be assessed on businesses with negative balances in their unemployment tax accounts to meet those interest payments.  Without a change in state law, these businesses would be forced to pay the tax even though the federal government is waiving the interest payments.

Granholm pushed the Obama administration for a solution to help Michigan businesses avoid this tax.  Congressmen Sander Levin and Gary Peters and U.S. Senators Carl Levin and Debbie Stabenow were instrumental in crafting language in the American Recovery and Reinvestment Act to make this happen.

HB 4239 was sponsored by Representative Robert Constan (D-Dearborn Heights).

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