LEGISLATIVE FISCAL OFFICE
Fiscal Note
Fiscal Note On: SB 76 SLS 202ES 256
Bill Text Version: ORIGINAL
Opp. Chamb. Action:
Proposed Amd.:
Sub. Bill For.:
Date: October 13, 2020 5:26 PM Author: LUNEAU
Dept./Agy.: Revenue
Subject: Misclassification of employees Analyst: Tanesha Morgan
REVENUE DEPARTMENT OR INCREASE GF RV See Note Page 1 of 2
Provides for penalties for employers who fail to withhold due to misclassification of employees. (2/3 - CA7s2.1(A)) (1/1/21)
(Item #24)
Proposed law provides for a penalty for employers who fail to withhold the amounts required to be withheld due to the
misclassification of an employee. The penalty is determined by multiplying the highest LA individual income tax rate by the
total wages paid to the misclassified employee during the period. However, the penalty may be reduced if the misclassified
employee paid LA income tax on these wages. Proposed law provides for a penalty for contractors who knew that amounts
paid to its subcontractor included labor costs of misclassified employees equal to 25% of the penalty for employers who fail
to withhold due to employee misclassification. Proposed law increases the late filing penalty for quarterly withholding return
and an annual reconciliation report for employees from $5 to $25 for each late return, report, or receipt and increases the
maximum penalty from $7,500 to $37,500. Proposed law provides a penalty of 25% of the amount of withholding tax that
should have been remitted for nonfiling of withholding returns, reports, and receipts or failure to remit withholding where the
failure to file or remit is due to employee misclassification. Effective January 1, 2021.
EXPENDITURES 2020-21 2021-22 2022-23 2023-24 2024-25 5 -YEAR TOTAL
State Gen. Fd. $0 $0 $0 $0 $0 $0
Agy. Self-Gen. $0 $0 $0 $0 $0 $0
Ded./Other $0 $0 $0 $0 $0 $0
Federal Funds $0 $0 $0 $0 $0 $0
Local Funds $0 $0 $0 $0 $0 $0
Annual Total $0 $0 $0 $0 $0 $0
REVENUES 2020-21 2021-22 2022-23 2023-24 2024-25 5 -YEAR TOTAL
State Gen. Fd. INCREASE INCREASE INCREASE INCREASE INCREASE
Agy. Self-Gen. INCREASE INCREASE INCREASE INCREASE INCREASE
Ded./Other $0 $0 $0 $0 $0 $0
Federal Funds $0 $0 $0 $0 $0 $0
Local Funds $0 $0 $0 $0 $0 $0
Annual Total
EXPENDITURE EXPLANATION
The LA Dept. of Revenue (LDR) anticipates a one-time expenditure of $51,360 in FY 21 for staff time to program and test
changes to the Department’s tax systems associated with the proposed measure’s revised penalties.
REVENUE EXPLANATION
The proposed bill works to increase state general fund withholding tax and self-generated penalty revenue for the Revenue
Dept associated with the assessment of tax liability for misclassified employees, penalties for misclassifying employees, and
increased late fees. While the bill works to facilitate the discovery of employment misclassification by the Revenue Dept, and
may improve withholding compliance, potential revenue gains are indeterminable, as the extent of employee
misclassification and especially the associated wages is unknown.
Tax Liability for Employers
The bill provides for the assessment of tax liability for employers who fail to withhold the amounts required to be withheld
due to the misclassification of an employee. The amount assessed is determined by multiplying the highest Louisiana
individual income tax rate (currently 6%) by the total wages paid to the misclassified employee during the period. However,
the liability may be reduced if the misclassified employee filed their Louisiana income tax return and paid the tax on these
wages prior to the assessment.
For informational purposes, in FY 19, the Louisiana Workforce Commission issued 367 warning letters to employers that
appeared to misclassify 3,768 employees. The Department does not capture the amount of wages associated with these
warnings.
Additional Late Fees due to Employee Misclassification
The bill provides a specific penalty for non-filing of withholding returns, reports, and receipts or failure to remit withholding
where the failure to file or remit is due to the misclassification of an employee. This penalty is equal to 25% of the amount
of withholding tax that should have been remitted.
REVENUE EXPLANATION CONTINUED ON PAGE 2
Senate Dual Referral Rules House
13.5.1 >= $100,000 Annual Fiscal Cost {S & H} 6.8(F)(1) >= $100,000 SGF Fiscal Cost {H & S}
Gregory V. Albrecht
13.5.2 >= $500,000 Annual Tax or Fee 6.8(G) >= $500,000 Tax or Fee Increase
Change {S & H} Chief Economist
or a Net Fee Decrease {S}
 LEGISLATIVE FISCAL OFFICE
Fiscal Note
Fiscal Note On: SB 76 SLS 202ES 256
Bill Text Version: ORIGINAL
Opp. Chamb. Action:
Proposed Amd.:
Sub. Bill For.:
Date: October 13, 2020 5:26 PM Author: LUNEAU
Dept./Agy.: Revenue
Subject: Misclassification of employees Analyst: Tanesha Morgan
CONTINUED EXPLANATION from page one: Page 2 of 2
REVENUE EXPLANATION CONTINUED FROM PAGE 1
Penalty for Contractors
The bill provides for a penalty for contractors who knew or had reason to know that amounts paid to its subcontractor
included labor costs of misclassified employees. This penalty is equal to 25% of the amount of withholding tax that should
have been remitted by the subcontractor.
Late Fees
Currently, the department assesses a penalty of $5 per quarterly return, annual reconciliation report and receipt (W-2, 1099,
etc.) for late filing or failure to file the required returns, reports, or receipts, limited to $7,500 annually. The bill increases
this penalty from $5 to $25 for each late return, report, or receipt and increases the annual maximum penalty from $7,500
to $37,500.
For informational purposes, LDR states that 24,537 late quarterly returns were submitted in 2017, 21,069 in 2018, and
17,316 in 2019. LDR was not able to provide the number of late annual reconciliation reports and receipts. The Dept
indicates that it does not generally assess the current $5 penalty. However, the proposed $25 penalty is significantly higher
and more cost effective to implement, but would also likely encourage fewer late reports.
Senate Dual Referral Rules House
13.5.1 >= $100,000 Annual Fiscal Cost {S & H} 6.8(F)(1) >= $100,000 SGF Fiscal Cost {H & S}
Gregory V. Albrecht
13.5.2 >= $500,000 Annual Tax or Fee 6.8(G) >= $500,000 Tax or Fee Increase
Change {S & H} Chief Economist
or a Net Fee Decrease {S}


Statutes affected:
SB76 Original: 47:111(A)(10), 47:114(F)(2)