Special Service Districts and the Utah Unemployment Act

By: Richard Snow

Do Special Service Districts (“SSD”) in Utah have to pay “contributions” (read “taxes”) pursuant to the State Unemployment Tax Act and Employment Security Act?

The quick answer is yes. Under Utah’s Employment Security Act, any political subdivision in Utah must pay unemployment contributions to the State’s unemployment fund. See Utah Code 35A-4-311(1)(a). The Utah Administrative Code further explains that governmental units, which include any political subdivisions, “will pay contributions in the same manner as other employers.” Utah Admin. Code R. 994-311(1) and (2). As SSDs are defined as “political subdivisions” of the State, any SSD that has employees is required to pay contributions under the Employment Security Act. See Utah Code 17D-1-103(1)(a)(iii) (defining SSDs as a political subdivision of the State).

It is possible, however for a SSD to avoid paying “contributions” to the State’s unemployment fund. To do so, an SSD must elect to become a reimbursable employer. See Utah Code 35A-4-311(1)(a) and Utah Admin. Code R. 994-311-101(1). Instead of making contributions to the unemployment fund, a reimbursable employer is “liable for payments to the fund in an amount equal to the regular benefits and all of the extended benefits paid to former employees.” Utah Admin. Code R. 994-311-101(1). By electing to become a reimbursable employer, a SSD avoids administrative expenses, but must make payments monthly rather than annually. This “reimbursable employer” status, however, must last for at least one full contribution year and requires the SSD to file a written notice of its decision to be a reimbursable employer within 30 days of “the date that the [Unemployment Insurance Division] gives notice to the [SSD] that it is subject to the [Employment Security Act].” Utah Code 35A-4-311(1)(b).

Note that while the analysis may change slightly similar rules apply to all local districts.