This section discusses the aspects of the law that specifically apply to penalties.

Section 213.021 as amended effective September 31, 1989, and provided, in part:

Penalties attach to unpaid taxes as a matter of law (State v. Mauritz-Wells Co., 175 S.W. 2nd 238) rather than being assessed under any administrative authority of the Commission. Failure to pay taxes when due causes penalties to accrue by operation of law (Quick Pay Insurance Company v. The State of Texas, et al).

If an employer does not pay taxes when due, even though the failure to do so is in good faith, interest will be assessed on the original taxes due, from the original due date. Unless the Commission has made an error of such a nature that it prevented taxes from being timely paid or unless the Commission--in writing--has granted an extension of the due date as authorized in Rules 815.107 and 815.109. (See Chapter 4 - Extension of Due Dates, and Chapter 5 - Filed By Whom and When).

A change of ruling by the Commission (or one of its representatives) which finds taxes to be due, unless there is a material change in facts, is an example of action which would prevent timely payment of taxes. A ruling based on inaccurate or incomplete facts furnished by the employer is not action by the Commission, which prevents taxes from being paid.

Timely payment of taxes at an incorrect lower rate will not relieve an employer of liability for penalty on additional taxes computed at correct rate.

As provided in Section 213.021, penalty accrues at the rate of 1 1/2 percent of the amount of unpaid delinquent taxes for each month or fraction of a month the employer fails to remit payment after expiration of the ‘grace period’ in which payment may be submitted without penalty.

The maximum interest is 37.5 percent and interest on judgments for the same liability period will be charged at 1.0 percent per month.

Example: A liable employer does not pay taxes for second quarter of 1993 until December 5, 1994. Since the employer did not submit payment on or before July 31, 1993, the employer incurred a 1.5 percent interest on August 1, 1993, and an additional 1 1/2 percent interest for each subsequent month until taxes were paid. From August 1, 1993, to December 5, 1994, is 17 months. The employer would owe a penalty of 25.5 percent of the tax due on December 5, 1994.

Currently we are operating under the United States Bankruptcy Code Title II as amended by the Bankruptcy Reform Act of 1994. Under this amended Act, interest & penalties are allowable under certain circumstances:

In straight liquidation cases under Chapter 7, Chapter 11, Proceedings in Arrangement, or Chapter 13, Wage Earner Proceedings, interest accrued prior to petition date for bankruptcy proceedings may be claimed as priority. If the indebtedness has been secured, that is, a tax lien and/or abstract of judgment has been recorded in the county records prior to the petition date, then the penalties can be claimed as priority also.

Whenever a claim for pre-petition penalties is appropriate, only the interest and penalty amount accrued to the petition date is permitted. As in the past, the current Act permits any interest or other amounts incurred subsequent to the petition date to be claimed, thus all post-petition interest and penalties may be included in our claim to the bankruptcy court.

In a state receivership or an assignment for benefit of creditors, penalties are due for periods both before and after the court or fiduciary takes possession.

Section 213.021 charges the Commission with assessing late payment interest when an employer becomes delinquent in his tax payments. An Attorney General's opinion, dated April 12, 1937, holds that these interest penalties cannot be waived. However, the Commission does have the authority to grant extensions under certain circumstances.

When an employer has actually tendered payment of the tax to the Commission and such payment has been rejected or refunded, a subsequent assessment of this tax is without interest.

If the final due date on which taxes for a quarter may be paid without interest falls on a Saturday, Sunday, or a holiday, interest will not be assessed on a payment mailed on the next 'working day' following such final date.

Subsequent to July 1, 1965, if taxes due under the Act were timely paid in error into the unemployment compensation fund of another state and were subsequently paid to Texas upon discovery of the error, the Commission took the position that the taxes were paid to Texas as of the date they were actually paid to the other state.

As provided in Subsection 213.021, the interest penalty will not apply if payment was made timely to another state due to the belief that taxes were due to such other state.

No waiver of the interest penalty applies to payments mistakenly made to any agency of the Federal Government.

An employer who does not file a report of wages paid or contributions due as required by this subtitle or commission rule shall pay to the commission a penalty in the amount equal to:

Ordinarily, newly established accounts are allowed ten (10) days from the date of Form C-198, Employer's Liability Notice, to file reports without the penalty. If the reports are not filed within this ten (10) day period, the penalty for late filing will be assessed. The following is an example of the application of Section 213.022 penalties on a ‘new’ account:

EXAMPLE: Employer A paid taxable wages of $10,000 in the third quarter of 1999. The employer was mailed an Employer's Liability Notice, Form C-198, on (and dated) November 8, 1999, yet the employer did not file the report until March 1, 2000. Section 213.022 penalties had accrued as follows:

Maximum report penalty is reached at the third month. Interest penalty continues to accrue at the rate of 1.5 percent per month to the maximum of 37.5 percent.

Commission Rule Number 815.107 (b)(3), provides in part:

If the employer alleges that filing the report was impossible, or failure to file the report was due to a valid, factual and reasonable cause, the examiner may suggest that the employer write a letter to the Commission setting forth the circumstances. The letter should accompany the late report and remittance.

See Procedures Manual, Chapter 2 – Abatement for specific guidelines.

Section 213.059 of the Texas Unemployment Compensation Act, effective September 1, 1999 authorizes the Texas Workforce Commission to freeze assets of debtor employers and then levy on those assets.

This revision is made to expand the use of Freeze and Levy procedures through seizure of assets held in banks, credit unions, and savings and loan institutions by promptly identifying delinquent accounts and initiating appropriate legal remedies.

See Procedures Manual, Chapter 4 - Notice of Freeze/Levy for additional information.