New York State employers will pay less in both federal and state unemployment insurance taxes in 2007—a change The Business Council projected back in 2004, according to Rich Schwarz, the Council's tax counsel.

The federal unemployment compensation tax (known as the FUTA tax) will decrease from $98/employee to $56/employee, Schwarz said. That extra $42 per employee would have been due on January 31 with employers' annual FUTA returns.

New York’s experience-rated unemployment compensation tax has been at the highest level permitted by statute since January 1, 2003. Next year, it will decrease by an average of $17 per employee.

In 2004, The Business Council predicted both tax decreases based on its projection that New York's unemployment insurance trust fund would finish repaying all outstanding federal advances in May, 2006. The Council also projected that New York's trust would retain a positive balance throughout 2006, thus showing a positive close-of-year balance on December 31, 2006—the first close-of-year positive balance since 2001.

Confirmation of this good news for employers was posted by the United States Department of Labor the last week of September.

“Since New York repaid its loan balance with the federal unemployment account before September 30, it will not be charged interest on those borrowed funds provided it does not take additional loans before December 31, 2006," the U.S. Department of Labor said in a statement. The statement added that New York has said it does not plan to request any additional loans in calendar 2006.

By statute, the federal unemployment insurance tax rate decreases from 1.4% to 0.8% on New York employers’ annual FUTA tax return due next January as long as New York’s unemployment insurance trust fund balance on November 11, 2006 is positive and remains positive through December. The fund balance is positive now and is expected to remain positive throughout the year, Schwarz said.