Governmental entities, Indian tribes and tribal units are, by law, reimbursing employers.
A 501c3 non-profit employer is considered a contributing employer by default but has the option to be classified as a reimbursing employer. An out-of-state governmental employer is only treated as a reimbursing employer if it is partnered with a Michigan governmental entity.
A reimbursing employer does not pay quarterly taxes to the Michigan Unemployment Insurance Agency (UIA). Rather, it pays dollar-for-dollar the amount of UI benefits that were paid in a calendar quarter to former employees. The employer is required to report to UIA quarterly employee wages and the UIA determines eligibility for benefits based on the wages reported. Each quarter, the employer will receive UIA Form 1763, Reimbursing Employer Billing for Benefit Charges which includes the balance due to be paid quarterly and annually based on organization type.
Only an entity that is classified by the federal Internal Revenue Service (IRS) as a church is exempt from paying Michigan unemployment taxes. Any other type of “religious” non-profit 501c3 entity is subject to reimbursement liability status and state unemployment taxes.
Employers may change their status from reimbursing to contributing by submitting a written request no later than Dec. 2 of the preceding year in which it plans to change.
Non-profit entities with 501c3 status, Indian tribes/tribal units, and out-of-state governmental units without an affiliated Michigan base are subject to security requirements. To retain reimbursing status, they must provide an original ink-signed or stamped security in the form of surety bond or letter of credit if its gross annual payroll (salary/wages) equals or exceeds $100,000.
The security must be updated annually based on an increase in gross annual payroll or coverage period of the expiration date.
|