GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 1993

S	1 

SENATE BILL 787

Short Title:  ESC Tax Proposals.	(Public)
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Sponsors: Senator Kerr.
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Referred to:  Manufacturing and Labor.
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April 8, 1993

A BILL TO BE ENTITLED
AN ACT TO IMPOSE A PENALTY FOR FAILURE TO COMPLY WITH ESC TAX REPORTING REQUIREMENTS, TO ALLOW FOR GARNISHMENT FOR UNPAID UNEMPLOYMENT INSURANCE CONTRIBUTIONS, AND TO CLARIFY THE LAW WITH RESPECT TO OVERPAYMENTS COLLECTED FROM CERTAIN CLAIMANTS.
The General Assembly of North Carolina enacts:
Section 1.  G.S. 96-9(a)(7) reads as rewritten:
"(7)	Effective with the quarter ending September 30, 1992, every employer with 250 or more employees, and every person or organization that, as agent, reports wages on a total of 250 or more employees on behalf of one or more subject employers, shall file that portion of the 'Employer's Quarterly Tax and Wage Report' that contains the name, social security number, and gross wages of each individual in employment on magnetic tapes or diskettes in a format prescribed by the Commission.
		For failure of an employer to comply with this subsection, there shall be added to the amount required to be shown as tax in the reports, a penalty of five percent (5%) of the amount of such tax or twenty-five dollars ($25.00), whichever is greater.  The Commission shall have the power to reduce or waive this penalty pursuant to G.S. 96-10(j).  For a person or organization that, as agents, fails to comply, that person or organization shall cease to have the right to report wages and file reports for subject employees for a period of one year following the calendar quarter in which that person or organization failed to comply."
Sec. 2.  G.S. 96-10(b) is amended by adding the following new subdivision to read:
"(4)	Bank deposits, rents, salaries, wages, and all other choses in action or property incapable of manual levy or delivery, including property held in the Escheat Fund, hereinafter called the intangible, belonging, owing, or to become due to any employer subject to any of the provisions of this Chapter, or which has been transferred by such employer under circumstances which would permit it to be levied upon if it were tangible, shall be subject to attachment or garnishment as herein provided, and the person owing said intangible, matured or unmatured, or having same in his possession or control, hereinafter called the garnishee, shall become liable for all sums due by the employer under this Chapter to the extent of the amount of the intangible belonging, owing, or to become due to the employer subject to the setoff of any matured or unmatured indebtedness of the employer to the garnishee; provided, however, the garnishee shall not become liable for any sums represented by or held pursuant to any negotiable instrument issued and delivered by the garnishee to the employer and negotiated by the employer to a bona fide holder in due course, and whenever any sums due by the employer and subject to garnishment are so held or represented, the garnishee shall hold such sums for payment to the Commission upon the garnishee's receipt of such negotiable instrument, unless such instrument is presented to the garnishee for payment by a bona fide holder in due course in which event such sums may be paid in accordance with such instrument to such holder in due course.  To effect such attachment or garnishment the Commission shall serve or cause to be served upon the employer and the garnishee a notice as hereinafter provided, which notice may be served by any deputy or employee of the Commission or by any officer having authority to serve summonses or may be served in any manner provided in Rule 4 of the North Carolina Rules of Civil Procedure.  The notice shall:
a.	Show the name of the employer, and if known the employer's social security number or federal tax identification number and the employer's address;
b.	Show the nature and amount of the contributions, and the interest and penalties thereon, and the quarter or quarters and the year or years for which the same were levied or assessed; and
c.	Be accompanied by a copy of this subsection, and thereupon the procedure shall be as follows:
	If the garnishee has no defense to offer or no setoff against the employer, he shall within 10 days after service of said notice, answer the same by sending to the Commission by registered or certified mail a statement to that effect, and if the amount due or belonging to the employer is then due or subject to his demand, it shall be remitted to the Commission with said statement, but if said amount is to mature in the future, the statement shall set forth that fact and the same shall be paid to the Commission upon maturity, and any payment by the garnishee hereunder shall be a complete extinguishment of any liability therefor on his part to the employer.  If the garnishee has any defense or setoff, he shall state the same in writing under oath, and, within 10 days after service of said notice, shall send two copies of said statement to the Commission registered or certified mail; if the Commission admits such defense or setoff, it shall so advise the garnishee in writing within 10 days after receipt of such statement and the attachment or garnishment shall thereupon be discharged to the amount required by such defense or setoff, and any amount attached or garnished hereunder which is not affected by such defense or setoff shall be remitted to the Commission as above provided in cases where the garnishee has no defense or setoff, and with like effect.  If the Commission shall not admit the defense or setoff, it shall set forth in writing its objections thereto and shall send a copy thereof to the garnishee within 10 days after receipt of the garnishee's statement, or within such further time as may be agreed on by the garnishee, and at the same time the Commission shall file a copy of said notice, a copy of the garnishee's statement, and a copy of its objections thereto in the superior court of the county where the garnishee resides or does business where the issues made shall be tried as in civil actions.
		If judgment is entered in favor of the Commission by default or after hearing, the garnishee shall become liable for the contributions, interest, and penalties due by the employer to the extent of the amount over and above any defense or setoff of the garnishee belonging, owing, or to become due to the employer, but payments shall not be required from amounts which are to become due to the employer until the maturity thereof, nor shall more than ten percent (10%) of any employer's salary or wages be required to be paid hereunder in any one month.  The garnishee may satisfy said judgment upon paying said amount, and if he fails to do so, execution may issue as provided by law.  From any judgment or order entered upon such hearing either the Commission or the garnishee may appeal as provided by law.  If, before or after judgment, adequate security is filed for the payment of said contributions, interest, penalties, and costs, the attachment or garnishment may be released or execution stayed pending appeal, but the final judgment shall be paid or enforced as above provided.  The employer's sole remedies to question his liability for said contributions, interest, and penalties shall be those provided in this Chapter, as now or hereafter amended or supplemented.  If any third person claims any intangible attached or garnished hereunder and his lawful right thereto, or to any part thereof, is shown to the Commission, such person shall discharge the attachment or garnishment to the extent necessary to protect such right, and if such right is asserted after the filing of said copies as aforesaid, it may be established by interpleader as now or hereafter provided by law in cases of attachment and garnishment.  In case such third party has no notice of proceedings hereunder, he shall have the right to file his petition under oath with the Commission at any time within 12 months after said intangible is paid to him and if the Commission finds that such party is lawfully entitled thereto or to any part thereof, it shall pay the same to such party as provided for refunds by G.S. 96-10(e) and if such payment is denied, said party may appeal from the determination of the Commission under the provisions of G.S. 96-10(f); provided, that in taking an appeal to the superior court, said party may appeal either to the Superior Court of Wake County or to the superior court of the county wherein he resides or does business.  The intangibles of an employer shall be paid or collected hereunder only to the extent necessary to satisfy said contributions, interest, penalties, and costs.  Except as hereinafter set forth, the remedy provided in this section shall not be resorted to unless a certificate or execution against the employer has been returned unsatisfied: Provided, however, if the Commission is of the opinion that the only effective remedy is that herein provided, it shall not be necessary that a certificate or execution shall be first returned unsatisfied, and in no case shall it be a defense to the remedy herein provided that a certificate or execution has not been first returned unsatisfied.
		This subsection shall be applicable with respect to the wages, salary, or other compensation of officials and employees of this State and its agencies and instrumentalities, officials and employees of political subdivisions of this State and their agencies and instrumentalities, and also officials and employees of the United States and its agencies and instrumentalities insofar as the same is permitted by the Constitution and laws of the United States.  In the case of State or federal employees, the notice shall be served upon such employee and upon the head or chief fiscal officer of the department, agency, instrumentality, or institution by which the employer is employed.  In case the employer is an employee of a political subdivision of the State, the notice shall be served upon such employee and upon the chief fiscal officer, or any officer or person charged with making up the payrolls, or disbursing funds, of the political subdivision by which the employer is employed.  Such head or chief officer or fiscal officer or other person as specified above shall thereafter, subject to the limitations herein provided, make deductions from the salary or wages due or to become due the employer and remit same to the Commission until the contribution, penalty, interest, and costs allowed by law are fully paid.  Such deductions and remittances shall, pro tanto, constitute a satisfaction of the salary or wages due the employer."
Sec. 3.  This act is effective upon ratification and applies to civil actions filed on or after that date.