After court ruling and IRS announcement, jobless Arkansas workers could see cash bounty soon

After court ruling and IRS announcement, jobless Arkansas workers could see cash bounty soon

Pulaski County circuit court orders Gov. Hutchinson to reinstate weekly $300 unemployment pay; IRS announces refund following tax adjustment to jobless benefits

BCN Executive Editor Wesley Brown – Aug. 1, 2021 — Arkansas’ unemployed workers receive a double dose of good news this week as the state continues to rebound from the loss of nearly 108,000 jobs at the peak of the pandemic.

On Wednesday (July 28), Pulaski County District Court Judge Herbert Wright granted a preliminary injunction to five plaintiffs represented by Arkansas Legal Services in a case against Gov. Asa Hutchinson and the state Division of Workforce Services (DWS) to opt out of the federal supplemental unemployment assistance program.

A day later, the Internal Revenue Service announced that another 1.5 million taxpayers will receive refunds averaging more than $1,600 as it continues to adjust unemployment compensation from previously filed income tax returns.

Both the Pulaski County ruling and the IRS announcement are tied to the American Rescue Plan, the $2.2 trillion COVID-19 emergency program signed into law by President Joe Biden on March 11, 2021. That program extended unemployment benefits until September 6 with a weekly supplemental payout of $300 on top of the regular $400 benefit. The first $10,200 of unemployment benefits will be tax-free for people with incomes less than $150,000.

However, Hutchinson directed the Division of Workforce Services (DWS), which is housed in the state Department of Commerce, to end Arkansas’s participation in the federal program after June 26. According to U.S. Labor Department data, Arkansas is among the 26 states that have now decided to end participation in the federal unemployment program that offers supplemental unemployment compensation during the pandemics. (See story here.)

“The programs were implemented to assist the unemployed during the pandemic when businesses were laying off employees and jobs were scarce,” said Hutchinson. “As we emerge from COVID-19, retail and service companies, restaurants, and industry are attempting to return to pre-pandemic unemployment levels, but employees are as scarce today as jobs were a year ago. The $300 federal supplement helped thousands of Arkansans make it through this tough time, so it served a good purpose. Now we need Arkansans back on the job so that we can get our economy back to full speed.”

But Judge Wright’s ruling last week temporarily halted Hutchinson’s directive but did not rule on the question of whether the governor had the power to end the program. Instead, Wright agreed that the federal unemployment program is “clearly voluntary, and a state may decide whether to participate in them or not. This Court is faced with the question of who gets to determine whether to participate – the executive branch or the legislative.”

According to Arkansas Legal Aid, about 69,000 out-of-work Arkansans are impacted by Hutchinson’s decision to opt out of the program at the end of June. Under state law, Wright said that the State Legislature has clearly stated its public policy is for Arkansas to participate in these types of programs for the benefit of its citizens.

“The Court finds that the Plaintiffs have a reasonable likelihood of success on the merits and are likely to suffer harm in the absence of a preliminary injunction,” wrote Wright in his four-page ruling. “The Court has serious doubts that the Governor and the Director of Workforce Services were acting within the scope of their duties, as these decisions would normally be the subject of legislation from the General Assembly.”

Under Wright’s order, Hutchinson and State Department of Commerce Secretary Mike Preston, who oversees the DWS must now “reengage” the state terminated unemployment compensation program. If the Biden administration reject Arkansas’ reinstatement, DWS then must provide show proof of that communication to the Wright and the District Court.

On Friday (July 30), however, Attorney General Leslie Rutledge filed an appeal with the Arkansas Supreme Court requesting a stay of Wright’s temporary injunction on behalf of Gov. Hutchinson and DWS Director Charisse Childers. The plaintiffs in the case represented by Arkansas Legal Aid of Arkansas Inc. include Logan Armstrong, Emily Ball, Ronald Bates, Cynthia Eyiuche, and Kurt Johnsen. They also filed a motion on Friday opposing Hutchinson’s and DWS’s request for a stay, asking the Court to leave the injunction in place.

The original Pandemic Unemployment Assistance (PUA) program, most notably, included an additional $600 per week in unemployment compensation on top of the usual unemployment payments from the state. After that program expired in July, President Trump then borrowed $44 billion from FEMA’s Disaster Relief Fund to provide a smaller $300 unemployment benefit to out-of-workers through the end of 2020.

Under the $900 billion Consolidated Appropriations Act signed into law by Trump a few days after Christmas, the PUC was reupped again at a reduced rate, allowing unemployed individuals to receive an additional $300 per week through early March. Biden’s American Rescue Plan extended that benefit through Labor Day.

Yet Hutchinson signaled in April that the Arkansas job market was returning to normal after state workforce officials reported unemployment at a solid 4.4%, which is significantly below the national average at 5.9%. However, Arkansas’ jobless rate has stalled at 4.4% for the past three months as many U.S. workers are still not returning to their old jobs as the Delta variant has rampaged through the state’s unvaccinated population.

Before the U.S. went into the pandemic in March 2020, the state and national jobless rate both held at near all-time records of 3.5% as most employers were struggling to fill jobs. The IRS said its ongoing effort to refund unemployment benefits is focused on minimizing burden on taxpayers that were sent to the unemployment line during the pandemic.

The current IRS review means most taxpayers affected by this change will not have to file an amended return because IRS employees have reviewed and adjusted their tax returns for them. For taxpayers who overpaid, the IRS will either refund the overpayment or apply it to other outstanding taxes or other federal or state debts owed. For this round, the IRS identified approximately 1.7 million taxpayers due an adjustment. Of that number, approximately 1.5 million taxpayers are expected to receive an average of $1,686.

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