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CCH® UNEMPLOYMENT INSURANCE — 6/2/15

Arkansas court says day care center at church not liable for UI taxes

The court reversed a decision of the Department, which found that a day care center operated by a church was an organization separate from the church and therefore required to report wages and pay unemployment insurance taxes. On review, the court concluded that the Department erroneously construed the pertinent statute. State precedent provides that the exemption statute requires only that the services performed be under the employment of a church. Here, the employees of the day care center were paid from the church account that paid all other employees, rather than from a separate account of the day care center. Moreover, the directors of the day care center were the same directors of the church, and there was no separate governing body. The pastor of the church made the final hiring and firing decisions, and the church secretary maintained the payroll accounts. The court thus held that the day care employees were to be considered employees of the church (Sunshine Academy/First Pentecostal Church of Bryant v. DWS, Ark. Ct. of App., Division I, No. E-14-623, April 1, 2015).