A Business Guide to the Georgia Security and Immigration Compliance Act

by Michael D. Cross, Jr. and Erik J. Broel.

1. Introduction
2. All Employers
3. Employers that Employ Form 1099 Employees
4. Public Employers, and Those Contractors and Subcontractors that Work for Public Employers
5. Where Does My Organization Stand?

Introduction

The Georgia Security and Immigration Compliance Act (the "Act"), also known as Senate Bill 529, impacts all Georgia employers by compelling them to verify the work eligibility of all new employees. Employers that fail to verify eligibility, or who hire ineligible employees, are not permitted to deduct the employee's salary as a business expense on their state tax returns.

The law also impacts employers who hire Form 1099 employees, as it requires the employer to withhold 6% of the employee's compensation if the employee fails to provide a taxpayer identification number, provides an incorrect taxpayer identification number, or provides a taxpayer identification number that is issued for nonresident aliens.

Public employers, and those contractors and subcontractors who work for public employers are also affected in that public employers will not be allowed to contract with private contractors and subcontractors unless those companies verify their new employees' eligibility to work through a system approved by the Department of Homeland Security.

This guide is intended to give an overview of the Georgia Security and Immigration Compliance Act, and should not be misconstrued as the dispensation of legal advice. If you would like to discuss specifically how this Act impacts your business, we would be happy to meet with you.

All Employers

Under the new law, all Georgia employers are required to verify that all employees hired after January 1st, 2008 are eligible to work in the United States. Employers that are exempt from compliance with federal employment verification procedures under federal law, however, are exempt from this provision as well. Additionally, the Act provides that this section does not apply to employees who have and present a valid Georgia Driver's License or identification card issued by the Georgia Department of Driver Services.

As a penalty, employers that do not verify an employee's eligibility to work in the United States may not deduct more than $600.00 of that employee's compensation from their Georgia income tax returns for that year. The provisions of this section apply regardless of whether the employee receives a W-2 statement or a Form 1099 statement.

In order to comply with this law, and avoid the tax penalty, ensure that all employees hired beginning January 1st, 2008 are eligible to work in the Untied States.

Employers that Employ Form 1099 Employees (Independent Contractors)

According to the provisions of the Act, beginning July 1st, 2007 employers that employ Form 1099 employees must withhold 6% of the employee's compensation for state income taxes if the employee fails to provide a taxpayer identification number, provides an incorrect taxpayer identification number, or provides an Internal Revenue Service taxpayer identification number that is issued for nonresident aliens. Employers that are exempt from federal withholding for the employee pursuant to a properly filed Internal Revenue Service Form 8233 are exempt from this provision. In order to maintain the exemption, the employer must provide a copy of Form 8233 to the Commissioner of the Georgia Department of Labor.

An employer that fails to comply with this section will remain liable for 6% of the employee's compensation.

In order to comply with this section, verify that all Form 1099 employees have a correct taxpayer identification number that is not issued for nonresident aliens. If an employee either does not have a correct taxpayer identification number, or has a taxpayer identification number that is issued for nonresident aliens, begin withholding 6% of that employee's compensation for Georgia income taxes on July 1st, 2007, and continue withholding until the employee provides a correct taxpayer identification number.

Public Employers, and Those Contractors and Subcontractors that Work for Public Employers

As of July 1, 2007, all contractors and subcontractors that wish to do business with state agencies must verify that any new employees are eligible to work in the United States through an electronic federal work authorization system designated by the Department of Homeland Security. As defined in the Act, subcontractors include contract employees, staffing agencies, or any other contractors regardless of their tier.

The verification requirement will be implemented and applied to organizations over a three year period based on organization size. All public employers, contractors, and subcontractors with 500 or more employees are required to register and participate in the federal work authorization program July 1, 2007. Organizations with 100 or more employees are required to register and participate in the program beginning July 1, 2008, and all other organizations must comply starting July 1, 2009.

The tiered implementation schedule gives smaller contractors additional time to meet the requirement without limiting their business opportunities with the state. For example, between July 1, 2007 and June 30, 2008, public employers with more than 500 employees will not be permitted to enter into contracts with contractors and subcontractors that employ more than 500 people unless those contractors and subcontractors have registered and are participating in the federal work authorization program. Furthermore, the Act prohibits those contractors and subcontractors from performing any work for a state agency unless and until they are participating in the program. Conversely, contractors and subcontractors with less than 500 employees are free to continue to perform work for any public employer, regardless of size, without participating in the program. Moreover, any public employer of any size may enter into a contract with any contractor or subcontractor that employs less than 500 employees, regardless of whether the contractor or subcontractor is participating in the program.

While failure to comply does not carry a penalty under the Act, failure to participate will restrict a company's business opportunities, as it will be unable to contract with any agency, department, or instrumentality of the state. Furthermore, a subcontractor that does not participate in the federal program is prohibited from performing work for a contractor on a state project.

In order to comply with this section, enroll in one of the electronic verification of work authorization programs operated by the Department of Homeland Security, and begin verifying that all new employees are authorized to work in the United States through that system on or before the effective date for your organization. Additionally, ensure that your organization is in compliance with any administrative rules and regulations. For all contracts except those relating to transportation, the Commissioner of the Georgia Department of Labor is empowered to enact rules and regulations to administer this section, and those rules and regulations must be posted on the Department of Labor website. With regard to matters relating to transportation, the Commissioner of the Georgia Department of Transportation is charged with enacting rules and regulations, and those rules and regulations will be posted on the Georgia Department of Transportation website.

Where Does My Organization Stand?

The Georgia Security and Immigration Compliance Act imposes several new requirements on Georgia employers, and will begin to take effect on July 1, 2007.

Conclusion

We hope this guide has been informative and helpful to you in understanding some of the impacts of the Georgia Security and Immigration Compliance Act, and we would value the opportunity to speak to you regarding where your organization stands in relation to the Act.