BILL ANALYSIS

C.S.H.B. 5545

By: LaHood

Trade, Workforce & Economic Development

Committee Report (Substituted)

BACKGROUND AND PURPOSE

Under federal law, wage replacement disability benefits are excluded from federal taxation if the payments are made under a statute in the nature of a workers' compensation act. Texas employers are not required to participate in the state workers' compensation system, but many nonparticipating employers still provide their injured workers with wage replacement disability benefits designed to serve the same purpose as workers' compensation. C.S.H.B. 5545 seeks to clarify that wage replacement disability benefits paid by an employer that does not carry a workers' compensation insurance policy are to be considered payments made under a statute in the nature of a workers' compensation statute solely for the purpose of exclusion from federal income and employment taxes.

CRIMINAL JUSTICE IMPACT

It is the committee's opinion that this bill does not expressly create a criminal offense, increase the punishment for an existing criminal offense or category of offenses, or change the eligibility of a person for community supervision, parole, or mandatory supervision.

RULEMAKING AUTHORITY

It is the committee's opinion that this bill does not expressly grant any additional rulemaking authority to a state officer, department, agency, or institution.

ANALYSIS

C.S.H.B. 5545 amends the Labor Code to establish that a wage replacement disability benefit paid by an employer that does not carry a workers' compensation insurance policy to an employee who sustained an injury in the course and scope of employment and is unable to return to work because of the injury is considered to be a payment made under a statute in the nature of a workers' compensation statute solely for the purpose of determining whether the benefit is excluded from taxable income for purposes of federal income and employment taxes.

C.S.H.B. 5545 establishes that the enactment of the bill's provisions is a clarification of existing law and does not imply that existing law may be construed as inconsistent with the law as amended by the bill.

EFFECTIVE DATE

September 1, 2025.

COMPARISON OF INTRODUCED AND SUBSTITUTE

C.S.H.B. 5545 differs from the introduced in minor or nonsubstantive ways by conforming to certain bill drafting conventions.