Chapter 35 Oregon Laws 2005

AN ACT

HB 2124

Relating to transfer of experience rating for unemployment taxes; creating new provisions; and amending ORS 657.430, 657.480 and 657.990.

Be It Enacted by the People of the State of Oregon:

SECTION 1. ORS 657.430 is amended to read:

657.430. Subject to ORS 657.480 and the conditions and exceptions contained in this chapter, the Director of the Employment Department shall, for each calendar year, determine the tax [rate] rates applicable to each employer on the basis of the actual experience of the employing enterprises of the employer with respect to benefits paid to unemployed individuals on account of wages for services performed in the employ of [such] the employer during the base years of [such] the unemployed individuals [subject to the conditions and exceptions contained in this chapter].

SECTION 2. ORS 657.480 is amended to read:

657.480. [(1) If the organization, trade or business, including the entire employing enterprise and all its incidents for all purposes of this chapter, of any employer is by purchase or otherwise transferred to an employing unit, whether or not such acquiring employing unit was an employing unit within the meaning of ORS 657.020 prior to such acquisition, the employing unit to which the transfer is made shall assume the position of such employer with respect to such employer’s experience, payrolls and otherwise the same as if there had been no change in ownership and shall be required to assume and continue the experience of such employer pursuant to ORS 657.430 to 657.475 and 657.480 to 657.487. However, no employing unit to which the organization, trade or business of an employer has been transferred is entitled to a tax rate of less than the rate assigned an employer in accordance with ORS 657.435 unless and until such employing unit, based upon its experience and the experience of the organization, trade or business transferred, has throughout the 12 consecutive months preceding the computation date had its account chargeable with benefits.]

[(2)(a) The Director of the Employment Department shall provide by rule for partial transfer of experience and payroll when an employer has transferred an identifiable and segregable portion of an employing unit to a successor employing unit. As a condition of such partial transfer of experience and payroll, the rules shall require an application by the successor, agreement by the predecessor and such evidence as the director may prescribe of the experience and payrolls attributable to the transferred portion up to the date of transfer. The rules shall provide that the successor, if not already an employer, shall become an employer as of the date of transfer. The rules shall also provide that the experience of the transferred portion of the predecessor’s account shall be removed from the experience rating record of the predecessor, and for each calendar year following the date of the transfer of the employment records, the director shall compute the rate of contribution payable by the successor on the basis of the successor’s experience, if any, combined with the experience of the portion of the record transferred. The rules shall provide which rates shall be payable by the predecessor and successor employing units for the period between the date of the transfer of the employment record of the transferred unit and the first day of the next calendar year.]

[(b) If the director determines the transfer was made solely to qualify for a reduced tax rate or if either the predecessor or the successor employing unit is delinquent with contributions or tax reports, the director shall deny the application for partial transfer of experience and payroll.]

[(c) An employing unit whose application is denied may request a hearing under the provisions of ORS 657.683.]

(1) If an employer transfers its trade or business or a portion of its trade or business to another employer, the portion of unemployment experience attributable to the transferred trade or business shall be transferred to the acquiring employer.

(2)(a) If a person is not an employer when the person acquires a trade or business or a portion of a trade or business of an employer, the unemployment experience of the acquired trade or business shall be transferred to the person unless the Director of the Employment Department finds that the person acquired the trade or business solely or primarily for the purpose of obtaining a lower tax rate.

(b) The person described in paragraph (a) of this subsection is not entitled to a tax rate of less than the tax rate assigned under ORS 657.435 unless and until the person, based upon the person’s unemployment experience and the unemployment experience of the trade or business transferred, has throughout the 12 consecutive months preceding the computation date had its account chargeable with benefits.

(c) If the director finds that a person acquired a trade or business solely or primarily for the purpose of obtaining a lower tax rate, the director shall deny a transfer of unemployment experience. In determining whether a person acquired a trade or business solely or primarily for the purpose of obtaining a lower tax rate, the director shall use objective factors that may include:

(A) The cost of acquiring the trade or business;

(B) Whether the person continued the business activities of the transferred trade or business;

(C) How long the person continued the business activities of the transferred trade or business; or

(D) Whether a substantial number of new employees were hired for the performance of duties unrelated to the business activities of the trade or business that were conducted before the transfer.

(3)(a) A person may not engage in activity to transfer or acquire, or to attempt to transfer or acquire, a trade or business or any portion of a trade or business solely or primarily for the purpose of obtaining a lower tax rate. If a person knowingly engages in activity to transfer or acquire, or to attempt to transfer or acquire, a trade or business or any portion of a trade or business solely or primarily for the purpose of obtaining a lower tax rate, the director shall assign the person the highest tax rate designated under this chapter for the rate year during which the activity occurred and for the next three rate years. However, if the person is already subject to the highest tax rate for a year, or if the amount of increase in the person’s tax rate would be less than two percentage points for the year, the director shall impose an additional penalty tax rate of two percentage points added to the calculated tax rate.

(b) A person may not advise another person to engage in activity to transfer or acquire, or to attempt to transfer or acquire, a trade or business or any portion of a trade or business solely or primarily for the purpose of obtaining a lower tax rate. In addition to any other penalty provided by law, the director may assess a civil penalty not to exceed $10,000 against a person that knowingly advises another person to engage in activity to transfer or acquire, or to attempt to transfer or acquire, a trade or business or any portion of a trade or business solely or primarily for the purpose of obtaining a lower tax rate. The director shall deposit all sums collected as civil penalties under this paragraph into the Employment Department Special Administrative Fund. An assessment under this paragraph is final unless within 20 days after the mailing of the notice of assessment the person files an application for a hearing under ORS 657.683.

(c) As used in this subsection, “knowingly” means having actual knowledge of or acting with deliberate ignorance or reckless disregard for the law.

(4) The director shall adopt necessary rules and procedures regarding the transfer of unemployment experience for purposes of establishing employer tax rates under this chapter to ensure that higher tax rates are not avoided through the transfer or acquisition of a trade or business or a portion of a trade or business. In adopting rules under this section, the director shall consider and strive to meet the minimum requirements in any guidance or regulations issued by the United States Department of Labor.

SECTION 3. ORS 657.990 is amended to read:

657.990. (1) Violation of ORS 657.295 is punishable for each offense[, upon conviction,] by a fine of not less than $50 nor more than $500, or by imprisonment for not more than six months, or both.

(2) Violation of ORS 657.300 is a misdemeanor.

(3) Violation of ORS 657.480 (3)(a) or (b) is a Class C felony.

[(3)] (4) In addition to any penalties otherwise prescribed in this chapter, violation of ORS 657.495, 657.565, 657.660 (2) or any other provision of this chapter is a misdemeanor and[, upon conviction,] is punishable by a fine of not less than $100 nor more than $500, or by imprisonment for not more than 90 days, or both. If an offending employer or the employer of an offending agent is a corporation, the president, secretary and the treasurer, or officers exercising corresponding functions, [shall be] are subject to the penalties in this subsection in respect to any duties[,] of which they respectively had or, in the proper exercise of their duties, ought to have had knowledge.

[(4)] (5) Subject to ORS 153.022, willful violation of this chapter or of any order[, rule or regulation thereunder] issued or rule adopted under this chapter, the violation of which is made unlawful or the observance of which is required under this chapter, and for which a penalty neither is prescribed in this section nor provided by any other applicable statute, is punishable[, upon conviction,] by a fine of not less than $20 nor more than $200, or by imprisonment for not more than 60 days, or both. Each day [such] the violation continues is considered a separate offense.

[(5)] (6) Circuit courts and justice courts have concurrent jurisdiction of any offense under this section.

SECTION 4. For the period of one year after the effective date of this 2005 Act, the Director of the Employment Department shall waive all civil penalties and interest under ORS 657.480 and may not initiate any criminal prosecution under ORS 657.990 (3) if both of the following conditions are met:

(1) The person voluntarily contacts the Employment Department to resolve any issue of past activity that could be construed as prohibited under ORS 657.480; and

(2) The person pays all past due taxes owed as a result of the improper but previously undetected transfers of unemployment experience.

SECTION 5. The amendments to ORS 657.430, 657.480 and 657.990 by sections 1 to 3 of this 2005 Act apply only to tax years beginning on and after January 1, 2006.

Approved by the Governor May 13, 2005

Filed in the office of Secretary of State May 13, 2005

Effective date January 1, 2006

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