Fla. Admin. Code Ann. R. 73B-10.031 - Succession and Transfer of Reemployment Experience

(1) Commencement Date and Records Regarding All Successions.

(a) A succession commences when all or part of a trade or business is transferred from one employer to another. If a transfer of workforce is involved, the succession commences when any of the transferred workers begin working for the successor employer.

(b) Each employing unit must keep complete, true and accurate records of any transfer or acquisition of a trade or business or portion thereof and make those records available to DOR upon request.

(2) Voluntary Transfer of Tax Rate.

(a) Requirements for Voluntary Transfer of Employment Records.

1. Timely Written Notification to DOR. A successor employer must notify DOR in writing of a total or partial succession within 90 days after the date the succession commenced or any application for transfer of employment records will be denied. Notification may be made on Form DR-1, Florida Business Tax Application, incorporated by reference in rule 12A-1.097, F.A.C. or RTS-1S, Report to Determine Succession and Application for Transfer of Experience Rating Records, incorporated by reference in rule 73B-10.037, F.A.C. If the initial written notification is not on Form RTS-1S or Form RTS-1S is incomplete, a completed Form RTS-1S must be filed within 30 days after DOR mails written notification of the requirement to the employer, or the application for transfer of employment records will be denied.

2. Time Limit for Application to transfer employment records. Pursuant to section 443.131(3) (f)1., F.S., DOR will notify each successor who was not an employer prior to the succession of its liability and the right to apply for transfer of the predecessor's employment records. DOR will issue written notification to each successor who was already an employer of the right to apply for transfer of the predecessor's employment records. The successor must file a written application for transfer of the predecessor's employment records within 30 days from the mailing date of DOR's written notification or the application will be denied.

3. Notification of Tax Rate Change Resulting from Transfer of Employment Records. Upon being notified in writing that a succession occurred, DOR will notify each affected employer of any tax rate change that would result from transfer of the predecessor's employment records, pursuant to sections 443.131(3) and 443.1316, F.S., as well as the tax rate that would be assigned if employment records were not transferred.

4. Withdrawal of Application. The successor and predecessor employer will each have 30 days from the mailing date of DOR notice of proposed tax rate to withdraw in writing the application or agreement to transfer employment records. Failure to timely withdraw an application or agreement will constitute acceptance of the transfer.

(b) Partial Succession.

1. In addition to the provisions of subsection (1), and paragraph (2)(a) of this rule, a partial successor must submit information from the predecessor's records regarding all employees who worked in the unit being transferred during any part of the 14 calendar quarters immediately preceding and up to the date the succession commenced, by completing and submitting Form RTS-1SA "List of Employees to be Transferred, " within 30 days after DOR mails written notification of the RTS-1SA requirement to the employer, or the application will be denied. Form RTS-1SA is incorporated by reference in rule 73B-10.037, F.A.C. If 10 or more employees were transferred, filing of the RTS-1SA must be by electronic means in accordance with the provisions of chapter 12-24, F.A.C.

2. A partial successor's application for transfer of employment records must include the written agreement of the predecessor for transfer of the employment records of each identifiable and segregable unit to be transferred, or the application will be denied.

3. The partial successor must establish that the records to be transferred are those of an identifiable and segregable unit or units and provide the date workers were first employed in each unit being transferred, even if the unit began employing workers under a previous legal entity. An identifiable, segregable unit is a distinct entity that could operate independently of the remainder of the business. If timely written notification of partial succession is filed and DOR determines additional information is needed, the partial successor will have the later of 90 days after the commencement of the partial succession or 30 days after DOR's mailed notification that additional information is needed to file the required information, or the application for transfer of employment records will be denied.

4. Upon receipt of a complete, timely Form RTS-1SA, DOR will identify the employment records to be transferred, based on wages and benefit charges associated with the transferred unit, and issue written notification of the determination to the predecessor and successor employers. The transferred employment records will be applied to the successor's records in the same calendar quarter that they are removed from the predecessor's records. The successor will be liable for charges associated with benefits paid to transferred employees for any claim based on wages paid by the predecessor. DOR's determination will become final and binding unless the successor or predecessor files a written request for reconsideration or appeal within the time permitted on the determination issued by DOR. Once the determination becomes final, no changes to the application or request for transfer of employment records will be permitted. DOR will revoke a previously approved transfer within three (3) years of the date of the partial succession if DOR determines the predecessor or successor submitted materially inaccurate or incomplete information.

(c) Tax Rate of Successor and Predecessor Upon Voluntary Transfer of Employment Records.

1. Tax Rate of Partial Successor.

a. The tax rate of a partial successor who was already an employer will be computed by DOR using the combination of the successor's own employment records, if any, and the transferred employment records of the predecessor, effective at the beginning of the calendar quarter immediately following the effective date of the succession.

b. A partial successor who was not already an employer will become an employer as of the effective date of the succession. The tax rate from the date of succession and until the partial successor becomes eligible for an earned rate will be the initial rate provided in section 443.131(2)(a), F.S. Thereafter, DOR will compute the tax rate pursuant to section 443.131(3), F.S., on the basis of the successor's own employment records and the transferred records.

2. Tax Rate of the Predecessor.

a. The transferred portion of the predecessor's records will be removed from the employment records of the predecessor as of the effective date of the succession.

b. The tax rate of the predecessor will remain unchanged until the predecessor qualifies for computation of a benefit ratio. Should this occur prior to the approval of the transfer, the rate computation for the immediately following rate year will be based on the employment inclusive of the portion sought to be transferred. After approval, DOR will recompute the rate of the predecessor for the entire rate year using only that portion of the employment records remaining after the transfer is completed.

3. Tax Rate of Total Successor Who Was Already an Employer. The tax rate of a total successor who was already an employer will remain unchanged for the remainder of the calendar quarter in which the total succession occurred. Thereafter, the rate will:

a. Be computed using the combination of the successor's own employment record with that of the predecessor; and,

b. Be assigned from the first day of the calendar quarter immediately following the date of succession; and,

c. Remain in effect until the successor next qualifies for computation of a benefit ratio.

4. Tax Rate of Total Successor Who Was Not Already an Employer. Upon transfer of employment records, the tax rate of a total successor who was not already an employer will:

a. Be the tax rate of the predecessor employer from the date of succession; and,

b. Remain in effect until the successor qualifies for computation of a benefit ratio.

5. Tax Rate of Predecessor Upon Total Succession. When a total succession occurs, the tax rate of the predecessor will be:

a. The initial rate, if employment recommences; or

b. The earned rate, if the only wages paid are for employment that occurred prior to the total succession.

(3) Mandatory Transfer of Employment Records. Each employer must notify DOR in writing of any total or partial transfer of trade or business within 90 days after the date of transfer if there was any common ownership, management, or control of the two employers at the time of the transfer. For the purpose of implementing section 443.131(3)(g), F.S.:

(a) The term "ownership" means any proprietary interest in a business, including, but not limited to, shares of stock in a corporation, partnership interest in a partnership or membership interest in a Limited Liability Company (LLC).

(b) "Common ownership" exists when a person has ownership in two or more businesses.

(c) A person in "management" includes any officer or director of a corporation, owner of a sole proprietorship, partner in a partnership, manager of an LLC, or person with the ability to direct the activities of an employing unit, either individually or in concert with others.

(d) "Common management" exists when a person concurrently occupies management positions in two or more businesses.

(e) A person in "control" of a business includes any officer or director of a corporation, owner of a sole proprietorship, partner in a partnership, manager of an LLC, or other person with the ability, directly or indirectly, individually or in concert with others, to influence or direct management, activities or policies of the business through ownership of stock, voting rights, contract, or other means. Control exists when an employee leasing company dictates or specifies the businesses with which a client company must contract.

(f) "Common control" exists when a person or group of persons has control of two or more businesses.

(g) The phrase "transfer or acquisition" encompasses any and all types of transfers and acquisitions including, but not limited to, assignments, changes in legal identity or form, consolidations, conveyances, mergers, name changes, purchase and sale agreements, reorganizations, stock transfers and successions.

(h) The phrase "trade or business or a portion thereof" includes but is not limited to assets, customers, management, organization and workforce.

(i) For the purpose of determining issues relating to the transfer of employment records upon transfer or acquisition of a business, the term "person" has the meaning set forth in section 7701(a)(1) of the Internal Revenue Code.

(j) In determining whether common management, ownership, or control exists, DOR may consider common relationships between owners or persons who exert control over or occupy management positions in the businesses under consideration. For purposes of this rule, a common relationship exists when persons are related to each other by adoption, marriage, step-relationships, direct line blood relationships such as grandchild, child, parent, grandparent (lineal consanguinity), or common ancestry, such as brothers, sisters, aunts, uncles, nieces, and nephews (collateral consanguinity to the third degree). A common relationship is also deemed to exist between affiliated corporations as defined in Section 1504(a) of the Internal Revenue Code.

(k) A transfer of workforce includes direct transfers as well as those in which an employer transfers all or part of its trade or business to an employing unit for the purpose of reducing its unemployment tax rate and that employing unit subsequently transfers the acquired trade or business to an employer that has any common ownership, management or control with the first employer.

(l) Upon determining that conditions requiring mandatory transfer of employment records exist, DOR will issue a determination in accordance with section 443.131(3)(i), F.S. Such determinations, including but not limited to determinations that change an employer's tax rate, will be effective as of the beginning of the calendar quarter immediately following the date of the transfer unless the transfer occurred on the first day of a calendar quarter, in which case the rate will be recalculated as of that date.

(m) In determining, pursuant to section 443.131(3)(g) 1.b., F.S., whether a substantial purpose of a transfer was to obtain a reduced liability for contributions, DOR will consider whether retained or transferred employees were laid off and, if so, how soon after the transfer the layoff occurred. Obtaining a reduced liability for contributions will not be considered a substantial purpose of a transfer if a layoff occurs more than 6 months after the transfer and involves less than 25% of the employees transferred to the successor or retained by the predecessor.

(n) In determining, pursuant to section 443.131(3)(g)2., F.S., whether a business was acquired solely or primarily to obtain a lower rate of contributions, DOR will consider the length of time the business enterprise of the acquired business is continued. Generally, the longer a business operation continues, the less likely it is that DOR will determine the business was acquired to obtain a lower rate of contributions, unless a substantial number of new employees are hired whose job functions are unrelated to the business activity conducted prior to the succession. In determining whether the number is substantial, the number of new employees will be compared to the number of employees prior to the succession.

(o) If the transfer of trade or business involved a partial transfer of workforce and common ownership, management, or control, information from the predecessor's records must be submitted regarding all employees who worked for the transferred unit(s) or position(s) during any part of the 14 calendar quarters immediately preceding and up to the date the succession commenced, by completing and submitting Form RTS-1SA "List of Employees to be Transferred." within 30 days after DOR mails written notification of the RTS-1SA requirement to the employer. If 10 or more employees were transferred, filing of the RTS-1SA must be by electronic means in accordance with the provisions of chapter 12-24, F.A.C. If the successor employer cannot provide the information required on the RTS-1SA despite a good faith effort to obtain the information, DOR will combine the employment records of the employers to determine the tax rate. However, if an employer knowingly fails to provide the required information in the manner required by this paragraph, DOR will impose the maximum rate in accordance with section 443.131(3)(g)3.a., F.S. Additionally, if DOR determines an employer knowingly violated section 443.131(3)(g), F.S., DOR will not give effect to the taxable wages paid by the predecessor in determining whether the taxable wage base is met and will restart the taxable wage base for the individuals at zero.

(p) If the person in violation of section 443.131(3)(g)1. or 2., F.S., is not an employer, the civil penalty imposed by section 443.131(3)(g)3.b., F.S., will equal twice the amount of tax that was evaded or attempted to be evaded but not more than $5, 000.

(q) The fact that the employer had a legitimate business purpose for a transfer does not preclude a finding that a substantial reason for the transfer was to obtain a reduced liability for contributions.

(r) If a person who knowingly advises another person to violate the law is an employee, the employer of that employee will be subject to the rate increase penalty provided in section 443.131(3)(g)3.a., F.S. If the person is a partner, member of an LLC or an officer or director of a corporation, then the partnership, LLC or the corporation will be subject to the rate increase.

Notes

Fla. Admin. Code Ann. R. 73B-10.031

Rulemaking Authority 443.1317 FS. Law Implemented 443.036(20), 443.1215, 443.131(3) FS.

New 8-25-92, Amended 12-7-97, Formerly 38B-2.031, Amended 1-19-03, 7-17-06, Formerly 60BB-2.031, Amended 6-2-14, Amended by Florida Register Volume 43, Number 191, October 3, 2017 effective 10/16/2017.

New 8-25-92, Amended 12-7-97, Formerly 38B-2.031, Amended 1-19-03, 7-17-06, Formerly 60BB-2.031, Amended 6-2-14, 10-16-17.