2004 Legislation
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SENATE BILL NO. 1226 – Unemploymnt insrnce/experience rate

SENATE BILL NO. 1226

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S1226.......................................by COMMERCE AND HUMAN RESOURCES
UNEMPLOYMENT INSURANCE - EXPERIENCE RATING - Amends and adds to existing
law to revise the method used to compute the experience rating account for
unemployment insurance for a business when ownership of the business is
transferred from a covered employer and there is a continuity of business
activity by the successor; and to make technical adjustments to the
employment security law.
                                                                        
01/23    Senate intro - 1st rdg - to printing
01/26    Rpt prt - to Com/HuRes
02/11    Rpt out - rec d/p - to 2nd rdg
02/12    2nd rdg - to 3rd rdg
02/17    3rd rdg - PASSED - 31-0-4
      AYES -- Bailey, Bunderson, Burkett, Calabretta, Cameron, Compton,
      Darrington, Davis, Gannon, Geddes, Goedde, Hill, Ingram, Kennedy,
      Keough, Little, Lodge, Malepeai, Marley, McKenzie, McWilliams, Noble,
      Noh, Pearce, Richardson, Schroeder, Stegner, Stennett, Sweet, Werk,
      Williams
      NAYS -- None
      Absent and excused -- Andreason, Brandt, Burtenshaw, Sorensen
    Floor Sponsor - Goedde
    Title apvd - to House
02/18    House intro - 1st rdg - to Com/HuRes
02/24    Rpt out - rec d/p - to 2nd rdg
02/25    2nd rdg - to 3rd rdg
02/27    3rd rdg - PASSED - 64-0-6
      AYES -- Andersen, Barraclough, Barrett, Bauer, Bayer, Bedke, Bell,
      Black, Block, Boe, Bolz, Bradford, Campbell, Cannon, Clark, Collins,
      Cuddy, Deal, Denney, Douglas, Edmunson, Ellsworth, Field(18),
      Field(23), Gagner, Garrett, Harwood, Henbest, Jaquet, Kellogg,
      Kulczyk, Lake, Langford, Langhorst, Martinez, McGeachin, McKague,
      Meyer, Miller, Mitchell, Moyle, Naccarato, Nielsen, Pasley-Stuart,
      Raybould, Ridinger, Ring, Ringo, Roberts, Robison, Rydalch, Sali,
      Sayler, Shepherd, Shirley, Skippen, Smith(30), Smith(24), Smylie,
      Snodgrass, Stevenson, Trail, Wills, Wood
      NAYS -- None
      Absent and excused -- Crow, Eberle, Eskridge, Jones, Schaefer, Mr.
      Speaker
    Floor Sponsor - McKague
    Title apvd - to Senate
03/01    To enrol
03/02    Rpt enrol - Pres signed
03/03    Sp signed
03/04    To Governor
03/05    Governor signed
         Session Law Chapter 24
         Effective: 03/05/04 Section 4;
         07/01/04 All others

Bill Text


                                                                        
                                                                        
  ]]]]              LEGISLATURE OF THE STATE OF IDAHO             ]]]]
 Fifty-seventh Legislature                 Second Regular Session - 2004
                                                                        
                                                                        
                                       IN THE SENATE
                                                                        
                                    SENATE BILL NO. 1226
                                                                        
                         BY COMMERCE AND HUMAN RESOURCES COMMITTEE
                                                                        
  1                                        AN ACT
  2    RELATING TO THE EMPLOYMENT SECURITY LAW; AMENDING SECTION 72-1316, IDAHO CODE,
  3        TO CLARIFY THE DEFINITION OF LOCALIZED SERVICE; AMENDING SECTION  72-1346,
  4        IDAHO  CODE, TO CLARIFY REFERENCES TO THE FEDERAL UNEMPLOYMENT TRUST FUND,
  5        TO PROVIDE THAT REED ACT APPROPRIATIONS ARE SUBJECT TO  CERTAIN  STATUTORY
  6        CONDITIONS  AND  TO  DELETE  OBSOLETE  LANGUAGE; AMENDING SECTION 72-1348,
  7        IDAHO CODE, TO PROVIDE A CORRECT CODE REFERENCE; AMENDING SECTION 72-1351,
  8        IDAHO CODE, TO PROVIDE A LONGER PERIOD OF TIME TO REQUEST A TRANSFER OF AN
  9        EXPERIENCE RATING ACCOUNT, TO PROVIDE THAT WHENEVER AN INDIVIDUAL OR ORGA-
 10        NIZATION SUCCEEDS TO OR ACQUIRES ALL OR PART OF THE BUSINESS OF A  COVERED
 11        EMPLOYER THE TRANSFER OF THE PREDECESSOR'S EXPERIENCE RATING ACCOUNT SHALL
 12        BE  MANDATORY IF THE MANAGEMENT OR OWNERSHIP OR CONTROL OF THE BUSINESS IS
 13        SUBSTANTIALLY THE SAME FOR THE SUCCESSOR AS FOR THE PREDECESSOR AND  THERE
 14        IS  A  CONTINUITY  OF BUSINESS ACTIVITY BY THE SUCCESSOR AND TO DEFINE THE
 15        TERM "EXPERIENCE RATING ACCOUNT"; AND DECLARING AN EMERGENCY FOR SECTION 4
 16        OF THIS ACT.
                                                                        
 17    Be It Enacted by the Legislature of the State of Idaho:
                                                                        
 18        SECTION 1.  That Section 72-1316, Idaho Code, be, and the same  is  hereby
 19    amended to read as follows:
                                                                        
 20        72-1316.  COVERED   EMPLOYMENT.   (1)   "Covered   employment"   means  an
 21    individual's entire service performed by him for wages or under  any  contract
 22    of hire, written or oral, express or implied.
 23        (2)  Notwithstanding  any  other provision of state law, services shall be
 24    deemed to be in covered employment if a tax is required  to  be  paid  or  was
 25    required to be paid the previous year on such services under the federal unem-
 26    ployment  tax  act  or if the director determines that as a condition for full
 27    tax credit against the tax imposed by the federal unemployment  tax  act  such
 28    services are required to be covered under this chapter.
 29        (3)  Services  covered  by  an election pursuant to section 72-1352, Idaho
 30    Code, and services covered by an election approved by the director pursuant to
 31    section 72-1344, Idaho Code, shall be deemed to be covered  employment  during
 32    the effective period of such election.
 33        (4)  Services  performed  by an individual for remuneration shall, for the
 34    purposes of the employment security law, be covered employment  unless  it  is
 35    shown:
 36        (a)  That the worker has been and will continue to be free from control or
 37        direction  in the performance of his work, both under his contract of ser-
 38        vice and in fact; and
 39        (b)  That the worker is engaged in  an  independently  established  trade,
 40        occupation, profession, or business.
 41        (5)  "Covered  employment"  shall  include an individual's entire service,
 42    performed within or both within and without this state:
 43        (a)  If the service is localized in this state; or
                                                                        
                                           2
                                                                        
  1        (b)  If the service is not localized in any state but some of the  service
  2        is performed in this state, and:
  3             (i)   The  individual's  base  of  operations or the place from which
  4             such service is directed or controlled is in this state; or
  5             (ii)  The individual's base of operations or place  from  which  such
  6             service   is directed or controlled is not in any state in which some
  7             part of the service is performed, but the individual's  residence  is
  8             in this state.
  9        (c)  Service shall be deemed to be localized within a state if:
 10             (i)   The service is performed entirely within such state; or
 11             (ii)  The  service  is  performed both within and without such state,
 12             but the service performed without such state is incidental, temporary
 13             or transitory in nature or consists of isolated transactions, as com-
 14             pared to the individual's service within  the  state.  is  temporary,
 15             transitory in nature, or consists of isolated transactions.
 16        (d)  "Covered  employment" shall include an individual's service, wherever
 17        performed within the United States, or Canada, if:
 18             (i)   Such service is not covered under the unemployment compensation
 19             law of any other state, the Virgin Islands, or Canada; and
 20             (ii)  The place from which the service is directed or  controlled  is
 21             in this state.
 22        (6)  "Covered  employment" shall include the services of an individual who
 23    is a citizen of the  United  States,  performed  outside  the  United  States,
 24    (except  in  Canada) in the employ of an American employer (other than service
 25    which is deemed "covered employment" under the provisions of subsection (5) of
 26    this section or the parallel provisions of another state's law), if:
 27        (a)  The employer's principal place of business in the  United  States  is
 28        located in this state; or
 29        (b)  The employer has no place of business in the United States; but
 30             (i)   Is an individual who is a resident of this state; or
 31             (ii)  Is  a  corporation  which  is  organized under the laws of this
 32             state; or
 33             (iii) Is a partnership or a trust and the number of the  partners  or
 34             trustees  who  are residents of this state is greater than the number
 35             who are residents of any other state; or
 36        (c)  None of the criteria of provision (a) or (b) of  this  subsection  is
 37        met  but  the employer has elected coverage in this state, or the employer
 38        having failed to elect coverage in any state, the individual has  filed  a
 39        claim for benefits based on such service, under the law of this state;
 40        (d)  An "American employer" for purposes of this subparagraph means a per-
 41        son who is:
 42             (i)   An individual who is a resident of the United States; or
 43             (ii)  A  partnership  if two-thirds (2/3) or more of the partners are
 44             residents of the United States; or
 45             (iii) A trust if all of the trustees  are  residents  of  the  United
 46             States; or
 47             (iv)  A  corporation organized under the laws of the United States or
 48             of any state.
 49        (e)  For purposes of this subsection, "United States"  means  the  states,
 50        the  District of Columbia, the Commonwealth of Puerto Rico, and the Virgin
 51        Islands.
                                                                        
 52        SECTION 2.  That Section 72-1346, Idaho Code, be, and the same  is  hereby
 53    amended to read as follows:
                                                                        
                                           3
                                                                        
  1        72-1346.  EMPLOYMENT  SECURITY  FUND. (1) Establishment and Control. There
  2    is established in the state treasury, separate and apart from all other  funds
  3    of  this  state,  an  "Employment  Security  Fund," which shall be perpetually
  4    appropriated to the director to be administered pursuant to the provisions  of
  5    this  chapter and the social security act. This fund shall consist of all con-
  6    tributions collected pursuant to this chapter, payments in lieu  of  contribu-
  7    tions, interest earned upon any moneys in the fund, any property or securities
  8    acquired through the use of moneys belonging to the fund, all earnings of such
  9    property  or securities, moneys temporarily deposited in the clearing account,
 10    and all other moneys received for the fund from any other source.
 11        (2)  Accounts and Deposits. The state controller shall maintain within the
 12    fund three (3) separate accounts: (i) a clearing account, (ii) an unemployment
 13    trust fund account, and (iii) a benefit account. Upon receipt by the director,
 14    all moneys payable to the fund shall be promptly forwarded to the state  trea-
 15    surer  for  immediate  deposit  in  the clearing account. After clearance, all
 16    moneys in the clearing account shall, except as otherwise provided, be  depos-
 17    ited  promptly  with the secretary of the treasury of the United States to the
 18    credit of this state's account in the federal unemployment trust  fund  estab-
 19    lished  and  maintained pursuant to section 904 of the social security act (42
 20    U.S.C. 1104), any provisions of law in this state  to  the  contrary  notwith-
 21    standing.  The  benefit  account shall consist of all moneys requisitioned for
 22    the payment of benefits from this state's account in the federal  unemployment
 23    trust  fund.  in the treasury of the United States. Moneys in the clearing and
 24    benefit accounts may be deposited by the state treasurer under  the  direction
 25    of the director in any depository bank in which general funds of the state may
 26    be  deposited, but no public deposit insurance charge or premium shall be paid
 27    out of the fund. Moneys in the clearing and benefit accounts shall not be com-
 28    mingled with other state funds and shall be maintained in separate accounts on
 29    the books of the depository bank. Such moneys shall be secured by the  deposi-
 30    tory  bank in the same manner as required by the general public depository law
 31    of this state and collateral pledged for this purpose shall be  kept  separate
 32    and  distinct  from collateral pledged to secure other funds of the state. The
 33    state treasurer shall be liable on his official bond for the faithful  perfor-
 34    mance of his duties in connection with the employment security fund.
 35        (3)  Withdrawals.  Moneys  requisitioned by the director through the trea-
 36    surer from this state's account in the federal unemployment trust  fund  shall
 37    be  used  exclusively  for the payment of benefits and for refunds pursuant to
 38    section 72-1357, Idaho Code, except that Reed  act  moneys  credited  to  this
 39    state's  account pursuant to section 903 of the social security act (42 U.S.C.
 40    1103), shall be used exclusively as provided in subsection (4)  of  this  sec-
 41    tion.  The  director  through the treasurer shall requisition from the federal
 42    unemployment trust fund such amounts, not exceeding the  amounts  standing  to
 43    this  state's  account therein, as he deems necessary for the payment of bene-
 44    fits and refunds for a reasonable period. Upon receipt, such moneys  shall  be
 45    deposited  in  the  benefit account. Expenditures of moneys in the benefit and
 46    clearing accounts shall not require the approval of the board of examiners  or
 47    be subject to any provisions of law requiring specific appropriations or other
 48    formal release by state officers of money in their custody. The residual daily
 49    balance  in  the  benefit  account may be invested in accordance with the cash
 50    management improvement act of 1990, and earnings on those investments  may  be
 51    used  to pay the related banking costs of maintaining the benefit account. Any
 52    earnings in excess of the related banking  costs  shall  be  returned  to  the
 53    state's  account in the federal unemployment trust fund annually. All warrants
 54    issued for the payment of benefits and refunds shall bear the signature of the
 55    director. Upon agreement between the director and state controller, amounts in
                                                                        
                                           4
                                                                        
  1    the benefit  account may be transferred to a revolving account established and
  2    maintained in a depository bank from which the director may issue  checks  for
  3    the  payment of benefits and refunds. Moneys so transferred shall be deposited
  4    subject to the same requirements as provided with respect  to  moneys  in  the
  5    clearing  and  benefit accounts in subsection (2) of this section. Any balance
  6    of moneys requisitioned from the federal unemployment trust fund which remains
  7    unclaimed or unpaid in the benefit account  or  revolving  account  after  the
  8    expiration  of  the period for which such sums were requisitioned, may be uti-
  9    lized for the payment of benefits and refunds during succeeding  periods,  or,
 10    in  the discretion of the director, shall be redeposited with the secretary of
 11    the treasury of the United States to the credit of this state's account in the
 12    federal unemployment trust fund.
 13        (4)  Reed Act Moneys. Reed act moneys credited to this state's account  in
 14    the  federal  unemployment  trust fund by the secretary of the treasury of the
 15    United States pursuant to section 903 of the social security  act  (42  U.S.C.
 16    1103),  may  be requisitioned and used for the payment of benefits and for the
 17    payment of expenses incurred for the administration of  this  chapter.  Moneys
 18    may  only  be  requisitioned and used for the payment of expenses incurred for
 19    the administration of this chapter if the expenses are incurred and the  money
 20    is requisitioned after the enactment of a specific appropriation by the legis-
 21    lature  which specifies the purposes for which such money is appropriated, and
 22    the amounts appropriated therefor., and provides that  Such  appropriation  is
 23    subject to the following conditions:
 24        (a)  Such  money  may not be obligated after the close of the two (2) year
 25        period which began on the date of the enactment of the appropriation  law;
 26        and
 27        (b)  The  amount  which  may  be  obligated at any time may not exceed the
 28        amount by which the aggregate of the amounts transferred to the account of
 29        this state pursuant to section 903 of the social security act  (42  U.S.C.
 30        1103), exceeds the aggregate of the amounts used by this state and charged
 31        against the amounts transferred to the account of this state. For the pur-
 32        poses  of  this  subsection, amounts obligated for administrative purposes
 33        pursuant to an  appropriation  shall  be  chargeable  against  transferred
 34        amounts at the exact time the obligation is entered into.
 35        (c5)  Reed  act  moneys requisitioned for the payment of benefits shall be
 36    deposited in the benefit account established in this section. Reed act  moneys
 37    requisitioned  for  the  payment of administrative expenses pursuant to a spe-
 38    cific appropriation shall be deposited in the employment security  administra-
 39    tion  fund,  section  72-1347, Idaho Code, except that moneys appropriated for
 40    the purchase of lands and buildings shall be deposited in the state employment
 41    security administrative and reimbursement  fund  in  accordance  with  section
 42    72-1348,  Idaho Code. Money so deposited shall, until expended, remain part of
 43    the employment security fund and, if not expended, shall be promptly  returned
 44    to this state's account in the federal unemployment trust fund.
 45        (5)  Special  Reed  Act  Distributions.  Notwithstanding subsection (4) of
 46    this section, Reed act moneys credited with respect to  federal  fiscal  years
 47    2000,  2001  and 2002 shall be used solely for the administration of the unem-
 48    ployment insurance program and are not subject to appropriation by the  legis-
 49    lature.
                                                                        
 50        SECTION  3.  That  Section 72-1348, Idaho Code, be, and the same is hereby
 51    amended to read as follows:
                                                                        
 52        72-1348.  STATE EMPLOYMENT SECURITY ADMINISTRATIVE AND REIMBURSEMENT FUND.
 53    (1) There is created in the state  treasury  the  "State  Employment  Security
                                                                        
                                           5
                                                                        
  1    Administrative and Reimbursement Fund." Notwithstanding the provisions of sec-
  2    tions 72-1346 and 72-1347, Idaho Code, the fund shall consist of:
  3        (a)  All  penalties,  and all interest on judgments or accounts secured by
  4        liens, collected pursuant to the provisions of sections 72-1347A, 72-1347B
  5        and 72-1354 through 72-1364, Idaho Code, but only after such interest  and
  6        penalties  have  been deposited in the clearing account and are thereafter
  7        transferred to this fund in such amounts as,  in  the  discretion  of  the
  8        director, will leave a sufficient balance of interest and penalties in the
  9        clearing account to pay refunds; and
 10        (b)  Reed  act  moneys appropriated for the purchase of land and buildings
 11        pursuant to section 72-1346(45), Idaho Code.
 12        (2)  Moneys referred to in subsection (1)(a) of this section are  perpetu-
 13    ally  appropriated  to the director and may be used upon written authorization
 14    of the board of examiners for any lawful purpose, including, but  not  limited
 15    to:
 16        (a)  As  a  revolving  fund  to cover expenditures for which federal funds
 17        have been duly requested but not yet received,  subject  to  reimbursement
 18        upon receipt of the federal funds;
 19        (b)  For  the  payment of costs of administration including costs not val-
 20        idly chargeable against federal grants;
 21        (c)  For the payment of refunds of penalties pursuant to section  72-1357,
 22        Idaho Code; and
 23        (d)  For  the  purchase of land and buildings for the purpose of providing
 24        office space for the department.
 25        (3)  Moneys referred to in subsection (1)(b) of this section may  be  used
 26    by the department to acquire for and in the name of the state by term purchase
 27    agreement  lands  and  buildings  for  office space for the department at such
 28    places as the director finds necessary. An agreement made for the purchase  of
 29    premises  pursuant  to this subsection shall be subject to the approval of the
 30    attorney general as to form and title.
 31        Premises purchased pursuant to this section shall be used for the  depart-
 32    ment, or if it is desirable to move the department, similar space will be fur-
 33    nished  by the state to the department without further payment therefor by the
 34    United States.
                                                                        
 35        SECTION 4.  That Section 72-1351, Idaho Code, be, and the same  is  hereby
 36    amended to read as follows:
                                                                        
 37        72-1351.  EXPERIENCE  RATING.  (1) Subject to the other provisions of this
 38    chapter, each eligible and deficit    employer's  (except  cost  reimbursement
 39    employers) taxable wage rate shall be determined in the manner set forth below
 40    for each calendar year:
 41        (a)  (i)  Each  eligible  employer  shall  be given an "experience factor"
 42             which shall be the ratio of excess  of  contributions  over  benefits
 43             paid  on the employer's account since December 31, 1939, to his aver-
 44             age annual taxable payroll rounded to the next  lower  dollar  amount
 45             for  the  four (4) fiscal years immediately preceding the computation
 46             date, except that  when  an  employer  first  becomes  eligible,  his
 47             "experience  factor"  will  be computed on his average annual taxable
 48             payroll for the two (2) fiscal years or more, but not to exceed  four
 49             (4)  fiscal  years,  immediately  preceding the computation date. The
 50             computation of such "experience factor" shall be to six  (6)  decimal
 51             places.
 52             (ii)  Each deficit employer shall be given a "deficit experience fac-
 53             tor"  which  shall  be  the  ratio  of excess of benefits paid on the
                                                                        
                                           6
                                                                        
  1             employer's account over contributions since December 31, 1939, to his
  2             average annual taxable payroll  rounded  to  the  next  lower  dollar
  3             amount  for  one (1) or more fiscal years, but not to exceed four (4)
  4             fiscal years, for which he had covered employment ending on the  com-
  5             putation date; provided, however, that any employer who on any compu-
  6             tation  date has a "deficit experience factor" for the period immedi-
  7             ately preceding such computation date but who has filed all  reports,
  8             paid  all  contributions  and  penalties due on or before the cut-off
  9             date, and has during the last four (4) fiscal  years  paid  contribu-
 10             tions  at  a  rate  of not less than the standard rate applicable for
 11             each such year and in excess of benefits charged  to  his  experience
 12             rating  account during such years, shall have any balance of benefits
 13             charged to his account which on the computation date immediately pre-
 14             ceding such four (4) fiscal years were  in  excess  of  contributions
 15             paid,  deleted  from  his account, and the excess benefits so deleted
 16             shall not be considered in the computation of his taxable  wage  rate
 17             for the rate years following such four (4) fiscal years. For the rate
 18             year  following such computation date, he shall be given the standard
 19             rate for that year.
 20             (iii) In the event an employer's coverage has been terminated because
 21             he has ceased to do business  or  because  he  has  not  had  covered
 22             employment  for  a  period  of  four  (4) years, and if said employer
 23             thereafter becomes a covered  employer,  he  will  be  considered  as
 24             though  he were a new employer, and he shall not be credited with his
 25             previous experience under this chapter for the purpose  of  computing
 26             any future "experience factor."
 27        (b)  Schedules shall be prepared listing all eligible employers in inverse
 28        numerical  order of their experience factors, and all deficit employers in
 29        numerical order of their deficit experience factors. There shall be listed
 30        on such schedules for each such employer in  addition  to  the  experience
 31        factor (i) the amount of his taxable payroll for the fiscal year ending on
 32        the computation date, and (ii) a cumulative total consisting of the sum of
 33        such employer's taxable payroll for the fiscal year ending on the computa-
 34        tion  date  and the corresponding taxable payrolls for all other employers
 35        preceding him on such schedules.
 36        (c)  The cumulative taxable payroll amounts listed on the  schedules  pro-
 37        vided  for  in  paragraph  (b) of this subsection shall be segregated into
 38        groups whose limits shall be those set out in the table  of  schedules  of
 39        taxable  wage  rates,  section 72-1350(7), Idaho Code. Each of such groups
 40        shall be identified by the rate class number listed  in  the  table  which
 41        represents  the  percentage  limits  of  each  group. Each employer on the
 42        schedules shall be assigned the taxable wage rate opposite his rate  class
 43        for the tax schedule in effect for the taxable year.
 44        (d)  (i)  If  the  grouping  of  rate  classes  requires  the inclusion of
 45             exactly one-half (1/2) of an employer's taxable payroll, the employer
 46             shall be assigned the lower of the two (2) rates designated  for  the
 47             two  (2)  classes  in  which the halves of his taxable payroll are so
 48             required.
 49             (ii)  If the group of rate classes requires the inclusion of  a  por-
 50             tion  other than exactly one-half (1/2) of an employer's taxable pay-
 51             roll, the employer shall be assigned  the  rate  designated  for  the
 52             class  in  which  the  greater  part  of  his  taxable  payroll is so
 53             required.
 54             (iii)  If one (1) or more employers on the schedules have  experience
 55             factors identical to that of the last employer included in a particu-
                                                                        
                                           7
                                                                        
  1             lar  rate class, all such employers shall be included in and assigned
  2             the taxable wage rate specified for such class,  notwithstanding  the
  3             provisions of paragraph (c) of this subsection.
  4        (e)  If  the  taxable payroll amount or the experience factor or both such
  5        taxable payroll amount and experience factor of any  eligible  or  deficit
  6        employer  listed on the schedules is changed, the employer shall be placed
  7        in that position on the schedules which he would  have  occupied  had  his
  8        taxable  payroll  amount  and/or experience factor as changed been used in
  9        determining his position in the first instance, but such change shall  not
 10        affect the position or rate classification of any other employer listed on
 11        the  schedules  and  shall  not affect the rate determination for previous
 12        years.
 13        (2)  For experience rating purposes, all  previously  accumulated  benefit
 14    charges  to  covered employers' accounts, except cost reimbursement employers,
 15    shall not be changed except as provided by this chapter. Benefits  paid  prior
 16    to  June  30 shall, as of June 30 of each year preceding the calendar year for
 17    which a covered employer's taxable wage rate is effective, be charged  to  the
 18    account of the covered employer, except cost reimbursement employers, who paid
 19    the  largest individual amount of base period wages as shown on the determina-
 20    tion used as the basis for the payment of such benefits, except that no charge
 21    shall be made to the account of such covered employer with respect to benefits
 22    paid under the following situations:
 23        (a)  If paid to a worker who terminated his services  voluntarily  without
 24        good  cause  attributable  to  such covered employer, or who had been dis-
 25        charged for misconduct in connection with such services;
 26        (b)  If paid in accordance with the  provisions  of  section  72-1368(10),
 27        Idaho Code, and the decision to pay benefits is subsequently reversed; or
 28        (c)  For that portion of benefits paid to multistate claimants pursuant to
 29        section  72-1344,  Idaho  Code,  which exceeds the amount of benefits that
 30        would have been charged had only Idaho  wages  been  used  in  paying  the
 31        claim;
 32        (d)  If  paid in accordance with the extended benefit program triggered by
 33        either national or state indicators;
 34        (e)  If paid to a worker who continues to perform services for  such  cov-
 35        ered  employer without a reduction in his customary work schedule, and who
 36        is eligible to receive benefits due to layoff or a reduction  in  earnings
 37        from another employer.
 38        (3)  A  covered employer whose experience rating account is chargeable, as
 39    prescribed by this section, is an  interested  party  as  defined  in  section
 40    72-1323,  Idaho Code. An experience rating record shall be maintained for each
 41    covered employer. The record shall be credited with  all  contributions  which
 42    the  covered  employer  has  paid  for covered employment prior to the cut-off
 43    date, pursuant to the provisions of this and preceding acts, and which covered
 44    employment occurred prior to the computation date. The record  shall  also  be
 45    charged  with  the amount of benefits paid which are chargeable to the covered
 46    employer's account as provided by the appropriate provisions of the employment
 47    security law and regulations thereunder in effect at the  time  such  benefits
 48    were  paid.  Nothing  in  this section shall be construed to grant any covered
 49    employer or individual in his service a priority with respect to any claim  or
 50    right  because  of  amounts  paid by such covered employer into the employment
 51    security fund.
 52        (4)  (a)  Whenever any individual or type of organization (whether or  not
 53        a  covered  employer within the meaning of section 72-1315, Idaho Code) in
 54        any manner succeeds to, or acquires all or substantially all, of the busi-
 55        ness of an employer who at the time of acquisition was a covered employer,
                                                                        
                                           8
                                                                        
  1        and in respect to whom the director finds that the business of the  prede-
  2        cessor  is continued solely by the successor, the separate experience rat-
  3        ing account and the actual contribution, benefit and taxable payroll expe-
  4        rience of the predecessor shall, upon the joint application of the  prede-
  5        cessor  and  the successor within the ninety (90) one hundred eighty (180)
  6        days after such acquisition and approval by the director,  be  transferred
  7        to  the successor employer for the purpose of determining such successor's
  8        liability and taxable wage rate and any successor who was not an  employer
  9        on the date of acquisition shall as of such date become a covered employer
 10        as defined in this chapter.; provided, however, that such ninety (90) Such
 11        one  hundred  eighty (180) day period may be extended at the discretion of
 12        the director., and provided further that whenever  a  predecessor  covered
 13        employer has a deficit The transfer of the predecessor's experience rating
 14        account as of the last computation date such transfer, as herein provided,
 15        to  the  successor shall be mandatory except where it is shown by substan-
 16        tial evidence that if the management or ownership or both  management  and
 17        ownership  are  not control is substantially the same for the successor as
 18        for the predecessor, in which case the successor shall begin with the rate
 19        of a new employer and there is a continuity of business  activity  by  the
 20        successor.
 21        (b)  Whenever  any  individual  or  type of organization, whether or not a
 22        covered employer within the meaning of section 72-1315, Idaho Code, in any
 23        manner succeeds to, or acquires, part of the business of an  employer  who
 24        at the time of acquisition was a covered employer, and such portion of the
 25        business is continued by the successor, so much of the separate experience
 26        rating  account  and  the actual contribution, benefit and taxable payroll
 27        experience of the predecessor as is attributable to  the  portion  of  the
 28        business  transferred, as determined on a pro rata basis in the same ratio
 29        that the wages of covered employees properly allocable to the  transferred
 30        portion  of  the  business  bears to the payroll of the predecessor in the
 31        last four (4) completed calendar quarters immediately preceding  the  date
 32        of  transfer, shall, upon the joint application of the predecessor and the
 33        successor within ninety (90) one hundred  eighty  (180)  days  after  such
 34        acquisition  and approval by the director, be transferred to the successor
 35        employer for the purpose of determining  such  successor's  liability  and
 36        taxable wage rate and any successor who was not an employer on the date of
 37        acquisition  shall as of such date become a covered employer as defined in
 38        this chapter.; provided, however, that such ninety (90) Such  one  hundred
 39        eighty  (180)  day  period  may  be  extended  at  the  discretion  of the
 40        director., and  provided  further  that  whenever  a  predecessor  covered
 41        employer has a deficit The transfer of the predecessor's experience rating
 42        account  as  of  the  last computation date, such transfer, as herein pro-
 43        vided, to the successor shall be mandatory except where  it  is  shown  by
 44        substantial  evidence  that if the management or ownership or both manage-
 45        ment and ownership are not control is substantially the same for the  suc-
 46        cessor  as  for  the  predecessor, in which case the successor shall begin
 47        with the rate of a new employer and there  is  a  continuity  of  business
 48        activity  by the successor. Whenever such mandatory transfer involves only
 49        a portion of the experience rating record, and the predecessor or  succes-
 50        sor  employers  fail  within  ten  (10)  days  after  notice to supply the
 51        required payroll information, the transfer shall be based on estimates  of
 52        the allocable payrolls.
 53        (c)  (i)  If the successor was a covered employer prior to the date of the
 54             acquisition  of  all or a part of the predecessor's business his tax-
 55             able wage rate, effective the first day of the calendar quarter imme-
                                                                        
                                           9
                                                                        
  1             diately following the date of acquisition, shall be a newly  computed
  2             rate  based on the combined experience of the predecessor and succes-
  3             sor, the resulting rate remaining in effect the balance of  the  rate
  4             year.
  5             (ii)  If  the  successor was not a covered employer prior to the date
  6             of the acquisition of all or a part of  the  predecessor's  business,
  7             his rate shall be the rate applicable to the predecessor with respect
  8             to  the  period immediately preceding the date of acquisition, but if
  9             there were more than one (1) predecessor the successor's  rate  shall
 10             be a newly computed rate based on the combined experience of the pre-
 11             decessors,  becoming effective immediately after the date of acquisi-
 12             tion, and shall remain in effect the balance of the rate year.
 13        (d)  For purposes of this section, an employer's experience rating account
 14        shall consist of the actual  contribution,  benefit  and  taxable  payroll
 15        experience  of  the  employer  and any amounts due from the employer under
 16        this chapter.
                                                                        
 17        SECTION 5.  An emergency existing  therefor,  which  emergency  is  hereby
 18    declared  to exist, Section 4 of this act shall be in full force and effect on
 19    and after passage and approval.

Statement of Purpose / Fiscal Impact


                      STATEMENT  OF  PURPOSE
                           RS 13581C1
This bill amends Idaho's Employment Security Law.  It would
accomplish the following:

Section 1 clarifies the definition of localized service.
                                
 Section 2 clarifies references to the federal unemployment trust
fund.  It also provides that Reed Act appropriations are subject to
two statutory conditions and deletes obsolete language pertaining
to past years.

Section 3 corrects a reference to the Idaho Code.
                                
Section 4 will assist in preventing a tax evasion scheme used by a
growing number of employers to lower their Unemployment Insurance
(U.I.) tax rates. All states use experience rating systems to
determine an employer's U.I. tax rate. An employer's U.I. tax rate
is based on their individual experience of accumulated U.I.
contributions paid and the accumulated amount of U.I. benefits
charged to their account. Experience rating helps ensure an
equitable distribution of the costs of the U.I. program among
employers.
                                
Some employers have found ways to manipulate experience rating so
they receive a lower U.I. tax rate than their U.I. experience would
otherwise allow. Nationally, these tax evasion schemes are called
"SUTA dumping" ("SUTA" refers to State Unemployment Tax Acts). SUTA
dumping generally occurs in two ways:
 
1.   To escape a poor experience rating, an employer will
     set up a shell company and transfer payroll from the
     business with the poor rating to the shell. If it is a
     new shell, it will be taxed at the "standard rate"
     established for new employers (currently 1.5 percent,
     substantially below the current maximum rate of 5.4
     percent). A more sophisticated approach to SUTA dumping
     reduces the tax burden even further. This involves
     transferring a few low turnover positions to the shell,
     earning a positive rate (as low as 0.2 percent) over a
     few years and then transferring payroll from the
     company with the poor experience rating to the shell
     company.  

2.   An employer with a poor experience rating buys a small
     business that has a low U.I. tax rate. The new owner
     then closes the business activity of the small business
     and transfers payroll from the business with the poor
     rating, thereby receiving the U.I. tax rate of the
     small business.  

According to the U.S. Department of Labor, SUTA dumping could
cost the U.I. system billions of dollars nationally if it is not
brought under control, and they have recommended that states
amend their laws to prevent the practice.

  Section 4 will assist in preventing SUTA dumping by providing
that whenever an individual or organization succeeds to or acquires
all or part of the business of a covered employer, the transfer of
the predecessor's experience rating account shall be mandatory if
the management or ownership or control of the business is
substantially the same for the successor as for the predecessor and
there is a continuity of business activity by the successor. 
Section 4 also enlarges the time period for employers to request a
discretionary transfer of an experience rating account and it
defines the term "experience rating account."



                         FISCAL  IMPACT
                                
                                
There is no impact on the State General Fund. Sections 1, 2 and 3
have no fiscal impact.
  
If Section 4 is not enacted, Idaho's U.I. Trust Fund could suffer
a substantial loss of U.I. tax revenue. The Idaho Department of
Labor recently discovered four cases of SUTA dumping that have cost
Idaho's U.I. Trust Fund an estimated $436,818. Now that SUTA
dumping has received national attention, more employers may be
encouraged to engage in the practice while it is still legal to do
so. Preventing SUTA dumping is an essential step toward maintaining
an adequate U.I. Trust Fund.
                                
                                
                                
                                
                                
                                
CONTACT   
Name:     Dwight Johnson
Agency:   Department of Labor
Phone:    332-3570 ext. 3209

Statement of Purpose/Fiscal Impact                 S 1226