100TH GENERAL ASSEMBLY
State of Illinois
2017 and 2018
HB3474

 

Introduced , by Rep. Peter Breen

 

SYNOPSIS AS INTRODUCED:
 
820 ILCS 405/1507.1

    Amends the Unemployment Insurance Act. Provides that if a business is transferred to another individual or entity that, at the time of transfer, has any substantial common ownership, management, or control of the transferor and transferee, then the experience rating records of the transferred business shall be transferred to the transferee. Effective January 1, 2018.


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FISCAL NOTE ACT MAY APPLY

 

 

A BILL FOR

 

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1    AN ACT concerning employment.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 5. The Unemployment Insurance Act is amended by
5changing Section 1507.1 as follows:
 
6    (820 ILCS 405/1507.1)
7    Sec. 1507.1. Transfer of trade or business; contribution
8rate. Notwithstanding any other provision of this Act:
9    A.(1) If an individual or entity transfers its trade or
10business, or a portion thereof, to another individual or entity
11and, at the time of the transfer, there is any substantial
12common ownership, management, or control of the transferor and
13transferee, then the experience rating records attributable to
14of the transferred trade or business transferor and transferee
15shall be transferred to the transferee combined for the purpose
16of determining their rates of contribution. For purposes of
17this subsection, a transfer of trade or business includes but
18is not limited to the transfer of some or all of the
19transferor's workforce.
20    (1.5) if, following a transfer of experience rating records
21under paragraph (1), the Director determines that a substantial
22purpose of the transfer of the trade or business was to obtain
23a reduced liability for contributions, the experience rating

 

 

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1accounts of the employers involved shall be combined into a
2single account and a single rate shall be assigned to the
3account.
4    (2) For the calendar year in which there occurs a transfer
5to which paragraph (1) or (1.5) applies:
6        (a) If the transferor or transferee had a contribution
7    rate applicable to it for the calendar year, it shall
8    continue with that contribution rate for the remainder of
9    the calendar year.
10        (b) If the transferee had no contribution rate
11    applicable to it for the calendar year, then the
12    contribution rate of the transferee shall be computed for
13    the calendar year based on the experience rating record of
14    the transferor or, where there is more than one transferor,
15    the combined experience rating records of the transferors,
16    subject to the 5.4% rate ceiling established pursuant to
17    subsection G of Section 1506.1 and subsection A of Section
18    1506.3.
19    B. If any individual or entity that is not an employer
20under this Act at the time of the acquisition acquires the
21trade or business of an employing unit, the experience rating
22record of the acquired business shall not be transferred to the
23individual or entity if the Director finds that the individual
24or entity acquired the business solely or primarily for the
25purpose of obtaining a lower rate of contributions. Evidence
26that a business was acquired solely or primarily for the

 

 

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1purpose of obtaining a lower rate of contributions includes but
2is not necessarily limited to the following: the cost of
3acquiring the business is low in relation to the individual's
4or entity's overall operating costs subsequent to the
5acquisition; the individual or entity discontinued the
6business enterprise of the acquired business immediately or
7shortly after the acquisition; or the individual or entity
8hired a significant number of individuals for performance of
9duties unrelated to the business activity conducted prior to
10acquisition.
11    C. An individual or entity to which subsection A applies
12shall pay contributions with respect to each calendar year at a
13rate consistent with that subsection, and an individual or
14entity to which subsection B applies shall pay contributions
15with respect to each calendar year at a rate consistent with
16that subsection. If an individual or entity knowingly violates
17or attempts to violate this subsection, the individual or
18entity shall be subject to the following penalties:
19        (1) If the individual or entity is an employer, then,
20    in addition to the contribution rate that would otherwise
21    be calculated (including any fund building rate provided
22    for pursuant to Section 1506.3), the employer shall be
23    assigned a penalty contribution rate equivalent to 50% of
24    the contribution rate (including any fund building rate
25    provided for pursuant to Section 1506.3), as calculated
26    without regard to this subsection for the calendar year

 

 

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1    with respect to which the violation or attempted violation
2    occurred and the immediately following calendar year. In
3    the case of an employer whose contribution rate, as
4    calculated without regard to this subsection or Section
5    1506.3, equals or exceeds the maximum rate established
6    pursuant to paragraph 2 of subsection E of Section 1506.1,
7    the penalty rate shall equal 50% of the sum of that maximum
8    rate and the fund building rate provided for pursuant to
9    Section 1506.3. In the case of an employer whose
10    contribution rate is subject to the 5.4% rate ceiling
11    established pursuant to subsection G of Section 1506.1 and
12    subsection A of Section 1506.3, the penalty rate shall
13    equal 2.7%. If any product obtained pursuant to this
14    subsection is not an exact multiple of one-tenth of 1%, it
15    shall be increased or reduced, as the case may be, to the
16    nearer multiple of one-tenth of 1%. If such product is
17    equally near to 2 multiples of one-tenth of 1%, it shall be
18    increased to the higher multiple of one-tenth of 1%. Any
19    payment attributable to the penalty contribution rate
20    shall be deposited into the clearing account.
21        (2) If the individual or entity is not an employer, the
22    individual or entity shall be subject to a penalty of
23    $10,000 for each violation. Any penalty attributable to
24    this paragraph (2) shall be deposited into the Special
25    Administrative Account.
26    D. An individual or entity shall not knowingly advise

 

 

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1another in a way that results in a violation of subsection C.
2An individual or entity that violates this subsection shall be
3subject to a penalty of $10,000 for each violation. Any such
4penalty shall be deposited into the Special Administrative
5Account.
6    E. Any individual or entity that knowingly violates
7subsection C or D shall be guilty of a Class B misdemeanor. In
8the case of a corporation, the president, the secretary, and
9the treasurer, and any other officer exercising corresponding
10functions, shall each be subject to the aforesaid penalty for
11knowingly violating subsection C or D.
12    F. The Director shall establish procedures to identify the
13transfer or acquisition of a trade or business for purposes of
14this Section.
15    G. For purposes of this Section:
16        "Experience rating record" shall consist of years
17    during which liability for the payment of contributions was
18    incurred, all benefit charges incurred, and all wages paid
19    for insured work, including but not limited to years,
20    benefit charges, and wages attributed to an individual or
21    entity pursuant to Section 1507 or subsection A.
22        "Knowingly" means having actual knowledge of or acting
23    with deliberate ignorance of or reckless disregard for the
24    statutory provision involved.
25        "Transferee" means any individual or entity to which
26    the transferor transfers its trade or business or any

 

 

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1    portion thereof.
2        "Transferor" means the individual or entity that
3    transfers its trade or business or any portion thereof.
4    H. This Section shall be interpreted and applied in such a
5manner as to meet the minimum requirements contained in any
6guidance or regulations issued by the United States Department
7of Labor. Insofar as it applies to the interpretation and
8application of the term "substantial", as used in subsection A,
9this subsection H is not intended to alter the meaning of
10"substantially", as used in Section 1507 and construed by
11precedential judicial opinion, or any comparable term as
12elsewhere used in this Act.
13(Source: P.A. 94-301, eff. 1-1-06.)
 
14    Section 99. Effective date. This Act takes effect January
151, 2018.