H*4420(Rat #0328, Act #0245 of 2004)  General Bill, By Kirsh
 AN ACT TO AMEND THE CODE OF LAWS OF SOUTH CAROLINA, 1976, BY ADDING SECTION
 41-31-125 SO AS TO PROVIDE THAT FOR PURPOSES OF THE SOUTH CAROLINA EMPLOYMENT
 SECURITY LAW, AN EMPLOYING UNIT MUST BE ASSIGNED ALL OR SOME PORTION OF THE
 EMPLOYMENT BENEFIT RECORD OF AN EXISTING EMPLOYMENT UNIT WHEN THERE HAS BEEN
 AN ACQUISITION OR REORGANIZATION OF AN EXISTING BUSINESS ENTERPRISE WITH
 CONTINUITY OF CONTROL, TO PROVIDE THAT THE PREDECESSOR'S RATE MUST BE APPLIED
 TO THE SUCCESSOR, TO PROVIDE NECESSARY DEFINITIONS, AND THE EXCEPTIONS TO THIS
 REQUIREMENT, AND TO PROVIDE PENALTIES TO BE IMPOSED ON AN EMPLOYING UNIT AND A
 CONTRIBUTION TAX RETURN PREPARER WHO WILFULLY VIOLATES THIS REQUIREMENT, WITH
 INDIVIDUAL LIABILITY FOR THE PENALTIES ON THE OFFICERS AND DIRECTOR OF THE
 ENTERPRISE IN VIOLATION. - ratified title

   12/03/03  House  Prefiled
   12/03/03  House  Referred to Committee on Labor, Commerce and Industry
   01/13/04  House  Introduced and read first time HJ-68
   01/13/04  House  Referred to Committee on Labor, Commerce and
                     Industry HJ-68
   02/25/04  House  Committee report: Favorable with amendment Labor,
                     Commerce and Industry HJ-2
   02/26/04         Scrivener's error corrected
   03/02/04  House  Requests for debate-Rep(s). Vaughn, FN Smith,
                     Leach, GR Smith, and Rice HJ-20
   03/03/04  House  Requests for debate removed-Rep(s). Leach,
                     Vaughn, GR Smith, and FN Smith HJ-24
   03/03/04  House  Amended HJ-24
   03/03/04  House  Read second time HJ-26
   03/04/04  House  Read third time and sent to Senate HJ-21
   03/09/04  Senate Introduced and read first time SJ-14
   03/09/04  Senate Referred to Committee on Labor, Commerce and
                     Industry SJ-14
   04/08/04  Senate Committee report: Favorable with amendment Labor,
                     Commerce and Industry
   04/12/04         Scrivener's error corrected
   04/13/04  Senate Amended SJ-18
   04/13/04  Senate Read second time SJ-18
   04/14/04  Senate Read third time and returned to House with
                     amendments SJ-28
   04/20/04  House  Debate adjourned until Tuesday, April 27, 2004 HJ-41
   04/27/04  House  Debate adjourned until Wednesday, May 4, 2004 HJ-40
   05/04/04  House  Debate adjourned until Thursday, May 6, 2004 HJ-15
   05/06/04  House  Concurred in Senate amendment and enrolled HJ-97
   05/19/04         Ratified R 328
   05/24/04         Signed By Governor
   05/27/04         Copies available
   05/27/04         Effective date 05/24/04
   06/10/04         Act No. 245

(A245, R328, H4420)

AN ACT TO AMEND THE CODE OF LAWS OF SOUTH CAROLINA, 1976, BY ADDING SECTION 41-31-125 SO AS TO PROVIDE THAT FOR PURPOSES OF THE SOUTH CAROLINA EMPLOYMENT SECURITY LAW, AN EMPLOYING UNIT MUST BE ASSIGNED ALL OR SOME PORTION OF THE EMPLOYMENT BENEFIT RECORD OF AN EXISTING EMPLOYMENT UNIT WHEN THERE HAS BEEN AN ACQUISITION OR REORGANIZATION OF AN EXISTING BUSINESS ENTERPRISE WITH CONTINUITY OF CONTROL, TO PROVIDE THAT THE PREDECESSOR'S RATE MUST BE APPLIED TO THE SUCCESSOR, TO PROVIDE NECESSARY DEFINITIONS, AND THE EXCEPTIONS TO THIS REQUIREMENT, AND TO PROVIDE PENALTIES TO BE IMPOSED ON AN EMPLOYING UNIT AND A CONTRIBUTION TAX RETURN PREPARER WHO WILFULLY VIOLATES THIS REQUIREMENT, WITH INDIVIDUAL LIABILITY FOR THE PENALTIES ON THE OFFICERS AND DIRECTOR OF THE ENTERPRISE IN VIOLATION.

Be it enacted by the General Assembly of the State of South Carolina:

Employment benefit record; penalties

SECTION    1.    Article 1, Chapter 31, Title 41 of the 1976 Code, is amended by adding:

"Section 41-31-125.    (A)    Notwithstanding the provisions of Sections 41-31-100 and 41-31-120, an employing unit must be assigned all or a portion of the employment benefit record of an existing employing unit when there is an acquisition or change in the form or organization of an existing business enterprise, or severable portion thereof, and there is a continuity of control of the business enterprise. The employing unit must be assigned the same rate as the predecessor, or the predecessor who has the highest base rate if there is more than one predecessor employing unit with different base rates.

(1)    For purposes of this section control of the business enterprise may occur by means of ownership of the organization conducting the business enterprise, ownership of assets necessary to conduct the business enterprise, security arrangements or lease arrangements covering assets necessary to conduct the business enterprise, including workers, or a contract when the ownership, stated arrangements, or contract provide for or allow direction of the internal affairs or conduct of the business enterprise.

(2)    For purposes of this section continuity of control exists if one or more persons, entities, or other organizations controlling the business enterprise remain in control of the business enterprise after an acquisition or change in form or there is a transfer to persons within the first degree of kinship to the transferors. Evidence of continuity of control includes, but is not limited to, changes of an individual proprietorship to a corporation, partnership, limited liability company, association, or estate; a partnership to an individual proprietorship, corporation, limited liability company, association, estate, or the addition, deletion, or change of partners; a limited liability company to an individual proprietorship, partnership, corporation, association, estate, or to another limited liability company; a corporation to an individual proprietorship, partnership, limited liability company, association, estate, or to another corporation or from any form to another form.

(B)    An employing unit must not be assigned any portion of the employment benefit record of an existing employing unit upon the acquisition of that established business or of an identifiable and segregable part thereof if:

(1)    the acquiring person was not otherwise an employer at the time of the acquisition;

(2)    the person has no substantial commonality of interest, including ownership or management, in the business acquired; and

(3)    the commission finds that the person acquired the business or an identifiable and segregable part thereof solely or primarily for the purpose of obtaining a lower rate of contributions.

(C)    If the experience rating account of the predecessor employer contains a debit balance, defined as an excess of total benefits charged over total contributions paid, the experience rating account of the predecessor employer in any event must be transferred to the successor employer in accordance with the provisions of Section 41-31-140.

(D)    An employing unit that wilfully attempts to violate the provisions of this section must be assessed a penalty in an amount equal to the greater of one thousand dollars or ten percent of the tax determined by the commission to be due for each report that is submitted in violation of this section. This penalty may be recovered in the manner provided in Article 3 of this chapter for the collection of other penalties. Officers and directors of the enterprise comprising the employing unit are individually liable for the penalties assessed pursuant to this paragraph.

A contribution tax return preparer who violates this section or provides advice to an employing unit that results in a wilful violation of the provisions of this section is liable to a penalty of not less than one thousand dollars nor more than ten thousand dollars for each report submitted in violation of this section. This penalty may be recovered by the commission in an appropriate civil action in any court of competent jurisdiction.

As used in this section, a 'contribution tax return preparer' is a person who prepares for compensation, or who employs one or more persons to prepare for compensation, any contribution and wage report or report of change in the status of an employing unit required by this chapter or any claim for credit for a tax imposed by this chapter. For purposes of this definition, the completion of a substantial portion of a report is treated as the preparation of the entire report. The term does not include a person merely because the person furnishes typing, reproducing, or other mechanical assistance, prepares a report of the employer, or an officer or employee of the employer, by whom the person is regularly and continuously employed, prepares as a fiduciary a report for any person, or represents a taxpayer in a hearing regarding an issue arising under this chapter."

Time effective

SECTION    2.    This act takes effect upon approval by the Governor.

Ratified the 19th day of May, 2004.

Approved the 24th day of May, 2004.