Ariz. Admin. Code § 6-3-1713

Current through Register Vol. 30, No. 44, November 1, 2024

Section R6-3-1713 - Business Transfers

A. General

1. The manner in which an organization, trade or business is acquired or succeeded to is not determinative of successor status. A business may be acquired or succeeded to "in any manner" which includes, but is not limited to, acquisition by purchase, lease, repossession, bankruptcy proceedings, default, or through the transfer of a third party.

2. An "organization, trade or business" as used in A.R.S. §§ 23-613 and 23-733(A) through (D) is acquired if the factors of an employer's organization, trade or business succeeded to are sufficient to constitute an entire existing operating business unit as distinguished from the acquisition of merely dry assets from which a new business may be built. The question of whether an organization, trade or business is acquired is determined from all the factors of the particular case. Among the factors to be considered are:

a. The place of business

b. The trade name

c. The staff of employees

d. The customers

e. The goodwill

f. The inventory

g. The accounts receivable/accounts payable

h. The tools and fixtures

i. Other assets.

3. For the purpose of determining successorship status under A.R.S. §§ 23-613(A)(3) and 23-733(A) or (B), an individual or employing unit who in any manner acquires or succeeds to all or a part of an organization, trade or business from an employer as defined in A.R.S. § 23-613 shall be deemed the successor employer provided the organization, trade or business is continued. Continuation of the organization, trade or business shall be presumed if the normal business activity was not interrupted for more than 30 days before or after the date of transfer. However, the interruption of business activity of a seasonal enterprise during its off season shall not be considered an interruption of normal business activity.

B. Special provisions

1. An individual or employing unit shall be determined a successor under the provisions of A.R.S. § 23-733(A) and receive the experience rating account of the predecessor when the organization, trade or business acquired or succeeded to constitutes all of the predecessor's employment generating enterprise upon which the experience rating account was primarily established without regard to those factors retained by the predecessor which represent:

a. Exempt employment; or

b. Employment necessary for the liquidation of the trade or business; or

c. Employment arising from the activities establishing another trade or business; or

d. Employment as a result of an organization, trade or business succeeded to or acquired within two calendar days of the date of transfer of the enterprise upon which the experience rating account is based.

2. When the members of a partnership are changed, the new partnership will be treated as the same employing unit if more than 50% of the ownership existing prior to the change is retained. However, when a partnership dissolves and each partner takes a separately identifiable portion of the business which by itself would be an employer as provided in A.R.S. § 23-613, the reserve shall be proportionately transferred to each former partner provided the requirements of A.R.S. § 23-733(B) are met.

3. An individual or employing unit who acquires or succeeds to the organization, trade or business for which a separate account in a combined experience rating account is required under the provisions of R6-3-1301(C) shall receive the entire experience rating account for the operation transferred except that the experience attributable to domestic employment shall not be transferred.

C. Transfer of entire business

1. When the Department determines that an individual or employing unit is a successor and shall inherit the experience rating account of the predecessor as provided in A.R.S. § 23-733(A), the determination shall be subject to the same provisions as determinations made in accordance with A.R.S. § 23-724.

2. When the experience rating account is transferred to the successor, the successor's account shall be charged with benefits determined chargeable as a result of the employment in the organization, trade or business acquired, and the successor's contribution rate shall be determined in accordance with A.R.S. § 23-733(C) for the calendar year beginning on the date of acquisition.

D. Transfer of severable portion

1. The successor to a part of an organization, trade or business shall be determined a successor employer as defined in A.R.S. § 23-613(A) and subsections (A) and (B) above provided the portion acquired either during the calendar year in which the acquisition occurred or in the preceding calendar year had sufficient employment or wage history as specified in A.R.S. § 23-613 to be an employer without the remaining portion(s).

2. Application and required information

a. The reserve account of a distinct and severable portion of an organization, trade or business shall be transferred to an employing unit which has acquired such portion only if the successor employing unit:

i. Files with the Department a written application, approved in writing by the predecessor, within 180 days after the date of acquisition, unless the time is extended for good cause shown; and

ii. Submits necessary information establishing the separate identity of the account within 30 days after the Department's request is mailed to it unless the time is extended for good cause shown; and

iii. Continues to operate the acquired portion of the business.

b. "Necessary information establishing the separate identity of the account" includes but is not limited to:

i. Written agreement to the transfer by the predecessor; and

ii. The date the portion of the business was acquired; and

iii. The date employees were first hired for both the retained and transferred portions of the predecessor's business; and

iv. The amount of quarterly taxable wages attributable to each of the retained and transferred portions beginning with the 12th calendar quarter preceding the date of acquisition or beginning with the date employees were first hired if a portion of the business existed for less than 12 calendar quarters.

3. Portion of reserve and payrolls transferred. When the requirements for transfer have been met, there shall be transferred to the successor's account as of the date of acquisition a percentage of the predecessor's experience rating account. The percentage is arrived at by dividing the taxable payroll of the transferred portion by the predecessor's taxable payroll for the period beginning with the first day of the 12th calendar quarter preceding the quarter of the transfer, or the date employees were first hired for any portion of the business if subsequent to the first day of the 12th calendar quarter.

4. Benefit charges. After the date of the transfer, benefits paid to the predecessor's former employees, based on wages paid prior to the transfer date, shall be charged to both the predecessor's and successor's experience rating accounts in the same proportion as the percentage of the predecessor's experience rating account allocated to each at the date of transfer.

E. Liability for predecessor's debt

1. Notwithstanding subsections (A) and (B) above, when an individual or employing unit in any manner succeeds to or acquires the organization, trade or business, or substantially all of the assets of an employer as defined in A.R.S. § 23-613, the successor shall be equally liable along with the predecessor for the contributions, interest and penalties due or accrued and unpaid by the predecessor as provided in A.R.S. § 23-733(D).

2. When the Department determines an individual or employing unit is equally liable for the unpaid contributions, interest and penalties of another as provided in A.R.S. § 23-733(D), the determination shall be subject to the same provisions as determinations made in accordance with A.R.S. § 23-724. The Department shall furnish the successor with a written statement of the amount of contributions, interest, and penalties due and unpaid by the predecessor unless the liability is waived under the provisions of A.R.S. § 23-733(D).

3. "Reasonable value" as used in A.R.S. § 23-733(D) means the price that would be arrived at in good faith negotiations between a knowledgeable and willing buyer and a knowledgeable and willing seller.

4. Waiver of the successor's liability for the predecessor's debt as provided in A.R.S. § 23-733(D) shall not be granted when any ownership interest of the predecessor's business is found present in the ownership of the successor or when there is a reasonable basis for the successor to believe that there may be amounts due or accrued and unpaid by the predecessor employer.

Ariz. Admin. Code § R6-3-1713

Former Regulation 40-10; Amended as an emergency effective August 1, 1979, pursuant to A.R.S. § 41-1003, valid for only 90 days (Supp. 79-4). Former emergency adoption now adopted effective October 30, 1979 (Supp. 79-5). Former Section R6-3-1713 repealed, new Section R6-3-1713 adopted effective December 2, 1983 (Supp. 83-6).