WSR 05-19-017

PERMANENT RULES

EMPLOYMENT SECURITY DEPARTMENT


[ Filed September 9, 2005, 2:58 p.m. , effective October 10, 2005 ]


Purpose: Chapter 4, Laws of 2003 2nd sp.s. (2ESB 6097) made substantive changes to the unemployment insurance program. A number of those changes became effective in 2005. The proposed rules clarify requirements for employers reporting taxes and wages, define terms, update penalties for employers who do not report as instructed, and revise rules concerning predecessor/successor employers to be consistent with current law.

Citation of Existing Rules Affected by this Order: Repealing WAC 192-320-060; and amending WAC 192-300-050, 192-310-010, 192-310-030, and 192-320-050.

Statutory Authority for Adoption: RCW 50.12.010, 50.12.040, and 50.12.042.

Adopted under notice filed as WSR 05-13-157 on June 21, 2005.

Changes Other than Editing from Proposed to Adopted Version: A number of wording changes were made to comply with Executive Order 05-03, Plain talk.

Number of Sections Adopted in Order to Comply with Federal Statute: New 0, Amended 0, Repealed 0; Federal Rules or Standards: New 0, Amended 0, Repealed 0; or Recently Enacted State Statutes: New 4, Amended 4, Repealed 1.

Number of Sections Adopted at Request of a Nongovernmental Entity: New 0, Amended 0, Repealed 0.

Number of Sections Adopted on the Agency's Own Initiative: New 0, Amended 0, Repealed 0.

Number of Sections Adopted in Order to Clarify, Streamline, or Reform Agency Procedures: New 0, Amended 0, Repealed 0.

Number of Sections Adopted Using Negotiated Rule Making: New 0, Amended 0, Repealed 0; Pilot Rule Making: New 0, Amended 0, Repealed 0; or Other Alternative Rule Making: New 4, Amended 4, Repealed 1.

Date Adopted: August 31, 2005.

Karen T. Lee

Commissioner


AMENDATORY SECTION(Amending WSR 04-23-058, filed 11/15/04, effective 12/16/04)

WAC 192-300-050   What is a ((P))predecessor-successor relationship? ((defined.))   This section applies only to those individuals and organizations that meet the definition of an employer contained in RCW 50.04.080.

(1) Predecessor. You are a "predecessor" if, during any calendar year, you transfer any of the following to another individual or organization:

(a) All((,)) or ((a portion,)) part of your operating assets as defined in subsection (3) below; or

(b) A separate unit or branch of your trade or business.

(2) Successor. You are a "successor" if, during any calendar year, you acquire substantially all of a predecessor employer's operating assets. You are a "partial successor" if, during any calendar year, you acquire:

(a) ((A portion)) Part of a predecessor employer's operating assets, or

(b) A separate unit or branch of a predecessor employer's trade or business.

(3) Operating assets. "Operating assets" include the ((properties)) resources you use in the normal course of business ((operations)) to ((generate)) produce your operating income. They may include ((properties)) resources that are real or personal, and tangible or intangible. Examples include land, buildings, machinery, equipment, stock of goods, merchandise, fixtures, employees, or goodwill. ((Employees are not operating assets.))

(4) Transfer of assets. Transfers from a predecessor to a successor employer may occur by sale, lease, gift, or any legal process, except those listed in subsection (6) below.

(5) Simultaneous acquisition. For purposes of successor simultaneous acquisition, the term "simultaneous" means all transfers that ((occurred as a result of)) resulted from acquiring or reorganizing the business ((acquisition or reorganization)), beginning when the acquisition started and ending when the primary ((entity)) unit is transferred.

(6) Exceptions. A predecessor-successor relationship will not exist:

(a) For the purposes of chapter 50.24 RCW (payment of taxes), when the property is acquired through court proceedings, including bankruptcies, to enforce a lien, security interest, judgment, or repossession under a security agreement unless the court specifies otherwise;

(b) For the purposes of chapter 50.29 RCW (experience rating), when any four consecutive quarters, one of which includes the acquisition date, pass without reportable employment by ((either)) the predecessor, successor, or a combination of both.

[Statutory Authority: RCW 50.12.010, 50.12.040, 50.12.042. 04-23-058, 192-300-050, filed 11/15/04, effective 12/16/04. Statutory Authority: RCW 50.12.010, 50.12.040. 00-05-068, 192-300-050, filed 2/15/00, effective 3/17/00.]


AMENDATORY SECTION(Amending WSR 04-23-058, filed 11/15/04, effective 12/16/04)

WAC 192-310-010   ((Employer)) What reports are required from an employer?--RCW 50.12.070.   (1) Master application. Every person or ((entity, which has)) unit with one or more individuals performing services for it in the state of Washington((,)) must file a master application with the department. The application must be in a format ((prescribed)) approved by the commissioner.

(2) Quarterly tax and wage reports:

(a) Tax report. Each calendar quarter, every employer must file a ((quarterly)) tax report with the commissioner. The report must list((ing)) the total wages paid to ((all individuals)) every employee ((in its employ)) during that ((calendar)) quarter.

(b) Report of employees'(('s)) wages. Each calendar quarter, every employer must file a ((quarterly)) report of employees'(('s)) wages with the commissioner. This report must list each employee by name, social security number, and total hours worked((,)) and wages paid during that ((calendar)) quarter.

(i) Social security numbers are required for persons working in the United States;

(ii) If an individual has a social security card, he or she must present the card to the employer at the time of hire or shortly after that. This does not apply to agricultural workers who, under federal rules, may show their social security card on the first day they are paid;

(iii) If the individual does not have a social security card, Internal Revenue Service rules allow an employer to hire the individual with the clear understanding that the individual will apply for a social security number within seven calendar days of starting work for the employer. The individual must give the employer a document showing he or she has applied for a social security card. When the card is received, the individual must give the employer a copy of the card itself. An employer should keep copies of the document(s) for his or her records; and

(iv) If the employee does not show his or her social security card or application for a card within seven days and the employer continues to employ the worker, the employer does not meet the reporting requirements of this section. The department will not allow waiver of the incomplete report penalty (see WAC 192-310-030).

(c) Format. Employers must file ((T))the quarterly tax and wage reports ((must be filed)) in one of the following formats:

(i) Electronically, using the current version of UIFastTax, UIWebTax, or ICESA Washington; or

(ii) Paper forms supplied by the department (or an approved ((certified)) version of those forms).

(d) Due dates. The quarterly tax and wage reports are due by the last day of the month following the end of the calendar quarter being reported. Calendar quarters end on March 31, June 30, September 30 and December 31 of each year. ((Therefore)) So, reports are due by April 30, July 31, October 31, and January 31, ((respectively)) in that order. If these dates fall on a Saturday, Sunday, or holiday, the reports will be due on the next business day. The commissioner must approve exceptions to the time and ((manner)) method of filing ((the report must be approved)) in advance ((by the commissioner)).

(e) Termination of business. Each employer who ((ceases)) stops doing business or whose account is closed by the department must immediately file:

(i) A tax report for the current calendar quarter which covers tax payments due ((to)) on the date ((such)) the account is closed; and

(ii) A report of employees'(('s)) wages for the current calendar quarter which includes all wages paid ((to)) as of the date ((such)) the account is closed.

[Statutory Authority: RCW 50.12.010, 50.12.040, 50.12.042. 04-23-058, 192-310-010, filed 11/15/04, effective 12/16/04. Statutory Authority: RCW 50.12.070. 98-14-068, 192-310-010, filed 6/30/98, effective 7/31/98.]


AMENDATORY SECTION(Amending WSR 04-23-058, filed 11/15/04, effective 12/16/04)

WAC 192-310-030   What are the ((R))report((s)) and tax payment((s subject to)) penalties((y.))?   (1) Penalty for ((L))late tax reports. An employer who ((files a tax report as described in WAC 192-310-010 (2)(a) but)) does not file ((it)) a tax report within the time frame ((prescribed in)) required by WAC 192-310-010 (2)(c) ((is subject to)) must pay a penalty of twenty-five dollars ((per)) for each violation, unless the penalty is waived by the department.

(2) Definition of ((I))incomplete ((T))tax ((R))reports. An employer ((is required to)) must file ((the)) a tax report ((required by WAC 192-310-010 in a)) that is complete ((manner)) and in the format required by the commissioner.

(a) An "incomplete report" is ((defined as)) any report ((submitted by either a contributory or reimbursable)) filed by any employer or their agent where:

(i) The entire wage report is not ((submitted timely)) filed on time; or

(ii) A required element is not reported (social security number, name, hours worked, or wages paid); or

(iii) A significant number of employees are not reported; or

(iv) A significant number of any given element is not reported, ((such as, but not limited to,)) for example, missing social security numbers, names, hours, or wages; or

(v) Either the employer reference number or Unified Business Identifier (UBI) number is not included with the tax or wage report((.)); or

(vi) The report includes duplicate social security numbers, or impossible social security numbers as shown by the Social Security Administration (such as 999-99-9991, 999-99-9992, etc.).

(b) An "incorrect format" means any report that is not ((submitted)) filed in the format required by the commissioner under WAC 192-310-010 (2)(c).

(c) For purposes of this section, the term "significant" means an employer who has:

(i) Two to 19 employees and reports incomplete wage records for two or more employees; or

(ii) Twenty to 49 employees and reports incomplete wage records for three or more employees; or

(iii) Fifty or more employees and reports incomplete wage records for four or more employees.

(3) Penalty for filing an incomplete or incorrect format tax report. An employer who files an incomplete or incorrectly formatted tax and wage ((fails to file a)) report ((required by RCW 50.12.070)) will receive a warning letter for the first occurrence. For subsequent occurrences the employer ((is subject to)) must pay a penalty as follows:

(a) ((Incomplete tax report. The penalty for filing an incomplete tax report will be t)) Two hundred fifty dollars or ten percent of the quarterly contributions for each occurrence, whichever is less.

(b) When no quarterly tax is due and an employer has submitted an incomplete report or filed the report in an incorrect format, the following schedule will apply after the initial warning letter:

(i) 1st Occurrence $75.00
(ii) 2nd Occurrence $150.00
(iii) 3rd and subsequent occurrences $250.00
(((b) Filing tax report in an incorrect format. The penalty for filing a tax report in an incorrect format will be two hundred fifty dollars or ten percent of the quarterly contributions for each occurrence, whichever is less. When no quarterly tax is due and an employer has submitted a tax report in an incorrect format, the following schedule will apply:

(((i) 1st Occurrence $150.00
(ii) 2nd and subsequent

occurrences))

$250.00
(4) Penalty for ((K))knowingly misrepresenting amount of payroll. If an employer knowingly (on purpose) misrepresents to the department the amount of his or her payroll that is subject to unemployment taxes, ((upon which contributions under this title are based,)) the ((employer is liable for a)) penalty ((of)) is ten times the difference between the ((contributions)) taxes paid, if any, and the amount of ((contributions)) taxes the employer should have paid for the period. This penalty is in addition to the amount the employer should have paid. The employer ((is)) must also ((liable to)) pay the department for the reasonable expenses of auditing his or her books and collecting ((such sums)) taxes and penalties due as provided in WAC 192-340-100.

(5) ((Report of employee's wages. Any decision to assess a penalty for filing a late or incomplete report of employee's wages as described in WAC 192-310-010 (2)(b) will be made on an individual basis by the chief administrative officer of the tax branch as provided in RCW 50.12.220.

(6))) ((Delinquent)) Late tax payments. ((For purposes of RCW 50.12.220, tax payments are delinquent as provided in WAC 192-310-020 and RCW 1.12.070.)) All employers must file a tax report every quarter, including employers who have no payroll for a given quarter. If an employer does not report on time, it will be charged a late fee of $25.00 for each report. If the payment is late, the employer will be charged interest at a rate of one percent of taxes due per month. A late payment penalty is also charged for overdue taxes:

(a) First month: Five percent of the total taxes due or $10.00, whichever is greater;

(b) Second month: An additional five percent of total taxes due or $10.00, whichever is greater;

(c) Third month: An additional 10 percent of total taxes due or $10.00, whichever is greater; and

(d) Fourth month and every month following for the life of the delinquent debt: A total of 20 percent of total taxes due or $10.00, whichever is greater.

(((7))) (6) Waivers of late filing and late payment Ppenalties((y waivers)). The department may, for good cause, waive penalties for late filing of a report and late payment of taxes that are due with a report. The commissioner must decide if the failure to file reports or pay taxes on time was not the employer's fault.((, waive penalties in the following situations:))

(a) The department may waive late penalties when there are circumstances beyond the control of the employer. These circumstances include, but may not be limited to, the following:

(i) The return was filed on time with payment but inadvertently mailed to another agency;

(((b))) (ii) The delinquency was ((due to an action of)) caused by an employee of the department, such as providing incorrect information to the employer, when the source can be identified((, or not furnishing proper forms to permit the filing of tax reports or the payment of taxes on time));

(((c))) (iii) The delinquency was caused by the death or serious illness, before the filing deadline, of the employer, a member of the employer's immediate family, the employer's accountant, or a member of the accountant's immediate family;

(iv) The delinquency was caused by the unavoidable absence of the employer or key employee before the filing deadline. "Unavoidable absence" does not include absences because of business trips, vacations, personnel turnover, or terminations;

(((d))) (v) The delinquency was caused by the accidental destruction of the employer's place of business or business records; ((or))

(vi) The delinquency was caused by fraud, embezzlement, theft, or conversion by the employer's employee or other persons contracted with the employer, which the employer could not immediately detect or prevent. The employer must have had reasonable safeguards or internal controls in place; or

(vii) The employer, before the filing deadline, requested proper forms from the department's central office or a district tax office, and the forms were not supplied in enough time to allow the completed report to be filed and paid before the due date. The request must have been timely, which means at least three days before the filing deadline.

(((e))) (b) The department may waive late penalties if it finds the employer to be out of compliance during an employer-requested audit, but the department ((determines)) decides the employer made a good faith effort to comply with all applicable laws and rules((.)); and

(c) The department will not waive late penalties if the employer has been late with filing or with payment in any of the last eight consecutive quarters immediately preceding the quarter for which a waiver is requested. If an employer has been in business for fewer than the eight preceding quarters, then all preceding quarters must have been filed and paid on time and a one-time only waiver may be granted.

(((8))) (7) Incomplete reports or incorrect format penalty waivers. For good cause, the department may waive penalties for incomplete reports or reports in an incorrect format one time only when the employer can demonstrate making a good faith attempt to correct the problem in a timely manner after the department notified the employer of the problem;.

(((b))) (8) Missing and Impossible Social Security Numbers. When a social security number is impossible or missing, the department may waive penalties for incomplete reports only once for each worker and only when:

(a) The report was incomplete because it included impossible social security numbers, but the employer can show that the impossible social security numbers were provided to the employer by the employees; or

(b) The report was incomplete because of missing social security numbers, but the employer can show that the employee did not work for the employer after failing to provide a valid social security card or application for social security number within seven days of employment.

(((9))) (9) Waiver requests. An employer must request ((for)) a waiver of penalties ((must be written)) in writing, ((contain)) include all ((pertinent)) relevant facts, ((be accompanied by)) attach available proof, and ((be filed through)) file the request with a tax office. In all cases the burden of proving the facts is on the employer.

(((9))) (10) Extensions. The department, for good cause, may extend the due date for filing a report. If granted, the employer must make a deposit with the department in an amount equal to the estimated tax ((liability)) due for the reporting period or periods ((for which the extension is granted)). This deposit will be ((credited to the employer's account and)) applied to the employer's debt. The amount of the deposit ((is subject to approval)) must be approved by the department.

[Statutory Authority: RCW 50.12.010, 50.12.040, 50.12.042. 04-23-058, 192-310-030, filed 11/15/04, effective 12/16/04. Statutory Authority: RCW 50.12.010 and 50.12.040. 98-14-068, 192-310-030, filed 6/30/98, effective 7/31/98.]

Reviser's note: RCW 34.05.395 requires the use of underlining and deletion marks to indicate amendments to existing rules. The rule published above varies from its predecessor in certain respects not indicated by the use of these markings.

Reviser's note: The typographical errors in the above section occurred in the copy filed by the agency and appear in the Register pursuant to the requirements of RCW 34.08.040.
NEW SECTION
WAC 192-320-005   What is "experience?" -- RCW 50.29.021.   As used in this chapter, the term "experience" includes matters that have a direct relation to the risk of unemployment. Any benefits paid that are based on wages paid by the employer and chargeable under RCW 50.29.020 are considered experience.

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NEW SECTION
WAC 192-320-010   When is experience transferred to a successor employer?.   (1) Any benefits paid which are based on wages paid by the predecessor employer before the transfer of ownership must be charged to the successor employer. Just as the successor employer gets the organization, trade, business, assets, and experience of a predecessor employer as of the date of transfer, it must also get the benefit charges for past, current, or future claims connected to the predecessor employer (or a part of the predecessor employer that can be singled out) prior to the transfer.

(2) Once experience has been transferred, it becomes the successor employer's experience. It must be used to decide the successor's rates for any rate year that follows the year in which the transfer occurs. (There is an exception when, following the transfer, the successor does not have enough experience to be a qualified employer under RCW 50.29.010(6).) Since the transferred experience belongs to the successor employer, it may no longer be used to compute rates for the predecessor employer for rate years that follow.

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Reviser's note: The typographical error in the above section occurred in the copy filed by the agency and appears in the Register pursuant to the requirements of RCW 34.08.040.
NEW SECTION
WAC 192-320-020   How is the of industry average calculated? -- RCW 50.29.025.   (1) As used in this title:

(a) "NAICS" is an abbreviation for North American Industry Classification System;

(b) "Industry average array calculation factor rate" means the average experience-based tax rate for a particular industry. It will be referred to as the "experience tax."

(c) "Industry average graduated social cost factor rate" is the average social tax rate for a particular industry. It will be referred to as the "social tax."

(2) When calculating the experience tax and social tax, the department will use the first four digits of the NAICS code of the industry being calculated.

(3) Experience tax. (a) The department will calculate the experience tax as follows:

(i) A table will be prepared that contains each of the 40 rate classes;

(ii) For each rate class, we will multiply, total, and display the taxable payrolls for all qualified employers assigned to that rate class with the NAICS code being calculated, by the percentage assigned to that rate class;

(iii) We will total the tax rates for the 40 industry rate classes and divide the sum by the total of all payrolls used in the calculation; and

(iv) We will add fifteen percent to the result, and show the final amount as a percentage rounded to two decimal places.

(b) The experience tax must be at least 1.00 percent and not more than 5.4 percent.

(4) Social tax. (a) The department will calculate the social tax as follows:

(i) The experience tax table will show the percentage of the social tax assigned to each of the 40 rate classes;

(ii) We will multiply, total, and display the total payroll in each industry rate class by the percentage of social tax assigned to that rate class;

(iii) We will total the social tax rate for the 40 industry rate classes and divide the sum by the total of all payrolls used in the calculation; and

(iv) We will add fifteen percent to the result, and show the final amount as a percentage rounded to two decimal places.

(b) The social tax for an industry cannot be higher than the percentage of social tax assigned to rate class 40.

(5) If there are no qualified employers in the four digit level of the NAICS code, we will calculate the rates using the corresponding three digit level and assign the result to the four digit level. If there are no qualified employers in the three digit level, we will calculate the rates using the corresponding two digit level and assign the result to both the three and four digit levels.

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AMENDATORY SECTION(Amending WSR 00-05-068, filed 2/15/00, effective 3/17/00)

WAC 192-320-050   What are the ((R))requirements of partial successors(( -- )) under chapter 50.29 RCW?((.))   (1) If you are a partial successor, both you and the predecessor employer must return the partial transfer of experience letter provided to you by the department within thirty days of the mailing date. Your response must ((indicate)) show the percentage of operating assets transferred to you as the partial successor. Operating assets include the employees of the business.

(2) If you ((do not return the letter within thirty days,)) are an employer at the time of the transfer, you will keep your existing rate class for the rest of the current rate year. If you are not an employer when you acquire the predecessor's business, you will keep the ((tax)) rate class that was assigned to the predecessor employer for the ((remainder)) rest of the rate year. ((However, in the following calendar year you will receive the average industry rate. You will keep this rate until you qualify for a different rate in your own right.))

(3) If you do not respond, for subsequent rate years the commissioner will estimate the percentage of employees transferred based on employment reports filed. That percentage will transfer to the successor until it provides compelling evidence to change the estimate.

(4) Changes in rate class are effective for the rate year the information was provided and for subsequent rate years only.

[Statutory Authority: RCW 50.12.010, 50.12.040. 00-05-068, 192-320-050, filed 2/15/00, effective 3/17/00.]


NEW SECTION
WAC 192-320-051   What are the requirements of partial predecessors under chapter 50.29 RCW.   (1) If you are a partial predecessor, both you and the successor employer must return the partial transfer of experience letter provided to you by the department within thirty days of the mailing date. Your response must show the percentage of operating assets transferred by you as the partial predecessor. Operating assets include the employees of the business.

(2) If you do not return the letter within thirty days, you will keep your existing rate class for the remainder of the current rate year.

(3) If you do not respond, for subsequent rate years the commissioner will estimate the percentage of employees transferred based on employment reports filed. That percentage will transfer to the successor until compelling evidence is provided to change the estimate.

(4) Changes in rate class are effective for the rate year the information was provided and for subsequent rate years only.

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REPEALER

     The following section of the Washington Administrative Code is repealed:
WAC 192-320-060 Delinquent predecessor taxes.

Washington State Code Reviser's Office