An Act To Conform Maine Employment Security Law with the Federal SUTA Dumping Prevention Act of 2004
Maine Legislature, Session 122, LD 0995
Committee: Labor
Sponsors: STRIMLING, HALL, HOBBINS, CLARK, CRESSEY, DUPLESSIE, HOTHAM, HUTTON, PERRY
Amends: 26 MRSA §1221

Legislative Document 
No. 995 
S.P.335 
In Senate, February 24, 2005 
An Act To Conform Maine Employment Security Law with the 
Federal SUTA Dumping Prevention Act of 2004 
Submitted by the Department of Labor pursuant to Joint Rule 204. 
Reference to the Committee on Labor suggested and ordered printed. 
Presented by Senator STRIMLING of Cumberland. 
Cosponsored by Representative HALL of Holden and 
JOY J. O'BRIEN 
Secretary of the Senate 
Senator: HOBBINS of York, Representatives: CLARK of Millinocket, CRESSEY of Cornish, 
DUPLESSIE of Westbrook, HOTHAM of Dixfield, HUTTON of Bowdoinham, PERRY of 
Calais. 
Plinkd on recycled paper 
Be it enacted by the People of the State of Maine as follows: 
Sec.t. 26 MRSA §1221, sub-§5-A is enacted to read: 
5-A. 
Transf~~ 
___ ~~~p~r~~~~~d assignment of 
Notwithstanding 
subsection 
5, 
the 
following 
applies 
assignment of rates and transfers of experience. 
rates. 
to 
the 
A. 
If an el1l.Q.l.Qyer tranli.ers its trade or business, or a 
portion of its trade or business, to another employer and, 
at the time of the transfer, there is substantially common 
ownership, management or control of the 
employers, 
then 
the unemployment experience attributable to the transferred 
trade or business is transferred to the employer to whom the 
business is transferred. The rates of both employers must be 
recalculated and made effective immediately upon the date of 
the transfer of the trade or business. 
B. 
Whenever 
a person who is not an employer under this 
chapter acguires the trade or business of an employer, the 
unemployment experience of the acguired trade or business is 
not transferred to that person if the commissioner finds 
that the person acguired the trade or business solely or 
primarily for 
the purpose of obtaining 
a 
lower 
rate of 
contr ibutions. In such circumstances, the person acguir ing 
the 
trade 
or 
business 
is 
assigned 
the 
applicable 
new 
employer rate under subsection 4-A. 
In determining whether 
the trade or business was acguired solely or primarily for 
the purpose of obtainin~ lower rate of contribution~h~ 
commissioner 
shall 
consider 
objective 
factors 
that 
may 
include the cost of acguiring the trade or business, whether 
the person continued the business enterprise of the acguired 
trade or business, 
how long the business enterprise was 
continued or whether a substantial number of new employees 
were 
hired 
for 
performance 
of 
duties 
unrelated 
to 
the 
business activity conducted prior to acguisition. 
C. 
If a person knowingly violates or attempts to violate 
paragraph A or B or any other provision of this chapter 
related to determining the assignment of a contribution rate 
or if a person knowingly advises another person in a way 
that results in a violation of such a provision, the person 
commits a Class D crime. 
In addition, the person is subject 
to the following: 
(1) 
If the person is an employer, then that employer 
is assigned the highest rate assignable 
under 
this 
chapter for the rate year during which the violation or 
attempted violation occurred and for the 3 rate years 
immediately following that rate year, except that, if 
the person's business is already at the highest rate 
Page l-LR0336(1) 
]2 
for 
any year or if the 
amount of increase in the 
person's rate would be less than 2% for such year, then 
a penalty rate of contributions of 2% of taxable wages 
is imposed for that year; and 
(2) 
If the person is not an employer, that person is 
subject to a fine of not more than $5,000, which must 
be deposited in the Special Administrative Expense Fund 
established under section 1164. 
D. 
As used in this subsection, unless the context otherwise 
indicates, the following terms have the following meanings. 
(1) 
"Knowingly" means having actual knowledge of or 
acting with deliberate ignorance or reckless disregard 
for the prohibition involved. 
(2) "Person" has the meaning given that term by Section 
7701(a)(1) of the Internal Revenue Code of 1986. 
( 3 ) 
"Trade 
or 
business" 
includes 
the 
employer's 
workforce. 
(4) 
"Violates or attempts to violate" includes, but is 
not limited to, intent to evade, misrepresentation or 
willful nondisclosure. 
E. 
The 
commissioner 
shall adopt 
rules 
to 
identify the 
transfer or acguisition of a business for purposes of this 
subsection. 
Rules adopted pursuant to this paragraph are 
routine technical rules as defined in Title 5, chapter 375, 
subchapter 2-A. 
F. 
This subsection must be interpreted and applied in such 
a manner as to meet the minimum reguirements contained in 
any guidance or regulations issued by the United States 
Department of Labor. 
SUMMARY 
The purpose of this bill is to help detect businesses with 
high 
unemployment 
insurance 
tax rates resulting 
from 
a 
high 
volume 
of 
layoff 
activity 
setting 
up 
shell 
companies 
and 
transferring their employees to the shell companies to get lower, 
new-employer unemployment insurance tax rates and deters those 
businesses from doing so. 
Federal legislation to address this 
type of unemployment tax rate manipulation was recently enacted, 
and this bill is designed to keep Maine law in compliance with 
federal law.