[ 7.1.1 - Partial Transfer Requirements ][ 7.1.2 - Partial Transfer Identifiable / Segregable ][ 7.1.3 - Partial Transfer Form C-82 ][ 7.1.4 - Partial Transfer Form C-83 ][ 7.1.5 - Partial Transfer Processing ][ 7.1.6 - Partial Transfer Changes to the EMF ][ 7.1.7 - Partial Transfer Discussions / Inquiries][ 7.1.8 - Partial Transfer Mailing Blank Forms ] [ 7.1.9 - Partial Transfer Instructions ]

Prior to September 1, 2005 when SUTA dumping laws took effect, the only way to transfer compensation experience between a predecessor and a successor that acquired part of their business was through the partial application process. Prior to that date, an employer would not be subject under 201.022 (acquisition) if they acquired only part of the predecessors business. SUTA dumping laws that became effective September 1, 2005 changed to include all successors, total or partial, by any means, to be subject under 201.022 (acquisition). Those laws also required the transfer of compensation experience in all these cases when there was common ownership or common management and control. Successors, both total and partial, who met these transfer requirements, receive all of the compensation experience of the predecessor or predecessors as required under section 204.0851 of the ACT. Employers, under certain conditions, subject under 201.022 may, along with the predecessor, jointly file an Application for Partial Transfer of Compensation Experience to transfer the experience attributable to the part acquired. This section describes the requirements of the application.

According to the Act a partial is approvable only if:

1. The successor employing unit continues operation of substantially the same part of the organization, trade, or business acquired;
   
   
2. The predecessor Employer waives all rights to the compensation experience attributable to the part of the business acquired by the successor Employer;
   
   If the partial acquisition is the result of the predecessor's death the predecessors signature on Form C-82 is not required.
   
   
3. The portion of the predecessor's business acquired by the successor employer is definitely identifiable and segregable and able to operate independently from the predecessor operations.
   
   
4. The successor is a liable employer in the year of acquisition. If an Employer is not liable, they may volunteer coverage in order to file a partial transfer.
   
   Note: An employer has to elect following 201.024 procedures. An employer has to have paid wages in the year for which they want to volunteer.
   
   
5. A complete application must be filed with the agency within 1 year from the date the transfer occurred.
   
   Note: Prior to September 1, 2005 all partial transfers, both common ownership and non-common ownership, were covered in section 204.084. SUTA laws split the two types into section 204.084 and 204.085 effective September 1, 2005. The 1-year deadline was passed by Rule in October 7, 2002 and covered all partial applications. Legislation also amended the Texas Unemployment Compensation Act effective September 1, 2003 to require the 1-year deadline on all partial applications. The only means available to the agency to segregate experience in a partial transfer is through the application processes as described in detail under section 204.084, thus the 1-year deadline is required on all transfer applications under sections 204.084 and 204.085.
   
   According to Law that became effective September 1, 2005, any partial acquisition that occurred after September 1, 2005 can be denied if the commission determines based on credible evidence that the acquisition was done primarily to qualify for a reduced unemployment insurance tax rate by:

If one or more of the above requirements are not met, a partial is not approvable. If a partial is not approvable write the successor a dictated letter to explain why the partial is not approvable returning the employer's original partial. Make a copy of the partial for the employers file. If this is not feasible, keep the original and send a rejection letter only. Do not trace the account. Place the file copy of the letter in the Doc Log & Destroy basket and update the FTC screen to document the actions.

An important criteria for approving a partial is that the wages must be identifiable and segregable. It is the responsibility of the Status section to decide whether or not wages are identifiable and segregable. For wages to be identifiable and segregable the Employer must be able to distinguish by location or accounting records which wages are attributable to the various parts of its business operations. An Employer may not arbitrarily split wages when filing a partial application.

To satisfy the identifiable and segregable requirement of section 204.084(c)(3) and 204.085(a), the applicants must show that the successor employer acquired a distinct and separable part of the organization, trade, or business, that is capable of operating independently and separately from the predecessor employer.

Attempts to transfer management and administrative functions to a partial successor fail the identifiable and segregable criteria as they are unable to operate independently from the rest of the operations.

Situation 1

As an example consider a sole proprietor who operates a restaurant and employs a nanny. The employer decides to incorporate the restaurant, which has separate accounting records from the nanny.

Solution 1

A partial is possible since the employer can clearly identify which wages are attributable to the nanny and which wages are attributable to the restaurant. The restaurant was able to operate separately and independently from the domestic employment.

Situation 2

A divorce occurs between a husband and wife who operate a business with only a single location. This single business location operates only one line of business. The husband and wife want to arbitrarily divide the employees in half and file a partial.

Solution 2

A partial is not possible since the wages are not identifiable and segregable.

Situation 3

Consider a law partnership which employs one secretary. The law partnership dissolves and each partner incurs liability as a sole proprietor. The partnership maintains cost accounting records so that the cost of the secretary is apportioned to each partner.

Solution 3

A partial is not possible because the law partnership only has one employee. This employee's wages cannot be attributed to either partner since both partners employ the employee simultaneously.

Situation 4

A corporation that operates oil change businesses operates 3 different locations. 1 location is sold to another entity. Each location can operate independently from each other, each with its own management team.

Solution 4

A partial would be possible since the wages are identifiable and segregable by the accounting records.

Situation 5

A company operates 5 separate fast food locations. Employer decides to establish another entity to separate the salary employees from the hourly employees. The salary employees include the managers and assistant managers at the different locations. The hourly employees include wait staff, cashiers, and cooks.

Solution 5

A partial application in this situation would not be approved. The salary employees and the hourly employees cannot operate independently from each other.

Form C-82 is a two-sided form that is completed by both the predecessor and successor Employers. The form is used to document the predecessor's desire to waive their rights to certain experience and to document the successor's desire to acquire certain experience. A partial cannot be approved without a properly completed Form C-82. One Form C-82 must be completed for each successor Employer desiring a partial transfer of compensation experience.

A completed Form C-82 must include the following elements:

1. The name of the Successor.
   
   
2. The name of the Predecessor.
   
   
3. The date of the acquisition.
   
   
4. The trade name and location of each business operated by the predecessor Employer.
   
   The Nature of each business.
   
   The date of first employment for each business location operated by the predecessor Employer.
   
   
5. The trade name and location of each business acquired by the successor Employer.
   
   The date acquired.
   
   Date of first employment by Successor.
   
   
6. The predecessor's notarized signature. The only valid signatures are owners, partners, officers or holders of a power of attorney.
   
   
7. The successor's notarized signature. The only valid signatures are owners, partners, officers or holders of a power of attorney.

Partial Transfer Form C-83 is used by the Experience Rating Unit to determine which part of the compensation experience should be transferred to the successor Employer and which part should remain with the predecessor Employer. A partial transfer cannot be approved without proper completion of these forms.

An Employer is required to complete Forms C-83 for each quarter in the year of acquisition plus each quarter during the 4 years prior to the acquisition. If the business being acquired does not go back four years, then the forms are needed only back to when the business first began. Employers are required to list wage detail on Forms C-83 in ascending social security number order.

All partials are to be submitted on paper Forms C-83. Currently no programming exists to process partial transfers submitted via magnetic media.

The Status Section is responsible for reviewing that all required Forms C-83 are included with the application. The Experience Rating Unit is responsible for reviewing these forms and notifying the Employer of any deficiencies. Additionally any question from an Employer or their agent regarding proper completion of Forms C-83 should be referred to the Experience Rating Unit.

1. All applications will be forwarded to the state office Tax Department - Tax Administration, Room 504. An application will be recorded as received, a copy of the application will be forwarded to Data Processing for keying to the document log (TDO), and originals immediately forwarded to the Status Section.
   
   
2. Status will receive the application and distribute to an accounts examiner. Partial applications being approved or denied will be reviewed by the accounts examiner, their supervisor, and the assistant section manager. An approved application will be hand delivered to the Rates Section no more than 30 days after the application was received by Status.
   
   
3. A 30-day "ACCOUNTS STATUS BEING CORRECTED" stop will be placed on the account by Status. Applications being held or denied will have proper FTC comments as to the status of the application.
   
   
4. The Status Section, Experience Rate Unit will assign the application to an account examiner, log the partial on the partial transfer log, and place a "PARTIAL TRANSFER PROCESSING" stop on the account. This stop will remain on the account until the partial application is finalized. The Status Section, Experience Rate Unit, will process the application within 60 days of receiving the application from Status. Applications that take more than 60 days will have appropriate FTC comments explaining the delay.
   
   
5. Partial acquisitions that occurred on or after October 7, 2002 have one year to file their application. The postmark on the receipt envelope will be the primary determining factor on whether an application was filed on time. The application will have to be complete and approvable within the 1-year time limit. The receipt date will be the date when a complete application is received.

Applications being returned will include the reason the partial is being returned and the date the 1-year rule expires.

Once a partial has been reviewed and is approved by the Status Section, changes should be made to the EMF to document the fact that a partial transfer is in progress. To show that a partial is in progress the EMF is updated with predecessor and successor information showing "Partial - Not Filed". "Partial - Not Filed" signifies a partial transfer has been received and approved by the Status Section but is still under review by the Experience Rating Unit. The EMF should only be updated with "Partial - Not Filed" in situations where the Employer has submitted an approvable partial transfer. If the Employer has not submitted a partial transfer or has submitted a Form C-82 without Forms C-83s, do not update the EMF with "Partial - Not Filed". If an approvable partial transfer is received use the STA screen to update the EMF with "Partial - Not Filed".

1. Access the STA screen and make changes to the predecessor account.
   
   
2. Key ACCT (Predecessor account number)
   
   
3. Press <Enter>
   
   If the predecessor Employer has multiple successors and is transferring away all of its experience to the successors, the predecessor account should be suspended reason "1".
   
   
4. Key  SUSPD DT
           NORPTDUE
           REAS
   
   The grid does not need to be coded in this situation.
   
   
5. Key A  SUCC             (Successor account number)
                DT                 (Acquisition date)
               T/P     =>  2    ("2" signifies a partial acquisition)
               A/N    =>  0    ("0" signifies "Not Filed")
   
   
6. Press <PF5> to add the record.
   
   
7. Access the STA screen and make changes to the successor account.
   
   
8. Key ACCT (Successor account number)
   
   
9. Press <Enter>
   
   
10. Key A PRED             (Predecessor account number)
               DT                  (Acquisition date)
               T/P      => 2    ("2" signifies a Partial Acquisition)
               A/N     => 0    ("0" signifies "Not Filed")
    
    
11. Press <PF5> to add the record.
    
    
12. The EMF will be update with "Partial - Not Filed" in the tax run.

Total and partial successors that come under 201.022 are advised of the option of filing a partial application. Accounts examiners do not routinely advise employers to file a partial application as the application may have adverse effect on their rates. If an employer inquires how an identifiable part of the predecessors’ experience may be transferred, the tax examiner will discuss the partial application process.

It is not possible to determine what tax rate an employer will be assessed until after a partial transfer has been received, approved, and processed. A predecessor or successor tax rate might even increase as the result of a partial transfer. For this reason a tax examiner should never advise the employer regarding their tax rate. Additionally a tax examiner should never advise an employer to file or not to file a partial transfer. If an employer asks what tax rate it will be assigned as the result of a partial transfer, inform the Employer there is no way to determine the results of the partial transfer and that the Experience Rating Unit will notify the employer after the partial transfer has been processed.

Because it is impossible to determine what tax rate an employer will be assessed as the result of a partial transfer, an employer should be encouraged to pay at the tax rate currently assigned by the Commission. An Employer paying at a tax rate less than currently assigned by the Commission will make the employer subject to late payment interest.

If an Employer requests blank partial transfer forms (C-82 & C-83), the Status section employee should mail three copies of each form to the Employer along with the instruction page. It is not necessary to furnish the Employer a complete number of Forms C-83 as the Employer can make copies as necessary.

Note: Effective 10-07-02 all partial applications must be submitted no later than the first anniversary of the effective date of the acquisition.

FORM C-82

1. Form C-82 is to be signed by the predecessor and successor in Items 5 and 6 and both signatures must be notarized.  Original copy is to be returned to us and one copy retained for each signatory's files.
   
   
2. Items 1 and 2 on Form C-82 must be completed.  Item 1 needs to clearly identify two or more operations or locations operated by the predecessor, the nature of each business, and the date that operation or location first paid wages in Texas.  Item 2 should indicate which of those listed on Item 1 was acquired by the successor.

FORM C-83 (See example)

1. In Columns 1 and 2, list the Social Security Number and name of each employee being transferred.  The list must be in ascending SSN order.
   
   
2. In Columns 3 and 4, list the amount of total wages for each employee being transferred as reported on the predecessor’s form C-4 for that quarter.
   
   
3. The total wages of all employees being retained by the predecessor may be shown as a “lump” sum in Columns 3 and 5 as wages retained by the predecessor.
   
   
4. The totals at the bottom of Column 3 should be the same as the amounts reported on the predecessor's Form C-3 for Total and Taxable wages.  Those amounts are then allocated between Column 4 (applicable to successor) and Column 5 (retained by the predecessor).

Forms C-83s are needed for each quarter in the year of acquisition plus the four prior years.  If the business being acquired does not go back four (4) years, then Forms C-83 are needed back to when the business first began.