1. Spurred by financial advisors, some employers are manipulating the state Unemployment Insurance (UI) experience rating system so that these employers pay lower state UI taxes than they properly should.

2. These practices, called SUTA dumping, cheat employers and employees that play by the rules. They also cheat the state UI fund.

3. The federal SUTA Dumping Prevention Act of 2004 requires states to enact anti-SUTA dumping legislation by 2006.

1. If an employer transfers its business, or a portion thereof, to another employer and, at the time of the transfer, there is substantially common ownership, management or control of the two employers, then the unemployment experience attributable to the transferred business shall be transferred to the employer that acquires such business.

2. If an employer transfers its business, or a portion thereof, to a person that was not an employer at the time the business was acquired, then the unemployment experience attributable to the acquired business shall be transferred to the new employer unless the new employer does not continue operating the same business enterprise as before the transfer.

3. The unemployment experience of an acquired business shall not be transferred to a new employer if the [Secretary] finds that the new employer acquired the business for the purpose of obtaining a lower rate of unemployment insurance taxation. In determining whether the business was acquired for the purpose of obtaining a lower rate of taxation, the [Secretary] shall use objective factors, including the cost of acquiring the business, whether the new employer continued the business enterprise of the acquired business, how long such business enterprise was continued, and whether a substantial number of new employees were hired for performance of duties unrelated to the business activity conducted prior to acquisition.

1. The [Secretary] shall promulgate such regulations as are necessary to implement and administer compliance.

2. A person who knowingly violates or attempts to violate this section, or a person who knowingly advises another person to violate this section, shall be guilty of a felony punishable by up to 2 years in prison and a fine of up to $500,000.

3. A person required to collect, withhold, account for, or pay any unemployment insurance tax contribution, who intentionally fails to collect, withhold, account for, or pay any contribution, shall be guilty of a misdemeanor punishable by up to one year in prison and a fine of up to $100,000.

4. In addition to any other penalties, an employer that knowingly violates or attempts to violate this section shall be assigned the highest unemployment insurance tax rate for the year during which such violation or attempted violation occurred, and for three subsequent years. However, if the employer’s business is already at the highest rate for any year, or if the amount of increase in the person’s rate would be less than two percent for such year, then a penalty rate of contributions of two percent of taxable wages shall be imposed for such year. In addition, the [Secretary] shall assess a civil fine equal to 50 percent of the tax contribution that the employer underpaid or attempted to underpay.

5. In addition to any other penalties, a person not an employer that knowingly violates or attempts to violate this section shall be subject to a civil fine equal to $50,000, or an amount equal to 50 percent of the tax contribution underpaid or attempted to be underpaid, whichever is greater.