{"data":{"id":"us-ky/krs-341.540","jurisdiction":"us-ky","citation":"KRS 341.540","heading":"Reserve accounts of successive employing units -- Resources  and","body":"liabilities -- Contribution rate -- Penalties.\n(1) As used in this section, unless the context clearly requires otherwise:\n(a) \"Substantially common\"  or \"substantially the same\" means  that there is\nidentifiable or demonstrative commonality or similarity of ownership,\nfamilial relationships, principals or  corporate officers, day-to-day\noperations, assets and liabilities, and stated business;\n(b) \"Trade\" or \"business\" includes but is not limited to a commercial\nenterprise or establishment; any  entity engaged  in the supplying,\nproduction, or manufacturing of goods, commodities, or services; any\nentity engaged in commerce, sale for profit, or the providing of goods,\npersonnel, or services;\n(c) \"Knowingly\" means having actual knowledge of, or acting with deliberate\nignorance or disregard for, the prohibition involved;\n(d) \"Violates\" or \"attempts to violate\" includes, but is not limited to, intended\nevasion, misrepresentation, or willful nondisclosure; and\n(e) \"Person\" has the same meaning as in Section 7701(a)(1) of the Internal\nRevenue  Code.\n(2) (a) For the purpose of this chapter, if a subject employer transfers all or part\nof its trade or business, the acquiring employing unit shall be deemed  a\nsuccessor if the transfer is in accordance with administrative regulations\npromulgated  by the secretary, or if there is substantially common\nownership, management,  or control of the subject employer  and\nemploying  unit. If an  employing unit is deemed  a successor, the\ntransferring employing unit shall be deemed a predecessor.\n(b) For the purpose of this chapter, if a nonsubject employer acquires all or\npart of the trade or business of a subject employer, the nonsubject\nemployer  shall file an application with the Office of Unemployment\nInsurance to establish an unemployment reserve account within forty-five\n(45) days of employing personnel. The application will be considered and\nprocessed in accordance with administrative regulations promulgated by\nthe secretary and  shall require information necessary to determine\nwhether the nonsubject employer is a successor of the subject employer\nand  to establish an  initial unemployment  contribution rate for the\nemployer. Factors to be considered in the determination of successorship\nand  the fixing of the initial rate shall include but not be limited to the\nnonsubject  employer's prior unemployment  claims history, benefit\ncharges, historical rate charges, and payment penalties assessed in the\nprevious five (5) years, in addition to the factors set forth in subsection\n(6)(b) of this section. After consideration of these factors, and others that\nthe applicant may submit in justification of an initial rate determination, the\nsecretary shall set an appropriate contribution rate. Any determinations of\ninitial unemployment contribution rates made  pursuant to this subsection\nshall not be effective prior to January 1, 2018.\n(3) (a) Notwithstanding subsection (2)(b) of this section, any successor to the\ntrade or business of a subject employer shall assume the resources and\nliabilities of the predecessor's reserve account, including interest, and\nshall continue the payment of all contributions and interest due under this\nchapter, except that the successor shall not be required to assume  the\nliability of any delinquent contributions and interest of a predecessor or\npredecessors unless the cabinet notifies the successor of the delinquency\nwithin six (6) months after the department has notice of the succession;\nand\n(b) Any  nonsubject employer that is deemed  a successor in whole or part\nshall be allowed to make a one (1) time voluntary payment to pay off or\nreduce  the negative reserve assumed  from the predecessor. This\npayment shall be made within sixty (60) days of receipt of the first notice\nof a negative predecessor reserve account. This one (1) time voluntary\npayment  cannot exceed the amount of negative reserve assumed by the\nsuccessor.\n(4) The  liability for delinquent contributions and  interest imposed  upon  the\nsuccessor by subsection (3) of this section shall be secondary to the liability of\nthe predecessor or predecessors, and if the delinquency has been reduced to\njudgment, the order of execution on the judgment shall be as follows:\n(a) Against the assets, both real and  personal, of the predecessor or\npredecessors;\n(b) Against the assets, both real and personal, of the business acquired; and\n(c) Against the assets, both real and personal, of the successor or acquirer.\n(5) (a) Notwithstanding the provisions of subsection (3) of this section, any\nsuccessor to a portion of the trade or business of a subject employer, who\nis, or by reason of the transfer becomes, a subject employer, shall\nassume  the resources and liabilities of the predecessor's reserve account\nin proportion to the percentage of the payroll or employees assignable to\nthe transferred portion. In calculating the transferred portion, the secretary\nshall utilize the last four (4) calendar quarters preceding the date of\ntransfer for workers employed by the successor subsequent to that date.\nThe  taxable payroll, benefit charges and the potential benefit charges\nshall be assumed by the successors in a like proportion.\n(b) Notwithstanding the provisions of paragraph (a) of this subsection, if any\nemploying unit succeeds to a portion of the trade or business of another\nemploying  unit; becomes,  by reason of that succession, a subject\nemployer with substantially the same ownership, management, or control\nas the predecessor employing unit; and lays off or terminates more than\none-half (1/2) of the original employees transferred within six (6) months\nof the date of transfer; then the succession and creation of the new\nemploying unit shall be voided, and the benefits attributable to the lay-offs\nor terminations shall be charged to the reserve account of the original\nemploying unit.\n(6) (a) The  contribution rate of a successor in whole or in part, which was a\nsubject employer prior to succession, shall not be affected by the transfer\nof the reserve account for the remainder of the rate year in which\nsuccession occurred; except that the rate of the successor shall be\nrecalculated and made effective upon the first day of the calendar quarter\nimmediately following the date of the transfer if there is substantially\ncommon  ownership, management,  or control of the predecessor and\nsuccessor.\n(b) The contribution rate of a successor in whole or in part, which was not a\nsubject employer prior to succession, shall be determined by a review of\nthe application required by subsection (2)(b) of this section, except if the\nsecretary finds, after a thorough investigation based on the use of\nobjective factors, including but not limited to:\n1. The cost of acquiring the business;\n2. How  long the original business enterprise was continued; and\n3. Whether  a substantial number  of new  employees were hired for\nperformance of duties unrelated to the business activity prior to\nacquisition;\nthat the succession was solely for the purpose of obtaining a rate lower\nthan that prescribed in KRS  341.270(1) and 341.272 for a new employing\nunit, then the unemployment experience of the predecessor shall not be\ntransferred, the rate for a new employing unit shall be assigned, and the\nemploying unit shall be otherwise deemed  a successor for the purpose of\nKRS  341.070(7) and subsection (3) of this section.\n(c) The contribution rate for a successor which becomes a subject employer\nthrough the simultaneous transfer, either in whole or in part, of two (2) or\nmore  predecessor reserve accounts shall be the rate determined in\naccordance with the provisions of KRS 341.270, by combining the reserve\naccounts succeeded to as of the computation date for determining rates\nfor the calendar year in which succession occurred.\n(d) The contribution rate of a successor which succeeds, either in whole or in\npart, to a predecessor's reserve account after a computation date, but\nprior to the beginning of the calendar year immediately following that\ncomputation date, shall be the rate determined in accordance with KRS\n341.270, by effecting the transfer of the reserve account as of the\ncomputation date immediately preceding the date of succession.\n(7) Notwithstanding KRS  341.270, the contribution rate for an employing unit that\nknowingly violates or attempts to violate the provisions of this section or any\nother provision of the chapter related to determining the assignment of a\ncontribution rate shall be the highest rate assignable under this chapter for the\ncalendar year during which the violation or attempted violation occurred and\nthe three (3) calendar years immediately following that year. If that employer's\nrate is already at the highest assignable rate, or if the amount of increase in the\nemployer's rate would be less than an additional two percent (2%) for that year,\nthen a penalty rate of contributions of an additional two percent (2%) of taxable\nwages  shall be imposed for each year.\n(8) In addition to the penalties prescribed in subsection (7) of this section and KRS\n341.990(9), any person who knowingly violates this section shall be subject to\nthe penalties stipulated under KRS 341.990.\n(9) (a) The  secretary shall establish procedures to identify the transfer of a\nbusiness for purposes of this section.\n(b) The  secretary shall have the authority and discretion to set an initial\ncontribution rate upon the providing of justification by a subject employer\nand  consideration of relevant factors, including but not limited to the\nfactors set forth in subsections (2) and (6)(a) of this section.","path":["KRS Chapter 341"],"source_url":"https://apps.legislature.ky.gov/law/statutes/statute.aspx?id=52458","current_through":"Includes enactments through the 2026 Regular Session","vintage":"09/05/2026","retrieved_at":"2026-09-05T20:58:29Z","sha256":"3b508515f4d3a32f598a1d4ad29f5190570ab290fc14e04fc2f666b70a8d8d01","source_id":"us-ky","stale":false,"prev":"us-ky/krs-341.530","next":"us-ky/krs-341.550"},"notice":"GroundRules: Original legal text. Not legal advice."}