This section discusses the aspects of the law that specifically apply to termination of coverage.

1. An employing unit may cease to be an employer only on January 1 of a year and only if the commission finds that:

2. The commission may not make a finding under Subsection (a)(1) unless the employing unit files an application of termination of coverage with the commission on or after January 1, but before April 1 of the year for which termination is requested. The commission may make a finding under Subsection (a)(2) without an application having been filed.

Comments: The Act requires two things as prerequisite for the termination of coverage by an employer subject to the Act: filing an application for termination of coverage, and a finding by the Commission of facts which entitle the employer to terminate it. We think the method prescribed is exclusive and that when the status of 'employer' once attaches under the Act it continues until terminated in the manner provided. There was an obviously sound reason for including such a provision in the Act. For without it, the Commission would find it most difficult to keep proper record of employers subject to unemployment contributions. And a construction of the provision which would permit termination of coverage by one appearing on the records of the Commission as an employer subject to the Act in some other manner of 'substantial compliance' could only lead to difficulty and confusion in the administration of the Act.

The subsection requires a written application by the employer. The written application must be in language capable of being clearly interpreted as an application for termination of coverage. The Commission prescribes a Form C-71, "Application for Termination of Coverage," for use in making a written request for termination of coverage; however, the Commission does recognize an application filed in some other written form.

The Commission will recognize an application for termination that covers a specific class of employment and liability. There are three classes of liability:

An employer who is liable under more than one class as indicated above may file for termination of coverage of a particular class and, if the Commission finds the employing unit was not an employer under that subsection during the preceding year, cease to be a covered employer within that class.

The subsection requires that the written application be filed with the Commission on or before the 31st day of March of the year at the beginning of which termination of coverage is sought. Employers should be instructed to file written applications for termination of coverage between January 1 and March 31. If a written application is filed prior to January 1 of any year, we shall request an application on the specified forms after January 1 and before March 31.

The employing unit filing the application shall cease to be an employer only after the Commission makes its finding as required by the law. It is not necessary that the Commission be able to make its finding exclusively on the basis of information included in the application. If an application has been filed in the proper form and within the proper time, the Commission must make a finding. If sufficient facts are not contained in the written application to enable the Commission to make its finding, additional facts will be secured from the employing unit. The Commission may seek verification of facts stated in the application, and this usually is accomplished through investigation by its own personnel prior to Commission action on the application.

If an Application for Termination of Coverage is filed on or before December 31, there may be occurrences during the remainder of the year which are material to a finding by the Commission. Even though the written application was filed in proper form at the time, no action can be taken on the application until all of the material facts are placed before the Commission. The employing unit does not cease to be an employer until these facts are presented and the Commission makes its finding.

An Application for Termination of Coverage, timely filed on or before March 31 of a calendar year, may be withdrawn at the employer's request in writing on or before April 30 of the same year (i.e., the date on which the current contribution and wage report would be finally due).

This section states that regardless of whether or not an application for termination of coverage has been filed, an employing unit shall cease to be an employer subject to this Act as of the first day of January of any year if the Commission finds that the employing unit has not had any individuals in employment on any one (1) or more days within the three (3) immediately preceding consecutive calendar years.

Comments: Each year the Status Section of the Tax Department makes status determinations concerning those employers who, according to the Commission's records, have not had any individuals in employment on any one or more days within the three immediately preceding consecutive calendar years.

The employers' accounts which have been on an "inactive" status throughout the three preceding calendar years are recorded as terminated under Section 206.004(a)(2) on the assumption that the employers did not have employment. Notice of Change of Records (Form C-10) is not prepared. Field Tax offices and the employers are not notified of the 206.004(a)(2) terminations. Field examiners will know which accounts are terminated by visual observation of the Employer's Master File on the PC. If and when it is discovered that an employer whose coverage has been shown to be terminated under Section 206.004(a)(2) actually had employment in the three year period but failed to report it, the account is reopened and we attempt to collect the tax for past due periods.

We also terminate the coverage of employers whose accounts are on an "active" status but who have filed quarterly reports showing "no wages" during each quarter of the three preceding calendar years. However, these employers are notified by letter that their coverage has been terminated under Section 206.004(a)(2) and that no further reports are required unless and until they again become a subject employer.

In the "Witherspoon" situation, the Commission notified Witherspoon Oil Company that it was not a subject employer and refunded taxes paid for 1936. It was later discovered that, as a matter of fact, liability occurred in 1936 and the company was so notified after March 31, 1939. Had Witherspoon been notified before March 31, 1939, the company could have filed an Application for Termination of Coverage as of January 1, 1939, because it did not have the then requisite eight employees in twenty weeks during 1938. The Commission's position that Witherspoon owed taxes for 1939, because an Application for Termination of Coverage was not filed during the period from January 1 to March 31, 1939, was not sustained by the Supreme Court.

The pertinent facts upon which the Court based its decision appear to be:

Under similar circumstances, the Commission will terminate an employer's coverage upon request even though a written application was not filed timely.

A request for termination of coverage under the Court's decision in the Witherspoon case (when a written application was not filed timely) cannot be approved if:

Obviously, this literal interpretation of the Court's decision in the Witherspoon case will practically eliminate situations in which coverage can be terminated even though a written Application for Termination of Coverage was not timely filed.

This section discusses the aspects of the law that specifically apply to alternate subject dates.

At the time liability of an employer is investigated or examined, if liability is found under the provisions of two or more sections for the same calendar year, liability will be established as of the earlier subject date, unless such liability as of the earlier date is difficult to prove and liability as of the later date is clear and uncontested.

EXAMPLE: If it appears that an employing unit might have become an employer under Section 201.022 on July 2, 1989, but proof of such liability is difficult and is contested, whereas liability as of September 30, 1989, under Section 201.021 is clear and uncontested, the Commission will establish liability under Section 201.021.

Company A hired employees that previously worked for Company B and C and were laid off after those companies lost their respective business contracts. Company A competitively won the contracts for janitorial services that had previously been performed by Company B and Company C.  Company A did not have any common ownership or share any common officers with Company B or C.  Company A did not and does not possess or control any assets or property that belonged to Company B or C.  Furthermore, Company A never entered any agreement or obtained any legal right from Company B or C to hire their employees.    HELD:  Simply winning a contract and hiring some of the workers who were being laid off by the previous contractor does not constitute an “acquisition” of the organization, trade, or business for purposes of section 204.086(a).  Therefore, because there was no kind of previous relationship between Company A and either Company B or C, the Commission holds that Company A did not acquire the tax liabilities of B or C.