02. Employer Liability, Tax Rate, Successorship

CTC Acquisition CO, LLC v. State of Michigan – 2.23

CTC Acquisition CO, LLC v. State of Michigan
Digest No. 2.23

Section 421.22, Section 421.41

Cite as: CTC Acquisition CO, LLC v State of Michigan, unpublished opinion of the Kent County Circuit Court, issued November 10, 2008 (Docket No. 2008-06293-AE).

Appeal pending: No
Claimant: N/A
Employer: CTC Acquisition Co., LLC
Docket no.: No. 2008-06293-AE
Date of decision: November 10, 2008

View/download the full decision

HOLDING: CTC is a “new employer” under the statute and a 2.7% rate must be applied.

FACTS:  Case stems from CTC Acquisitions Co’s purchase of most of Grand Rapids Controls, Inc’s (GRC) assets. GRC was a spring and cable manufacturer solely owned by Linda Southwick. Sale occurred in April 2004. CTC stopped the spring manufacturing but continued the cable production line. Production staff was retained, management was not. CTC reported the acquisition to the UIA for the determination of the appropriate contribution rate. The company was renamed GRC, LLC. Under the statute (MCL 421.22), a “new employer” is assigned 2.7% contribution (2.7% of its payroll to the UIA). A new employer is an acquisition under 75%. When a business acquires more than 75% of another business, then it is considered a “transfer of business” and the former employer’s contribution rate is transferred. In August 2004 UIA determined GRC, LLC to be a new employer because it has acquired less than 75% of GRC, Inc’s assets. However in June 2005 the UIA reversed its determination because it found that more than 75% of the assets were purchased and assigned a 10.3% contribution rate. UIA determined that the leasehold improvements (valued at $1.3 million) were not GRC, Inc assets.

DECISION: Board of Review’s decision is reversed. The decision reversed was the decision of the agency to recalculate Appellant-Employer’s contribution rate and increase the rate from 2.7% to 10.3%.

RATIONALE: UIA is permitted to reconsider and redetermine an employer’s contribution rate. MCL 421.32(a). However, if the reconsideration occurs within 30 days of the original intent, the rate may only be reconsidered for good cause.As a matter of law, the leasehold improvements were GRC, Inc’s assets and should have been included in the calculation.

Question 1: Is remand required for a determination of whether the agency had good cause to reconsider CTC’s contribution rate because the rate was not reconsidered within 30 days of the original determination?

  • Based on this decision is it not necessary to remand for a determination of whether the agency has good cause to reconsider the rate determination more than 30 days after the original determination.

Question 2: Did the Board err in not considering GRC, Inc’s leasehold improvements in the asset calculation? The improvements were properly written off and they were assets.

  • Court believes that the focus must be on what the seller’s total assets were and what percentage of those assets was transferred to a particular acquiring business. Not the total percentage of what was transferred.
  • CTC is a new employer and must be assessed under the 2.7% rate.

Digest author: Katrien Wilmots, Michigan Law, Class of 2017
Digest updated: 3/27/2016