Mergers Acquisitions and Reorganizations Asset Deal Stock Deal

Mergers, Acquisitions, and Reorganizations Asset Deal Stock Deal “F” Reorganization Statutory Merger 338(h)(10) 1

Mergers, Acquisitions, and Reorganizations Asset Deal – Buyer purchases the assets of a target company (partial or total) – Typically, the acquired employees will be immediately reported on the purchaser’s payroll – In the case of partial acquisitions, the target company continues to survive and report payroll – For both partial and total acquisitions there is generally a movement of employees and related assets 2

Mergers, Acquisitions, and Reorganizations Asset Deal – Considerations – Federal § “Successor” qualification § Carryover of YTD taxable wage bases § Tax deposit compliance/reconciliation § Payroll Systems Integration § Forms W-2 reporting (standard vs alternative) § Forms W-4 § Forms 1099 § Year-end notifications to IRS 3

Mergers, Acquisitions, and Reorganizations Asset Deal – Considerations – State § “Successor” qualification § Carryover of YTD taxable wage bases § SUI experience transfers (optional or mandatory) § Payroll Systems Integration § State Employee Withholding Allowance Certificate § State correspondence/notification § Account closures 4

Mergers, Acquisitions, and Reorganizations Stock Deal – Buyer purchases the stock of a target company – Typically, the acquired company remains “alive” and all employees will continue to be reported under the target company’s payroll id numbers – Generally no change in target company’s business – Generally no initial movement of employees from target company payroll to purchaser’s payroll 5

Mergers, Acquisitions, and Reorganizations Stock Deal – Considerations – Federal and State § There are generally no tax considerations in stock deals as the employees of the acquired company will continue to be reported under the acquired company’s federal/state ID numbers. § No Forms W-2, W-4, and 1099 issues § No SUI transfer of experience issues § Potential Payroll Systems Integration § Subsequent movement of employees 6

Mergers, Acquisitions, and Reorganizations “F” Reorganization – Typically involved when a corporation changes its name, the state where it does business, or makes changes to its corporate bylaws/charter – Does not change the federal or state identification numbers of the entity – No movement of employees – No movement of assets 7

Mergers, Acquisitions, and Reorganizations “F” Reorganization – Considerations – Federal and State § There are generally no employment tax considerations associated with a Type F reorganization § Forms W-2, W-4, and 1099 should reflect new entity name (if entity name change involved) § No SUI transfer of experience issues 8

Mergers, Acquisitions, and Reorganizations Statutory Merger – Also known as a Type A merger. It is a merger between two entities that is effected under the laws of the U. S. , a state or territory or the District of Columbia. Statutes of foreign jurisdictions will also qualify as long as the statute operates in a similar manner to a domestic merger statute. – Post merger, one company continues to exist while other ceases to exist – Movement of employees and assets 9

Mergers, Acquisitions, and Reorganizations Statutory Merger – Considerations – Federal § “Successor” qualification § Carryover of YTD taxable wage bases § Tax deposit compliance/reconciliation § Payroll Systems Integration § Successor must file one Forms W-2 for entire year § Forms W-4 § Successor must file one Forms 1099 for entire year 10

Mergers, Acquisitions, and Reorganizations Statutory Merger – Considerations – State § “Successor” qualification § Carryover of YTD taxable wage bases § SUI experience transfers (optional or mandatory) § Payroll Systems Integration § State Employee Withholding Allowance Certificate § State correspondence/notification § Account closures 11

Mergers, Acquisitions, and Reorganizations 338(h)(10) election – Jointly made election between purchaser and target company of a stock purchase – The stock purchase is ignored for corporate tax purposes – The target company is generally treated as having made a deemed sale of its assets and then liquidated 12

Mergers, Acquisitions, and Reorganizations IRC 338(h)(10) – Considerations – Federal/State § Generally same considerations as that of an asset acquisition. § SUI regulations/rules should be consulted as some states will consider the transaction a stock transaction. 13

Mergers, Acquisitions, and Reorganizations General considerations – Are employees AND assets involved – Related party transactions § In some states, the employees are enough to establish common ownership/management – – Working with 3 rd party payroll processors Potential Forms 1099 -B requirements Local Tax compliance Forms W-4 Compliance 14

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