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

2 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

3 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

4 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

5 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

6 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

7 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

8 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

9 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

10 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  Year-end notifications to IRS

11 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

12 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

13 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.

14 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

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