1. Mergers & Acquisitions
Presenter: Mindy Mayo

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

3. 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

4. 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

5. 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

6. 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

7. 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

8. 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 identification numbers of the entity
Some states require a new SUI number
No movement of employees
No movement of assets

9. 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)

10. 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

11. 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

12. 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

13. 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

14. 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.

15. 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 3rd party payroll processors
Potential Forms 1099-B requirements
Local Tax compliance
Forms W-4 Compliance

16. Mergers, Acquisitions, and Reorganizations
General considerations
Tax, Legal, Payroll, HR alignment
Due Diligence
Team to work through coordination of efforts
Workplan
Responsibility

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