Mergers, Acquisitions, and Reorganizations
Asset Deal
Stock Deal
“F” Reorganization
Statutory Merger
338(h)(10)
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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.
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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
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Working with 3rd party payroll processors
Potential Forms 1099-B requirements
Local Tax compliance
Forms W-4 Compliance
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