Tax Intelligence Bulletin: M&A Pre-Clearance Letters

August Tax Intelligence Bulletin

While most Merger & Acquisition (M&A) transactions are not driven by state unemployment insurance (SUI) tax implications, proper due diligence and pre-transaction planning can assist acquiring employers in avoiding unexpected outcomes.  As employers contemplate M&A transactions, which often occur at year end, those responsible for unemployment tax cost management should arm themselves with sufficient information to assess potential SUI tax risks and opportunities.

Employers should request three years of historical data (i.e. state unemployment tax rate notices, quarterly contribution reports, etc.) to perform an analysis to identify any potential issues within the organization being acquired, such as penalty tax rate assignments or unreported past M&A transactions.

Once an acquiring employer has assessed risks based on an analysis of the data acquired and has developed an optimal legal structure for the transaction, it is often recommended that a pre-clearance letter be submitted to state workforce agencies (SWAs), especially when an acquiring employer may materially benefit from the transaction.  A significant decrease in SUI tax rates or costs may increase the level of scrutiny by SWAs.

For more information about both the data request and analysis process and the development of a pre-clearance letter, please see our August Tax Intelligence Bulletin, M&A Transaction Pre-Clearance Letters.

About Sam Roberts

As an Employment Tax Senior for Equifax Workforce Solutions, Sam assists employers with complex employment tax matters including mergers and acquisitions, unemployment tax, tax authority representation, strategic planning, best practices, and compliance. Sam started his career in 2009 with Equifax Workforce Solutions as an Employment Tax Associate. He graduated in 2009 with a BS-Accounting from Trinity Christian College in Palos Heights, IL and currently holds both a Certified Public Accountant (CPA) license and Certified Payroll Professional (CPP) license.