§ 42-64.5-7 - Business reorganizations.
SECTION 42-64.5-7
§ 42-64.5-7 Business reorganizations.– (a) If:
(i) An eligible company (hereinafter referred to as the"resulting company") continues, succeeds to or acquires all or substantiallyall of the business of one or more eligible companies including all of itseligible subsidiaries (each such eligible company, together with its eligiblesubsidiaries being hereinafter referred to as a "combining company"), whetherby consolidation, merger, stock acquisition, asset acquisition, or other methodof business combination;
(ii) At least one of the combining companies has previouslyestablished a base employment date; and
(iii) The resulting company elects to have this section apply,
then the following rules shall apply for purposes ofdetermining the rate reduction applicable to the resulting company. Theresulting company, if in existence prior to the combination, is also acombining company.
(1) The "reference company" shall be the combining companywhich has a previously established base employment date and which, for its lasttaxable year ending before the combination, had the highest number of units ofnew employment; provided, that for purposes of making this determination only,no combining company shall be treated as a small business concern. If more thanone of the combining companies having previously established base employmentdates had the highest number of units of new employment, the reference companyshall be the one of those companies that has the largest total employmentbefore the combination.
(2) The resulting company may claim a rate reduction, and thebase employment of the resulting company shall be the base employment of thereference company plus, for each other combining company, the greatest of: (i)if the combining company had a previously established base employment date, itsbase employment; (ii) the base employment determined as of the base employmentdate of the reference company; and (iii) its adjusted current employment forits most recently completed taxable year. The initial new employment level ofthe resulting company shall be the initial new employment level of thereference company plus, for each other combining company, the greater of: (i)the combining company's previously established initial new employment level, ifany; and (ii) its adjusted current employment for its most recently completedtaxable year.
(3) The resulting company shall be a small business concernonly if: (A) the sum of: (i) for each combining company that has a previouslyestablished base employment date, the greater of its base employment level orits base employment level determined as of the base employment date of thereference company, plus (ii) for each other combining company, the greater ofits base employment level determined as of the base year of the referencecompany or its total employment immediately prior to the combination is lessthan one hundred (100); and (B) the resulting company is not atelecommunications company.
(4) If, for the year in which the combination occurs or foreither of the next two (2) taxable years thereafter, the resulting company'sunits of new employment is less than its initial new employment level, theresulting company shall compute and pay applicable taxes as though this chapterdid not apply for such year. If the restoration condition described inparagraph (6) is satisfied, the resulting company shall be entitled to a creditor refund equal to the sum of the amount actually paid by the resulting companyover:
(i) For the taxable year in which the combination occurred,the tax that would have been paid at the rate last previously determined forthe reference company, plus, for each other combining company that had apreviously established initial employment level, an amount equal to the productof the combining company's taxable income for its last prior taxable yearbefore the combination (but not less than zero) times the difference in the taxrate established for that combining company over the tax rate established forthe reference company; provided, however, that the tax on the resulting companyshall not be higher than the tax that would result if this chapter did notapply; and
(ii) For the first or second taxable year beginning after thecombination, the tax that would have been paid if using a rate reduction equalto one-quarter of one percent (0.25%) times the number of units of newemployment for that taxable year (but not in excess of the resulting company'sinitial new employment level).
(5) For each taxable year thereafter, the resulting company'srate reduction shall be the same as the reference company's rate reductionbefore the combination; provided, that if for any such succeeding taxable yearthe resulting company's number of units of new employment is less than itsinitial new employment level, the rate reduction provided for in this chaptershall expire permanently.
(6) The restoration condition shall be satisfied if: (i) bythe last month of the second taxable year beginning after the combination, theresulting company's units of new employment equals or exceeds its initial newemployment level; and (ii) for a twelve (12) month period (which may beselected after the end of such period by the resulting company) that includesthe last month of the second taxable year beginning after the combination, theresulting company's adjusted current employment (measured over such twelve (12)month period) equals or exceeds its initial new employment level.
(7) A resulting company may elect to have this subsectionapply only if the reference company's number of units of new employment for itslast taxable year ending before the date of the combination is not less thanthe reference company's initial new employment level.
(b) If an eligible company (hereinafter referred to as the"acquiring company") acquires an eligible subsidiary, division, or other unitof another eligible company (hereinafter referred to as the "divestingcompany") that does not represent all or substantially all of the business ofthe divesting company and its eligible subsidiaries, the acquiring company andthe divesting company may elect to determine any rate reduction applicable tothe acquiring company and the divesting company after the date of theacquisition in accordance with the following:
(1) If the acquiring company has previously established abase employment level:
(A) The base employment, if any, of the divesting companyshall be the lesser of its base employment before the divestment and its totalemployment immediately after the divestment; and
(B) If the base employment of the divesting company isreduced by reason of the rule stated in (A), the base employment of theacquiring company shall be increased by an equal amount.
(2) If the acquiring company has not previously established abase employment level, the base employment of the divesting company, if any,shall be unaffected.
(3) The acquiring company and the divesting company shalljointly make the election in such form as the tax administrator may require,and, once filed by either company, the election shall be irrevocable.