By Tom Towson
State unemployment taxes rarely drive decisions relating to the structure of a Merger and Acquisition (M&A) transaction. However, pre-transaction planning can result in significant M&A unemployment tax cost savings. This can come in many forms, but may only require minor changes that won't disrupt other organizational objectives. And, post-transaction actions may provide material cost savings if pre-transaction planning wasn't done.
Just as “follow the money” was coined in reference to tracking the financial substance of a series of interdependent transactions, “follow the workforce” is a phrase that can be used to reinforce the importance of employee movement in an M&A transaction. It implies how employee movement might impact SUI tax costs moving forward. In fact, we've written a whole white paper dedicated to this.
When employees move from one legal entity to another, there might be an impact to the Acquiring and/or Selling Employer. When undertaking an M&A transaction, there are certain pre-transaction and post-transaction risks that the Acquiring Employer must consider. However, the nature of the risk will vary depending on the structure of the transaction and whether the parties are related. Use the guide below to learn more about SUI risks and how to help mitigate them.
The Acquirer in an M+A transaction should identify and quantify areas of risk and opportunity pre-transaction. Use our free Ultimate M&A Employment Tax Checklist to keep track of it all. However, if due diligence and planning were not performed, there may still be opportunities to lower the Acquirer’s SUI tax rates and associated future tax costs. Our team of employment tax pros can provide expert assistance. We can also do a no-obligation LookBack tax review for you, which can help you discover potential overpaid or duplicated employment taxes that might have cost your business thousands of dollars. A typical LookBack goes beyond the surface to understand your unique employee movement activities, helping uncover amounts that are owed to you. Plus, we can help you to make sure you don’t overpay again. It’s free and easy to sign-up.