How to Handle “Type F” Reorganizations After Corporate Changes

Has your company undergone a recent name change? Has your legal name remained effectively the same but you are now operating as ABC, LLC instead of ABC, Inc.? From an employment tax reporting perspective, these relatively “superficial” changes are, in fact, considered formal “Type F” Reorganizations, as classified in the IRC and require special treatment and reporting.

Type F events are so relatively insignificant (compared to other types of reorganization) that their associated reporting requirements are often not fully completed. With that in mind, here’s a closer look at post-Type F compliance.

Don’t underestimate a “Type F” event 

If your organization has undergone a change of structure (Inc. to LLC, for example) and/or a legal name change, chances are that your Tax or Legal Department has appropriately advised the applicable Secretary of State(s) of your change. In fact, many employers do so and then consider their entity or name change a “done deal.” This leads to a common error. It is incorrect to assume that this notification to the Secretary of State will filter down to the Department of Labor and Department of Revenue. Separate notifications are required.

Given that Secretary of State notification is often done within Tax or Legal Departments, Payroll may not even be aware of any outstanding problems until they contact one of the state agencies on an unrelated issue.

Make sure there is a match between your current company name, entity type, FEIN, and the agency detail on your employer accounts.

Failure to notify agencies of changes may lead to:

  • significant extra work for the agencies to make retroactive corrections on your account
  • various delays
  • eventually, it can lead to extra work on your end too, having to chase down old documents and file and/or re-file forms
  • questions at the agency level (raising audit exposure)
  • information potentially flowing to the wrong accounts
  • unemployment claims possibly recorded against the wrong account

If that doesn’t sound compelling enough, consider this: poor reporting around Type Fs could set you up for unwanted negative attention from the agency. And that should compel anyone who has experienced negative agency attention before. At minimum, proper reporting will save you serious headaches. It could also help you save money if there is a Transfer of UI Experience opportunity.

 

There are three categories of change that Emptech encounters in our work related to state unemployment insurance and state withholding tax:

1)      Name change only (no change of entity structure / ownership or FEIN)

2)      Entity change (same FEIN, and no change in structure / ownership)

3)      Change of name / entity and new FEIN

For each of these categories, certain generalizations can be made about the type of documentation typically required by the agencies, as follows:

For name change only:

  • Submit name change via a letter or agency form (varies from agency to agency)
  • Include applicable documentation such as:

a. Copy of Articles of Amendment / Conversion with the State of Incorporation.

b. A printout of the change made with the Secretary of State(s) doing business in (expedites process), if applicable.

For entity change only (no change in FEIN):

Note: Some states require current account to be closed and a new account to be opened

  • Agency status form change OR new application (for agencies requiring a new account)
  • Account closure form required with some agencies
  • Include applicable documentation such as:

a. Copy of Articles of Amendment / Conversion with the State of Incorporation.

b. A printout of the change made with the Secretary of State(s) doing business in (expedites process), if applicable.

c. IRS letter (C147) indicating no change to the FEIN. (Send notice to IRS by letter with name change and request the C147 at the same time, or call the IRS to request it if you have already submitted your name change to them. Be sure to include a copy of the Articles of Amendment to the IRS).

For change of name / entity and new FEIN:

  • New application required for most agencies
  • Close existing account (if new application required)
  • Include applicable documentation such as:

a. Copy of Articles of Amendment / Conversion with the State of Incorporation.

b. A printout of the change made with the Secretary of State(s) doing business in (expedites process).

Remember, you must notify each agency separately:

  • Once for the State Workforce Agency / Department of Labor (for your unemployment tax account/s)
  • Once for the State Department of Revenue (for your income tax withholding accounts)
  • You will have to repeat this for each state in which you have operations
  • Proactive tracking and agency follow-up is highly recommended

Click which includes specific details of each state’s requirements. The first four pages apply to state income tax, and the last four pages to state unemployment tax. It should be used as a starting point to which you add your own notes and update as you use it. These details and form numbers/names are subject to change as agencies update their procedures, and all information should be re-verified with the agencies prior to submitting anything to them.

Related Resources:

Disclaimer: This article is general in nature and is not intended to replace the guidance of an employment tax expert and/or legal professional with regards to an appropriate course of action in your particular circumstances. Please consult with a professional for appropriate advice in your case. Pursuant to IRS “Circular 230” rules, any information included herewithin is not intended or written to be used for the purpose of avoiding penalties under the federal Internal Revenue Code.