will not be recognized by the Iowa Department of Revenue as valid unless it includes all of the following: » The name of the business being purchased or a description of the stock of goods being purchased. » The names of the licensee, retailer, or seller and the prospective purchaser(s). » The tax identification numbers of both the licensee, retailer, or seller and prospective purchaser(s). Entities shall include a federal employer identification number (FEIN). Individuals shall include a Social Security number (SSN) or individual tax identification number (ITIN). » An attestation signed by the licensee, retailer, or seller attesting that no delinquent tax, interest, or penalty of the retailer is unpaid as of the date of the closing of the sale.13 A certified statement has been taken “in good faith” if the immediate successor, in the exercise of due diligence, had no reason to believe a retailer’s statement was false or no reason to question the truth of the retailer’s statement.14 2. Personal Property Taxes: Iowa does not assess or tax personal property. 3. Real Property Taxes: Similar to Nebraska, Iowa law generally treats real property taxes as attaching to the real property. When property is transferred, the buyer takes the property subject to any existing liens.15 CONTRACTUAL PROVISIONS Generally, in an asset purchase, the buyer does not assume the liabilities of the seller as it would in a stock purchase. The stated successor liability rules can be an exception to this general rule relating to taxes owed by the seller. Therefore, buyers often try to minimize the impact of successor liabilities using contractual provisions in the purchase agreement. 1. Due Diligence: While not typically part of the purchase agreement, buyers should undertake sufficient and fulsome due diligence of all tax obligations for any open tax period that could be subject to audit. Often, buyers will require that three or six years of tax returns and/or audits be provided and sometimes even added to the disclosure schedules. 2. Representations: Buyer should ensure that seller’s representations in the purchase agreement contemplate the payment of any delinquent taxes assessed by any taxing authority. If the buyer is thereafter liable for any taxes owed, the buyer would have a cause of action for breach of contract against the seller. 3. Covenants: Seller should also covenant that it shall pay any taxes due and owing upon the closing date of the transaction. Again, if the buyer is thereafter liable for any taxes owed, the buyer would have a cause of action for breach of contract against the seller. 4. Indemnification Clauses: In the successor liability context, the buyer and seller can negotiate to minimize the impact of successor liabilities using indemnification clauses. Indemnification allocates risk of losses between parties through a process of negotiation. More importantly, it provides a process by which the buyer can more easily recover against the seller (as compared to a breach of contract claim). 5. Escrow/Holdback: Buyers with any concerns regarding seller’s taxes should also consider holding back a portion of the purchase price for a period of time to help cover any later discovered tax deficiencies. These escrow periods generally match the survival period of the fundamental representations but can extend further. CONCLUSION Buyers should be aware of the potential tax liabilities that can result from an acquisition, even in an asset purchase. Nebraska and Iowa each provide mechanisms for buyers to mitigate risk, including withholding, tax clearance certificates, and good-faith certified statements. Nonetheless, early due diligence and appropriate contractual protections remain essential tools for managing successor liability exposure. Hannah Fischer Frey is a partner at Baird Holm LLP, focusing on corporate transactions, federal and state tax planning issues, and tax-exempt matters. Fischer Frey has addressed complex partnership and corporate tax issues, including business reorganizations, private equity fund structuring, business succession planning, and tax planning in mergers and acquisitions. She has been closely involved in numerous federal and state tax examinations and audits. Carrie E. Schwab is an associate at the law firm, focusing on general corporate matters as well as tax law and employee compensation and benefits. She assists businesses of all sizes on a variety of matters, including entity formation, corporate governance, general tax strategy and planning, ERISA compliance and employee benefit programs, and equity compensation incentives. Christopher Thorpe was a summer associate for the firm. For more information, call (402) 344-0500 or email hfrey@bairdholm.com or cschwab@bairdholm.com. 1 Neb. Rev. Stat. § 77-2707. 2 See § 77-27,110; Gottsch Feeding Corp. v. State, 261 Neb. 19, 29–30, 621 N.W.2d 109, 117 (2001). 3 See § 77-2707. 4 See In re Estate of Karmazin, 299 Neb. 315, 325 (2018). 5 Iowa Code § 423.33(2). 6 Id. 7 § 452A.65(3). 8 § 423B. 9 § 423A. 10 § 423.33. 11 § 421.28. 12 Id. 13 Iowa Admin. Code § 701-202.12. 14 Id. 15 Iowa Code § 445.30. 19 nescpa.org
RkJQdWJsaXNoZXIy MTg3NDExNQ==