Below we review some of the topics that all business buyers and sellers need to consider before they sign that final purchase agreement. Potential Successor Liability Many states, including Nebraska, have laws that can impose successor liability on the buyer of a business for sales, withholding, or income taxes that were not paid by the previous business owner. However, buyers often have the ability to request a tax clearance certificate from a state, which will assure the buyer that no unpaid taxes are due. Alternatively, if unpaid taxes are due, the state will provide that information to the buyer so the purchase price can be allocated accordingly. Buyers should determine the states in which a business may have potential tax liabilities and then consider whether a tax clearance certificate should be requested from those states. This procedure can also help sellers, as they remain liable for unpaid taxes incurred during their ownership. Confirmation of any taxes owed—or that no taxes are due—can help bring finality for sellers. Transfer of Incentive Projects Many businesses have incentive projects from state and local governments based on their investment and employment in a state. For example, Nebraska offered incentives from 2005-2020 under the Nebraska Advantage Act and now offers incentives under the Imagine Nebraska Act, as well as a variety of other programs. We’ve discussed some of these programs in more detail in previous articles. Many incentive programs can be carried on by the buyer of a company and allow the buyer access to incentives for the buyer’s continuation of the business activities in a state. However, those programs often have specific rules that must be followed for the project to be properly transferred to a buyer. In addition, both buyers and sellers need to be aware which of them may have potential liability for repaying incentives should ongoing requirements of an existing incentive project not be met. Unplanned Nexus The concept of “nexus” refers to a state’s legal ability to impose tax on a company or individual. If a company or individual has “nexus” in a state, that means that such state can tax the company or individual. Taxable nexus can be acquired in multiple ways, but the most typical is having physical presence in a state. Physical presence for companies means that the company has property or employees in that state. Taxable nexus can also, through recent court decisions, be acquired by having an economic presence in a state. One of the greatest changes in business over the past few years has been the rise of remote working arrangements. For many types of employees, companies are no longer limited to hiring people in their geographic footprint. They can hire anywhere and have those employees work remotely. But, this hiring arrangement may mean that such company now has taxable nexus in the state where the remote employee is located— based on the employee’s physical presence in that state. So, buyers should be sure they understand the locations where all employees work— including the seller’s offices and remote employees—and the implications that the locations of those offices will have on state and local taxes. The alternative is an unexpected state tax liability. Nebraska’s Special Capital Gains Exclusion This factor is important to business sales in Nebraska by Nebraska residents. Nebraska’s special capital gains exclusion lets owners of many Nebraska-based corporations avoid Nebraska income tax 11 nebraska society of cpas W W W . N E S C P A . O R G
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