Bills › 90th General Assembly
Eliminating requirements providing for the payment of an outstanding tax liability by dissolved business entities as a condition to reinstatement
Topics:Business & economyTaxes
Where it is now
- Done: IntroducedJanuary 17, 2024
- Done: SubcommitteeJanuary 24, 2024
- Done: Senate committeeJanuary 30, 2024
- Done: Passes the SenateFebruary 19, 202447–0
- Done: House committeeMarch 14, 2024
- Done: Passes the HouseApril 8, 202489–0
- Done: To the GovernorApril 18, 2024
- Done: Signed into lawApril 19, 2024
Signed into law What’s a funnel?
What’s in it
AI summary Companies that have been shut down by the state can now apply to start doing business again without providing their federal tax ID number. This change removes the requirement for the Secretary of State to check with the Department of Workforce Development regarding a company's tax status during the reinstatement process. These updates affect corporations, limited liability companies, and cooperatives.1
Read the official explanation
BACKGROUND (TREATMENT OF BUSINESS ENTITIES). A business entity may be organized on a profit, nonprofit, or cooperative basis. This bill provides for each type of business entity, including a limited liability company and business corporation organized on a profit basis for the benefit of its investors (members or shareholders), a closed cooperative (closed coop) organized for the benefit of its investor-patrons (members), and a nonprofit corporation organized under principles other than investor benefit (members). , articles of incorporation or operating agreement) that sets forth its powers and duties., a board of directors or officers), and the use or distribution of its assets including earnings with related tax consequences. The business entity exercises its powers and duties under the general oversight of the secretary of state (secretary). The bill addresses statutory requirements for the reinstatement of a dissolved business entity. DISSOLUTION OF A BUSINESS ENTITY., its assets liquidated). For dissolution procedures governing each type of covered business entity, see Code chapter 489, subchapter VII, for limited liability companies; Code chapter 490, subchapter XIV, for business corporations; Code chapter 501, subchapter VIII, for closed cooperatives; and Code chapter 504, subchapter XIV, for nonprofit corporations. Generally, a dissolution may be initiated by the business entity on a voluntary basis (with the consent of its interest holders) or on an involuntarily basis pursuant to a legal action for administrative dissolution commenced by the secretary., a failure to maintain a place of business or be represented by a registered agent for purpose of receiving service of process). Once the secretary issues a certificate of dissolution, the subject business entity can no longer do business in the state other than winding up its affairs., the inadvertent failure of an officer of the business entity to file a biennial report with the secretary). Several escape procedures allow a business entity to avoid dissolution. First, the secretary of state is required to notify the business entity of its pending administrative dissolution to allow the business entity to cure the violation. Second, a business entity that has been issued a certificate of dissolution may apply to the secretary of state to cancel the certificate and be reinstated. If the secretary approves the application, the secretary issues a certificate of reinstatement., restrictions on the right of the business entity to regain its name if the application was not timely filed). BILL’S PROVISIONS (TAX STATUS NO LONGER REQUIRED AS A CONDITION FOR REINSTATEMENT). The bill eliminates provisions that require any of these covered business entities to include their federal tax identification number (tax ID number) in its application for administrative reinstatement. Secondly, the bill eliminates a requirement that the secretary refer the applicant’s tax ID number to the department of workforce development (department) and that the department report to the secretary the applicant’s tax status. The department (see Code chapter 84A) is primarily responsible for administering laws relating to unemployment compensation insurance supported by taxes collected from employers. The provisions to be eliminated currently prohibit the secretary from canceling a certificate of dissolution until the business entity satisfies its tax payment obligation.
House subcommittee
Named February 21, 2024. On February 28, 2024 it recommended passage. Vote Total: 3-0.
Three legislators hear a bill first and recommend what the committee should do; it’s the best time to weigh in. How to take part
Fiscal note
Can’t be estimated Compare with other bills
AI summary This bill removes the requirement for certain business entities to provide a federal tax identification number when applying to reinstate themselves after being dissolved. The fiscal impact cannot be estimated because the bill may reduce tax debt recovered for the Unemployment Insurance Trust Fund and may require the Iowa Workforce Development to hire more staff to collect outstanding debt. The Secretary of State faces an estimated cost of $2,000 to update its filing system, which will be paid from the Technology Modernization Fund.3
Read the fiscal note
Description
Senate File 2054 eliminates the requirement for an administratively dissolved business entity to submit its federal tax identification number on the application for administrative reinstatement to the Office of the Secretary of State (SOS). The Bill also eliminates the requirement for the SOS to refer the applicant’s federal tax identification number to the Department of Workforce Development (IWD). The Bill eliminates the federal tax identification requirement from the following business entity types:
- Limited liability companies under Iowa Code section 489.710.
- Business corporations under Iowa Code section 490.1422.
- Closed cooperatives under Iowa Code section 501.813.
- Nonprofit cooperatives under Iowa Code section 504.1423.
Background
The SOS may conduct administrative dissolution proceedings for entities that fail to meet statutory requirements found in Iowa Code section 489.708. A business entity that has been subject to administrative dissolution that later seeks reinstatement must currently include its federal tax identification number as part of the application for reinstatement, pursuant to Iowa Code section 489.710. The SOS is then required to refer the tax identification number to the IWD so that the IWD can report to the SOS whether a filing delinquency or liability exists against the entity. If a delinquency or liability exists, the SOS will not cancel the certificate of dissolution until the filing delinquency or liability is resolved by the entity. The workflow for reinstatements is filed online through the SOS’s Fast Track Filing System. Information is automatically sent to the IWD to review and approve or reject based on the corporation’s unemployment insurance tax status.
Over the last 10 years, there have been 1,404 entities that underwent administrative dissolution that did not move for administrative reinstatement. The debt owed by these entities is approximately $8.9 million.
Assumptions
- The estimated tax debt recovered in the last 10 years by the IWD through the administrative reinstatement process was approximately $3.0 million from 1,400 businesses or $300,000 annually.
- The IWD anticipates, but in unable to calculate, additional resources or full-time equivalent (FTE) positions needed to collect outstanding debt without the current administrative reinstatement process.
- The cost to the SOS to remove the IWD from the Fast Track Filing System is estimated at $2,000. Any costs will be paid from the Technology Modernization Fund.
Fiscal Impact
Senate File 2054 may result in a reduction in the amount of current tax debt recovered for the Unemployment Insurance Trust Fund and may require the IWD to hire additional FTE positions to collect outstanding debt; however, the fiscal impact cannot be estimated.
Sources
- Secretary of State
- Iowa Workforce Development
- Final Fiscal Note — Administrative Dissolution of Business Entities, Requirements · April 17, 2024
- Administrative Dissolution of Business Entities, Requirements · February 19, 2024
Iowa Code it changes
Amends§489.710§490.1422§501.813
Cites§504.1423
Lobbying
2 for · 0 against · 4 undecided · Who →
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