§ 42-64.5-7. Business reorganizations. (a) If:

(i) An eligible company (hereinafter referred to as the "resulting company") continues, succeeds to or acquires all or substantially all of the business of one or more eligible companies including all of its eligible subsidiaries (each such eligible company, together with its eligible subsidiaries being hereinafter referred to as a "combining company"), whether by consolidation, merger, stock acquisition, asset acquisition, or other method of business combination;

(ii) At least one of the combining companies has previously established a base employment date; and

(iii) The resulting company elects to have this section apply,

then the following rules shall apply for purposes of determining the rate reduction applicable to the resulting company. The resulting company, if in existence prior to the combination, is also a combining company.

(1) The "reference company" shall be the combining company which has a previously established base employment date and which, for its last taxable year ending before the combination, had the highest number of units of new employment; provided, that for purposes of making this determination only, no combining company shall be treated as a small business concern. If more than one of the combining companies having previously established base employment dates had the highest number of units of new employment, the reference company shall be the one of those companies that has the largest total employment before the combination.

(2) The resulting company may claim a rate reduction, and the base employment of the resulting company shall be the base employment of the reference company plus, for each other combining company, the greatest of: (i) if the combining company had a previously established base employment date, its base employment; (ii) the base employment determined as of the base employment date of the reference company; and (iii) its adjusted current employment for its most recently completed taxable year. The initial new employment level of the resulting company shall be the initial new employment level of the reference company plus, for each other combining company, the greater of: (i) the combining company's previously established initial new employment level, if any; and (ii) its adjusted current employment for its most recently completed taxable year.

(3) The resulting company shall be a small business concern only if: (A) the sum of: (i) for each combining company that has a previously established base employment date, the greater of its base employment level or its base employment level determined as of the base employment date of the reference company, plus (ii) for each other combining company, the greater of its base employment level determined as of the base year of the reference company or its total employment immediately prior to the combination is less than one hundred (100); and (B) the resulting company is not a telecommunications company.

(4) If, for the year in which the combination occurs or for either of the next two (2) taxable years thereafter, the resulting company's units of new employment is less than its initial new employment level, the resulting company shall compute and pay applicable taxes as though this chapter did not apply for such year. If the restoration condition described in paragraph (6) is satisfied, the resulting company shall be entitled to a credit or refund equal to the sum of the amount actually paid by the resulting company over:

(i) For the taxable year in which the combination occurred, the tax that would have been paid at the rate last previously determined for the reference company, plus, for each other combining company that had a previously established initial employment level, an amount equal to the product of the combining company's taxable income for its last prior taxable year before the combination (but not less than zero) times the difference in the tax rate established for that combining company over the tax rate established for the reference company; provided, however, that the tax on the resulting company shall not be higher than the tax that would result if this chapter did not apply; and

(ii) For the first or second taxable year beginning after the combination, the tax that would have been paid if using a rate reduction equal to one-quarter of one percent (0.25%) times the number of units of new employment for that taxable year (but not in excess of the resulting company's initial new employment level).

(5) For each taxable year thereafter, the resulting company's rate reduction shall be the same as the reference company's rate reduction before the combination; provided, that if for any such succeeding taxable year the resulting company's number of units of new employment is less than its initial new employment level, the rate reduction provided for in this chapter shall expire permanently.

(6) The restoration condition shall be satisfied if: (i) by the last month of the second taxable year beginning after the combination, the resulting company's units of new employment equals or exceeds its initial new employment level; and (ii) for a twelve (12) month period (which may be selected after the end of such period by the resulting company) that includes the last month of the second taxable year beginning after the combination, the resulting company's adjusted current employment (measured over such twelve (12) month period) equals or exceeds its initial new employment level.

(7) A resulting company may elect to have this subsection apply only if the reference company's number of units of new employment for its last taxable year ending before the date of the combination is not less than the reference company's initial new employment level.

(b) If an eligible company (hereinafter referred to as the "acquiring company") acquires an eligible subsidiary, division, or other unit of another eligible company (hereinafter referred to as the "divesting company") that does not represent all or substantially all of the business of the divesting company and its eligible subsidiaries, the acquiring company and the divesting company may elect to determine any rate reduction applicable to the acquiring company and the divesting company after the date of the acquisition in accordance with the following:

(1) If the acquiring company has previously established a base employment level:

(A) The base employment, if any, of the divesting company shall be the lesser of its base employment before the divestment and its total employment immediately after the divestment; and

(B) If the base employment of the divesting company is reduced by reason of the rule stated in (A), the base employment of the acquiring company shall be increased by an equal amount.

(2) If the acquiring company has not previously established a base employment level, the base employment of the divesting company, if any, shall be unaffected.

(3) The acquiring company and the divesting company shall jointly make the election in such form as the tax administrator may require, and, once filed by either company, the election shall be irrevocable.

History of Section. (P.L. 2004, ch. 333, § 2; P.L. 2004, ch. 396, § 2.)