Pub. 6 2011-2012 Issue 6

www.nebankers.org 16 Extraordinary Service for Extraordinary Members. certificate stating that no amount is due.” This statute goes on to provide that if the purchaser fails to either obtain the clearance letter from the department, or withhold the funds, the purchaser becomes liable for the entire amount up to the amount of the purchase price, valued in money. Thus, the statute imposes this liability up to the value of the entire transaction, not just the cash portion. Under this statute, purchasers of a business or the assets of a business have a statutory obligation tomake sure that any sales tax liability is paid before the seller receives anything from the sale. The penalty for failure to do so is transfer of the liability to the purchaser, up to the amount of the purchase price, valued in money, including any assumption of debt. This obligation must be addressed first, before any liens are considered. While successor liability may exist in connection with any sale of a business, it often comes into play when a creditor is attempting to arrange transfer of the business and the underlying loan to another operator. Successor liability may be a deal killer in these cases. The statute cited above applies only to sales and use taxes, but a similar statute andNebraska case law extends this treat- ment to income taxes and withholding. [See Neb. Rev. Stat. § 77-27,110 and Gottsch Feeding Corp. v. State, 261 Neb. 19, 621 N.W.2d 109 (2001).] Corporate Officer Liability Neb. Rev. Stat. § 77-1783.01 provides that any corporate officer or employee who had a duty to collect, account for, or remit any taxes imposed on the corporation is personally liable for any willful failure to cause the corporation to pay the tax. Willful failure to pay the tax can be established if the department shows that the corporate officer or employee knew taxes were due, had funds available, and paid any other creditor. This is a powerful collection tool that is useful if a business that is a corporation is sold or liquidated and there is simply not enough money to go around. The department may be able to establish willful failure to pay taxes by one or more former owners or responsible employees. Once that assess- ment is final and can no longer be appealed, the department may proceed to issue a Demand for Payment and garnish wages, levy bank accounts, or seize and sell property of the individual corporate officer or employee. Protecting the Interests of Nebraskans Often when businesses are struggling financially, those businesses fall behind in paying taxes when due. When that happens, the Nebraska Department of Revenue has many collection tools available to protect the interest of the people of Nebraska. Some of these tools operate separate from the recorded lien process. To avoid surprises, bankers and other creditors need to be aware of these tools and investigate pos- sible tax liabilities when working with debtors. This is especially true if the plan revolves around selling the business to a new operator. Because the successor liability statute can stop the sale in its tracks, creditors need to find out early if sales or use taxes or withholding liabilities exist and howmuch. To receive clearance from the department for the sale to go through, contact the Department of Revenue and include a Power of Attorney appointment (Form33) from the selling business. This form authorizes the department to reveal confidential taxpayer information to the bank or other creditors. Once everyone is aware of all the liabilities and relative rights, the department can work with the bank and other creditors in a joint effort to limit everyone’s loss exposure as much as possible and allow the sale to take place. Z For more information, contact George Kilpatrick, attorney, at the Nebraska Department of Revenue at (402) 471-6024 or george.kilpatrick@ nebraska.gov. You also may visit the Nebraska Department of Revenue website at www.revenue.ne.gov. Q Business Failures — continued experience direction Omaha 402.392.1040 Lincoln 402.473.7600 BKD, LLP has helped 1,200 financial services clients manage change and stay compliant by offering audit and internal audit, tax, regulatory compliance, loan review services and more. Let us help you chart a course to success . Learn more at bkd.com and get the latest industry insights at FinancialReformInsights.com.