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Employer identification numbers ("EINs") are often considered solely from the administrative and employment tax perspectives; however, when a business entity undergoes a restructuring or corporate reorganization, particularly an F reorganization, the impact on the entity's EIN can have unexpected, ancillary consequences. While the IRS has issued a surplus of guidance on EINs generally, the law remains uncertain with respect to the proper treatment and carryover of EINs in certain multi-legal entity F reorganizations-such as when the target becomes a disregarded entity as part of the transaction, but still maintains a regarded obligation to file federal employment and excise tax returns. This article provides a description of the relevant guidance currently issued by the IRS and highlights the items taxpayers should keep in mind when structuring their next reorganization transactions to avoid any EIN-induced pitfalls.
Background
In 2015, more than 243 million returns were filed with the IRS, including approximately 2.2 million C corporation returns and 4.7 million S corporation returns.1 The IRS tracks these returns, and the taxpayers filing them, in its computerized data information systems through the use of EINs.
The Code provides the Secretary with broad authority to assign identifying numbers to any person subject to tax and require information as is necessary or helpful in securing the proper identification of that person.2 Any person required to file a return, statement, or other document must include with the filing an identifying number as required by regulations prescribed by the Secretary.3
There are several types of taxpayer identifying numbers used by the IRS, including social security numbers, individual taxpayer identifiWhen cation numbers, adoption taxpayer identification numbers, and EINs.4 Any person, other than an individual, required to furnish a taxpayer identifying number must specifically request and use an EIN.5 Further, an individual, either U.S. or foreign, who is an employer or engaged in a trade or business as a sole proprietor should use an EIN as required by returns, statements, or other documents and their related instructions.6
A business entity should only have one EIN. As a result, when an entity experiences a change to its corporate structure, it may be required to also change its EIN.7 If the entity is inadvertently assigned a new EIN or fails to accurately report the correct EIN, there...