As noted by Justin Vartanian and Maurice Gilbert in the September 6–19 issue of the New Hampshire Business Review, the New Hampshire Department of Revenue Administration (DRA) recently issued a favorable tax declaratory ruling regarding a proposed S corporation conversion to an LLC. The DRA’s detailed ruling included analysis of New Hampshire’s Business Profits Tax, Business Enterprise Tax, Real Estate Transfer Tax, and Interest & Dividends Tax.
In light of the ruling, and because of the complexities and nuances involved, the authors offer the following advice:
Because the ruling is conditioned upon the conversion being recognized federally as a tax-free reorganization, it is important to carefully review, plan, document and execute the conversion transaction. This requires a team effort from your accountant and your business attorney, who will prepare a plan of conversion and the formation documents for the converted LLC.
Don’t forget, the DRA’s ruling cannot be relied upon definitively by any other taxpayer, so in order to ensure your conversion will be treated similarly, close adherence to the DRA’s ruling and relevant IRS rulings is strongly recommended.
The ruling is In Re ABC, Inc., 123, LLC, and an Individual, Document #10391 (July 26, 2013).