New IRS Requirements for EIN Applications Go Into Effect May 13, 2019

April 16, 2019
As we have all been scrambling to get our taxes completed this month, a new IRS requirement may have been overlooked that goes into effect on May 13, 2019. This new requirement impacts the process by which any new entity (including sole proprietorships, partnerships, limited liability companies, trusts, and corporations) can apply for an Employer Identification Number (EIN), the 9-digit identification number assigned to entities for tax filing and reporting purposes. The new requirements will impact all of our clients engaged in forming new entities, in particular, clients who utilize holding company structures and those who participate in joint ventures.

For any EIN application, whether completed through the IRS online EIN application or in hard copy on a Form SS-4, the applying entity has to name a “responsible party.” Previously, under the old requirements, the responsible party could be either an individual or another entity. The new requirement specifies that for purposes of applying for an EIN, the responsible party must be an individual with his or her own tax ID number; entities can no longer serve as responsible parties. This will be of particular note to our clients who rely on holding companies to form and own multiple subsidiaries, where the parent company has historically served as the “responsible party” on the EIN applications of its subsidiaries. Similarly, for our clients who participate in joint ventures, whereas previously the “responsible party” would often be the entity constituting the majority member of the JV, now the JV must name an individual as the “responsible party.”

IRS Form SS-4 contains detailed instructions on who should be named as the “responsible party” for an EIN application, but generally the responsible party is the individual who ultimately owns or controls the entity or who exercises ultimate effective control over the entity. This can be a direct majority owner or the ultimate majority owner of a controlling parent company applying on behalf of a subsidiary. It can also include a highest-ranking officer, general partner, or manager of the applying entity. In cases where more than one individual meets the definition of “responsible party,” the entity may decide which individual should be the responsible party.

If you have questions, please contact Kathryn L. Hickey – Practice Group Chair of PilieroMazza’s Business & Corporate Law Group. Ms. Hickey can be reached at khickey@pilieromazza.com or at 202.857.1000.

SBA Seeks Comments on Reducing Unnecessary Regulatory Burden

August 15, 2017
On August 15, 2017, the U.S. Small Business Administration (“SBA”) released a request for information (“RFI”) seeking input from the public as to which SBA regulations should be repealed, replaced, or modified because they are obsolete, unnecessary, ineffective, or burdensome. The RFI is prompted by various Executive Orders seeking to reduce the number and costs of federal regulations, including Executive Order 13771, signed by President Trump on January 30, 2017, requiring agencies to identify two existing regulations that the agency may cancel for every new regulation it proposes to implement, and Executive Order 13777, in which President Trump ordered agencies to evaluate existing regulations to determine ones to be repealed, replaced, or modified.

Through the RFI, SBA seeks comments from the public as to SBA regulations that parties “believe impose unnecessary burdens or costs that exceed their benefits, eliminate jobs or inhibit job creation, or are ineffective or outdated.” To guide such public input, the RFI includes the following list of questions for commenters:
  1. Are there SBA regulations that have become unnecessary or ineffective and, if so, what are they?
  2. Are there SBA regulations that can be repealed without impairing SBA’s regulatory programs and, if so, what are they?
  3. Are there SBA regulations that have become outdated and, if so, how can they be modernized to better accomplish their regulatory objectives?
  4. Are there SBA regulations that are still necessary, but which have not operated as well as expected such that a modified approach is justified, and what is that approach?
  5. Are there SBA regulations or regulatory processes that are unnecessarily complicated or could be streamlined to achieve regulatory objectives more efficiently?
  6. Are there any technological developments that can be leveraged to modify, streamline, or repeal any existing SBA regulatory requirements?
  7. Are there any SBA regulations that are not tailored to impose the least burden on the public?
  8. How can SBA best obtain and consider accurate, objective data about the costs, burdens, and benefits of existing SBA regulations?
  9. Are there any specific suggestions of ways SBA can better achieve its regulatory objectives?
In submitting comments, and responding to these questions, SBA asks the public to keep the following in mind: “One of SBA’s primary objectives in carrying out these efforts is to continue to promote economic growth, innovation, and job creation in the small business sector, and to ensure that disaster survivors have the clear policy and procedural guidance they need to quickly obtain financial assistance to rebuild their lives.”  
 
We would like to hear your views and we encourage all interested parties to submit comments.  Comments are due to SBA by October 16, 2017. If you would like our assistance preparing comments, or if you would like to share your views, please contact John Shoraka, Megan Connor, or Katie Flood at ajshoraka@pilieromazza.com, mconnor@pilieromazza.com, or kflood@pilieromazza.com
 

Client Alert - Overview of Select Provisions on the SBA's Final Rule of Limitations on Subcontracting

June 10, 2016
On May 31, 2016, SBA released its long anticipated final rule on the limitations on subcontracting. The final rule becomes...

Comments on Proposed Rule Regarding Small Business Subcontracting Improvements

August 7, 2015
After the recent small business subcontracting plan changes were implemented by the U.S. Small Business Administration (“SBA”) in its final rule at 78 Fed. Reg. 42391, dated July 16, 2013, many of our clients have asked us how the SBA’s new rules should be interpreted in light of the existing FAR small business subcontracting requirements. We believe that the FAR Councils are taking the right steps to harmonize the SBA’s requirements with the obligations the FAR imposes. However, we believe that there are several aspects of the proposed rule that could be amended to provide greater clarity and less burdensome outcomes for contractors administering subcontracting plans, particularly contractors that maintain commercial plans.

Analysis of the Fair Pay and Safe Workplaces Proposed Rule

July 2, 2015
On May 28, 2015, the Defense Department, General Services Administration and National Aeronautics and Space Administration announced the Federal Acquisition Regulatory Council’s proposed rule to implement Executive Order 13673 “Fair Pay and Safe Workplaces” (EO), dated July 31, 2014. Together with the proposed Federal Acquisition Regulation (FAR), the Department of Labor (DOL) published proposed guidance (collectively, “Proposed Rules”), defining many terms set forth in the EO and beginning to establish a framework of expectations. PilieroMazza addressed the requirements of the EO and identified prospective concerns in its Legal Advisor article "The Impact of the Fair Pay and Safe Workplaces Executive Order on Contract Procurement." While some of questions about the EO and its implementation have been answered in the Proposed FAR and DOL regulations, many of the concerns still remain. The deadline to submit comments has been extended to August 11, 2015.
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