SSB 3082 (LSB 5345XD (6) 90)

SENATE/HOUSE FILE _____

BY  (PROPOSED SECRETARY OF STATE BILL)

A BILL FOR

An Act eliminating requirements providing for the payment of an outstanding tax liability by dissolved business entities as a condition to reinstatement. 
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

DIVISION I
LIMITED LIABILITY COMPANIES

    Section 1.  Section 489.710, subsections 1 and 2, Code 2024, are amended to read as follows:
   1.  A limited liability company administratively dissolved under section 489.708 may apply to the secretary of state for reinstatement at any time after the effective date of dissolution. The application must meet all of the following requirements:
   a.  State the name of the limited liability company at its date of dissolution and the effective date of its administrative dissolution.
   b.  State that the ground or grounds for dissolution either did not exist or have been eliminated.
   c.  If the application is received more than five years after the effective date of the dissolution, state a name that satisfies the requirements of section 489.112.
   d.  State the federal tax identification number of the limited liability company.
   2.  a.  The secretary of state shall refer the federal tax identification number contained in the application for reinstatement to the department of workforce development. The department of workforce development shall report to the secretary of state the tax status of the limited liability company. If the department reports to the secretary of state that a filing delinquency or liability exists against the company, the secretary of state shall not cancel the certificate of dissolution until the filing delinquency or liability is satisfied.
   b.  (1)  2.  a.  If the secretary of state determines that the application contains the information required by subsection 1, and that a delinquency or liability reported pursuant to paragraph “a” has been satisfied, and that the information is correct, the secretary of state shall cancel the certificate of dissolution and prepare a certificate of reinstatement that recites the secretary of state’s determination and the effective date of reinstatement, file the certificate of reinstatement, and deliver a copy to the limited liability company under section 489.119.
   (2)  b.  If the limited liability company’s name in subsection 1, paragraph “c”, is different from the name in subsection 1, paragraph “a”, the certificate of reinstatement shall constitute an amendment to the company’s certificate of organization insofar as it pertains to its name. A company shall not relinquish the right to retain its name if the reinstatement is effective within five years of the effective date of the company’s dissolution.
DIVISION II
BUSINESS CORPORATIONS

    Sec. 2.  Section 490.1422, subsections 1 and 2, Code 2024, are amended to read as follows:
   1.  A corporation administratively dissolved under section 490.1421 may apply to the secretary of state for reinstatement at any time after the effective date of dissolution. The application must meet all of the following requirements: 
   a.  State the name of the corporation at its date of dissolution and the effective date of its administrative dissolution.
   b.  State that the ground or grounds for dissolution either did not exist or have been eliminated. 
   c.  If the application is received more than five years after the effective date of dissolution, state a corporate name that satisfies the requirements of section 490.401.
   d.  State the federal tax identification number of the corporation. 
   2.  a.  The secretary of state shall refer the federal tax identification number contained in the application for reinstatement to the department of workforce development. The department shall report to the secretary of state the tax status of the corporation. If the department reports to the secretary of state that a filing delinquency or liability exists against the corporation, the secretary of state shall not cancel the certificate of dissolution until the filing delinquency or liability is satisfied.
   b.  (1)  2.  a.  If the secretary of state determines that the application contains the information required by subsection 1, and that a delinquency or liability reported pursuant to paragraph “a” has been satisfied, and that the information is correct, the secretary of state shall cancel the certificate of dissolution and prepare a certificate of reinstatement that recites the secretary of state’s determination and the effective date of reinstatement, file the certificate of reinstatement, and deliver a copy to the corporation under section 490.504. 
   (2)  b.  If the corporate name in subsection 1, paragraph “c”, is different from the corporate name in subsection 1, paragraph “a”, the certificate of reinstatement shall constitute an amendment to the articles of incorporation insofar as it pertains to the corporate name. A corporation shall not relinquish the right to retain its corporate name if the reinstatement is effective within five years of the effective date of the corporation’s dissolution. 
DIVISION III
CLOSED COOPERATIVES

    Sec. 3.  Section 501.813, subsections 1 and 2, Code 2024, are amended to read as follows:
   1.  A cooperative administratively dissolved under section 501.812 may apply to the secretary of state for reinstatement at any time after the effective date of dissolution. The application must meet all of the following requirements:
   a.  Recite the name of the cooperative at its date of dissolution and the effective date of its administrative dissolution.
   b.  State that the ground or grounds for dissolution have been eliminated.
   c.  If the application is received more than five years after the effective date of the cooperative’s dissolution, state a name that satisfies the requirements of section 501.104.
   d.  State the federal tax identification number of the cooperative.
   2.  a.  The secretary of state shall refer the federal tax identification number contained in the application for reinstatement to the department of workforce development. The department of workforce development shall report to the secretary of state the tax status of the cooperative. If the department reports to the secretary of state that a filing delinquency or liability exists against the cooperative, the secretary of state shall not cancel the certificate of dissolution until the filing delinquency or liability is satisfied.
   b.  (1)  2.  a.  If the secretary of state determines that the application contains the information required by subsection 1, and that a delinquency or liability reported pursuant to paragraph “a” has been satisfied, and that the information is correct, the secretary of state shall cancel the certificate of dissolution and prepare a certificate of reinstatement that recites the secretary of state’s determination and the effective date of reinstatement, file the document, and deliver a copy to the cooperative under section 501.106.
   (2)  b.  If the name of the cooperative as provided in subsection 1, paragraph “c”, is different than the name in subsection 1, paragraph “a”, the certificate of reinstatement shall constitute an amendment to the articles of association insofar as it pertains to the name. A cooperative shall not relinquish the right to retain its name if the reinstatement is effective within five years of the effective date of the cooperative’s dissolution.
DIVISION IV
NONPROFIT COOPERATIVES

    Sec. 4.  Section 504.1423, subsections 1 and 2, Code 2024, are amended to read as follows:
   1.  A corporation administratively dissolved under section 504.1422 may apply to the secretary of state for reinstatement at any time after the effective date of dissolution. The application must state all of the following:
   a.  The name of the corporation and the effective date of its administrative dissolution.
   b.  That the ground or grounds for dissolution either did not exist or have been eliminated.
   c.  If the application is received more than five years after the effective date of dissolution, state the corporation’s name satisfies the requirements of section 504.401.
   d.  The federal tax identification number of the corporation.
   2.  a.  The secretary of state shall refer the federal tax identification number contained in the application for reinstatement to the department of workforce development. The department of workforce development shall report to the secretary of state the tax status of the corporation. If the department reports to the secretary of state that a filing delinquency or liability exists against the corporation, the secretary of state shall not cancel the certificate of dissolution until the filing delinquency or liability is satisfied.
   b.  (1)  2.  a.  If the secretary of state determines that the application contains the information required by subsection 1, that a delinquency or liability reported pursuant to paragraph “a” has been satisfied, and that all of the application information is correct, the secretary of state shall cancel the certificate of dissolution and prepare a certificate of reinstatement reciting that determination and the effective date of reinstatement, file the document, and deliver a copy to the corporation under section 504.504.
   (2)  b.  If the corporate name in subsection 1, paragraph “c”, is different from the corporate name in subsection 1, paragraph “a”, the certificate of reinstatement shall constitute an amendment to the articles of incorporation insofar as it pertains to the corporate name. A corporation shall not relinquish the right to retain its corporate name if the reinstatement is effective within five years of the effective date of the corporation’s dissolution.
EXPLANATION
The inclusion of this explanation does not constitute agreement with
the explanation’s substance by the members of the general assembly.
   BACKGROUND (TREATMENT OF BUSINESS ENTITIES). A business entity may be organized on a profit, nonprofit, or cooperative basis. This bill provides for each type of business entity, including a limited liability company and business corporation organized on a profit basis for the benefit of its investors (members or shareholders), a closed cooperative (closed coop) organized for the benefit of its investor-patrons (members), and a nonprofit corporation organized under principles other than investor benefit (members). Each of these business entities is governed under its own Code chapter and a specific form of organic document (e.g., articles of incorporation or operating agreement) that sets forth its powers and duties. These powers and duties include the rights and obligations of its interest holders (e.g., exercising voting power) and management (e.g., a board of directors or officers), and the use or distribution of its assets including earnings with related tax consequences. The business entity exercises its powers and duties under the general oversight of the secretary of state (secretary). The bill addresses statutory requirements for the reinstatement of a dissolved business entity.
   DISSOLUTION OF A BUSINESS ENTITY. Each Code chapter governing a business entity specifies how it may be dissolved and its activities and affairs are wound up (e.g., its assets liquidated). For dissolution procedures governing each type of covered business entity, see Code chapter 489, subchapter VII, for limited liability companies; Code chapter 490, subchapter XIV, for business corporations; Code chapter 501, subchapter VIII, for closed cooperatives; and Code chapter 504, subchapter XIV, for nonprofit corporations. Generally, a dissolution may be initiated by the business entity on a voluntary basis (with the consent of its interest holders) or on an involuntarily basis pursuant to a legal action for administrative dissolution commenced by the secretary. Administrative dissolution is the outcome caused by a business entity failing to comply with a statutory duty (e.g., a failure to maintain a place of business or be represented by a registered agent for purpose of receiving service of process). Once the secretary issues a certificate of dissolution, the subject business entity can no longer do business in the state other than winding up its affairs. The grounds for administrative dissolution may be intentional or unintentional (e.g., the inadvertent failure of an officer of the business entity to file a biennial report with the secretary). Several escape procedures allow a business entity to avoid dissolution. First, the secretary of state is required to notify the business entity of its pending administrative dissolution to allow the business entity to cure the violation. Second, a business entity that has been issued a certificate of dissolution may apply to the secretary of state to cancel the certificate and be reinstated. If the secretary approves the application, the secretary issues a certificate of reinstatement. The effect of the cancellation and reinstatement is to retroactively place the business entity in the same position it would have been in if there were no dissolution, subject to certain limitations (e.g., restrictions on the right of the business entity to regain its name if the application was not timely filed). 
   BILL’S PROVISIONS (TAX STATUS NO LONGER REQUIRED AS A CONDITION FOR REINSTATEMENT). The bill eliminates provisions that require any of these covered business entities to include their federal tax identification number (tax ID number) in its application for administrative reinstatement. Secondly, the bill eliminates a requirement that the secretary refer the applicant’s tax ID number to the department of workforce development (department) and that the department report to the secretary the applicant’s tax status. The department (see Code chapter 84A) is primarily responsible for administering laws relating to unemployment compensation insurance supported by taxes collected from employers. The provisions to be eliminated currently prohibit the secretary from canceling a certificate of dissolution until the business entity satisfies its tax payment obligation.