With the summer legislature recesses around the country, there is no state activity to report this month. There are, however, two Federal Developments of note.

Enjoy the rest of your summer it’s racing by as always.
Robert K. Rowell
General Counsel

Federal Legislation
The Internal Revenue Service revised Form SS-4, Application for Employer Identification Number, to clearly identify the applicant’s true owner. Effective January 2010, all mail, fax, phone and electronic EIN applications must disclose the name and taxpayer identification number of the true “responsible party” for the entity requesting an EIN. For an EIN applicant that is publically traded or is registered with the Securities and Exchange Commission, the “responsible party” is the principal officer, general partner, grantor, owner of a disregarded entity, owner or trustor, depending on the business entity of the applicant. For all other entities, the “responsible party” is the person who can control, manage or direct the entity and the disposition of the entity’s funds and assets.

A nominee is an entity with delegated authority to act in name only and can never be the “responsible party” for the Form SS-4 application. The IRS does not accept the use of nominees to obtain EINs. The SS-4 must be signed by an individual with the authority to legally bind the entity; therefore, it cannot be signed by a nominee. Prior to the SS-4 revision, taxpayers obtained EINs using nominee individuals for the EIN application process. Entities that used nominees on their applications should consider updating the information shown on the original application. Third party designees filing online applications must retain a complete copy of the paper Form SS-4, signed by the responsible party, and a signed authorization statement, for each EIN application filed with the IRS.

Using nominees in the EIN application process prevents the IRS from gathering appropriate information on entity ownership. It may also facilitate tax non-compliance by entities and their owners. Clearly identifying an entity’s true owner makes it difficult for taxpayers to conceal their income and assets. The IRS will pursue penalties, injunctions, or other enforcement action to prevent the misuse of EIN applications. For more information go to here.

Secondly, Congresswoman Carolyn D. Maloney (D-NY) is expected to introduce a bill along the lines of Senate Bill 569 requiring business entities to file beneficial ownership information with the Secretary of State of the jurisdiction in which they are organized. I have read through a copy of the bill, but as it hasn’t officially been introduced and assigned a bill number I am unable to provide a link at this time. I will do so when it is available.

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