Senate Study Bill 3082 - Introduced SENATE/HOUSE FILE _____ BY (PROPOSED SECRETARY OF STATE BILL) A BILL FOR An Act eliminating requirements providing for the payment of an 1 outstanding tax liability by dissolved business entities as 2 a condition to reinstatement. 3 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 4 TLSB 5345XD (6) 90 da/jh
S.F. _____ H.F. _____ DIVISION I 1 LIMITED LIABILITY COMPANIES 2 Section 1. Section 489.710, subsections 1 and 2, Code 2024, 3 are amended to read as follows: 4 1. A limited liability company administratively dissolved 5 under section 489.708 may apply to the secretary of state 6 for reinstatement at any time after the effective date of 7 dissolution. The application must meet all of the following 8 requirements: 9 a. State the name of the limited liability company 10 at its date of dissolution and the effective date of its 11 administrative dissolution. 12 b. State that the ground or grounds for dissolution either 13 did not exist or have been eliminated. 14 c. If the application is received more than five years 15 after the effective date of the dissolution, state a name that 16 satisfies the requirements of section 489.112 . 17 d. State the federal tax identification number of the 18 limited liability company. 19 2. a. The secretary of state shall refer the federal 20 tax identification number contained in the application for 21 reinstatement to the department of workforce development. 22 The department of workforce development shall report to the 23 secretary of state the tax status of the limited liability 24 company. If the department reports to the secretary of 25 state that a filing delinquency or liability exists against 26 the company, the secretary of state shall not cancel the 27 certificate of dissolution until the filing delinquency or 28 liability is satisfied. 29 b. (1) 2. a. If the secretary of state determines that 30 the application contains the information required by subsection 31 1 , and that a delinquency or liability reported pursuant to 32 paragraph a has been satisfied, and that the information is 33 correct, the secretary of state shall cancel the certificate 34 of dissolution and prepare a certificate of reinstatement 35 -1- LSB 5345XD (6) 90 da/jh 1/ 8
S.F. _____ H.F. _____ that recites the secretary of states determination and the 1 effective date of reinstatement, file the certificate of 2 reinstatement, and deliver a copy to the limited liability 3 company under section 489.119 . 4 (2) b. If the limited liability companys name in 5 subsection 1 , paragraph c , is different from the name in 6 subsection 1 , paragraph a , the certificate of reinstatement 7 shall constitute an amendment to the companys certificate of 8 organization insofar as it pertains to its name. A company 9 shall not relinquish the right to retain its name if the 10 reinstatement is effective within five years of the effective 11 date of the companys dissolution. 12 DIVISION II 13 BUSINESS CORPORATIONS 14 Sec. 2. Section 490.1422, subsections 1 and 2, Code 2024, 15 are amended to read as follows: 16 1. A corporation administratively dissolved under section 17 490.1421 may apply to the secretary of state for reinstatement 18 at any time after the effective date of dissolution. The 19 application must meet all of the following requirements: 20 a. State the name of the corporation at its date of 21 dissolution and the effective date of its administrative 22 dissolution. 23 b. State that the ground or grounds for dissolution either 24 did not exist or have been eliminated. 25 c. If the application is received more than five years after 26 the effective date of dissolution, state a corporate name that 27 satisfies the requirements of section 490.401 . 28 d. State the federal tax identification number of the 29 corporation. 30 2. a. The secretary of state shall refer the federal 31 tax identification number contained in the application for 32 reinstatement to the department of workforce development. The 33 department shall report to the secretary of state the tax 34 status of the corporation. If the department reports to the 35 -2- LSB 5345XD (6) 90 da/jh 2/ 8
S.F. _____ H.F. _____ secretary of state that a filing delinquency or liability 1 exists against the corporation, the secretary of state shall 2 not cancel the certificate of dissolution until the filing 3 delinquency or liability is satisfied. 4 b. (1) 2. a. If the secretary of state determines that 5 the application contains the information required by subsection 6 1 , and that a delinquency or liability reported pursuant to 7 paragraph a has been satisfied, and that the information is 8 correct, the secretary of state shall cancel the certificate 9 of dissolution and prepare a certificate of reinstatement 10 that recites the secretary of states determination and the 11 effective date of reinstatement, file the certificate of 12 reinstatement, and deliver a copy to the corporation under 13 section 490.504 . 14 (2) b. If the corporate name in subsection 1 , paragraph 15 c , is different from the corporate name in subsection 16 1 , paragraph a , the certificate of reinstatement shall 17 constitute an amendment to the articles of incorporation 18 insofar as it pertains to the corporate name. A corporation 19 shall not relinquish the right to retain its corporate name 20 if the reinstatement is effective within five years of the 21 effective date of the corporations dissolution. 22 DIVISION III 23 CLOSED COOPERATIVES 24 Sec. 3. Section 501.813, subsections 1 and 2, Code 2024, are 25 amended to read as follows: 26 1. A cooperative administratively dissolved under section 27 501.812 may apply to the secretary of state for reinstatement 28 at any time after the effective date of dissolution. The 29 application must meet all of the following requirements: 30 a. Recite the name of the cooperative at its date of 31 dissolution and the effective date of its administrative 32 dissolution. 33 b. State that the ground or grounds for dissolution have 34 been eliminated. 35 -3- LSB 5345XD (6) 90 da/jh 3/ 8
S.F. _____ H.F. _____ c. If the application is received more than five years after 1 the effective date of the cooperatives dissolution, state a 2 name that satisfies the requirements of section 501.104 . 3 d. State the federal tax identification number of the 4 cooperative. 5 2. a. The secretary of state shall refer the federal 6 tax identification number contained in the application for 7 reinstatement to the department of workforce development. 8 The department of workforce development shall report to the 9 secretary of state the tax status of the cooperative. If the 10 department reports to the secretary of state that a filing 11 delinquency or liability exists against the cooperative, 12 the secretary of state shall not cancel the certificate of 13 dissolution until the filing delinquency or liability is 14 satisfied. 15 b. (1) 2. a. If the secretary of state determines that 16 the application contains the information required by subsection 17 1 , and that a delinquency or liability reported pursuant to 18 paragraph a has been satisfied, and that the information is 19 correct, the secretary of state shall cancel the certificate 20 of dissolution and prepare a certificate of reinstatement 21 that recites the secretary of states determination and the 22 effective date of reinstatement, file the document, and deliver 23 a copy to the cooperative under section 501.106 . 24 (2) b. If the name of the cooperative as provided in 25 subsection 1 , paragraph c , is different than the name in 26 subsection 1 , paragraph a , the certificate of reinstatement 27 shall constitute an amendment to the articles of association 28 insofar as it pertains to the name. A cooperative shall not 29 relinquish the right to retain its name if the reinstatement 30 is effective within five years of the effective date of the 31 cooperatives dissolution. 32 DIVISION IV 33 NONPROFIT COOPERATIVES 34 Sec. 4. Section 504.1423, subsections 1 and 2, Code 2024, 35 -4- LSB 5345XD (6) 90 da/jh 4/ 8
S.F. _____ H.F. _____ are amended to read as follows: 1 1. A corporation administratively dissolved under section 2 504.1422 may apply to the secretary of state for reinstatement 3 at any time after the effective date of dissolution. The 4 application must state all of the following: 5 a. The name of the corporation and the effective date of its 6 administrative dissolution. 7 b. That the ground or grounds for dissolution either did not 8 exist or have been eliminated. 9 c. If the application is received more than five years after 10 the effective date of dissolution, state the corporations name 11 satisfies the requirements of section 504.401 . 12 d. The federal tax identification number of the corporation. 13 2. a. The secretary of state shall refer the federal 14 tax identification number contained in the application for 15 reinstatement to the department of workforce development. 16 The department of workforce development shall report to the 17 secretary of state the tax status of the corporation. If the 18 department reports to the secretary of state that a filing 19 delinquency or liability exists against the corporation, 20 the secretary of state shall not cancel the certificate of 21 dissolution until the filing delinquency or liability is 22 satisfied. 23 b. (1) 2. a. If the secretary of state determines 24 that the application contains the information required by 25 subsection 1 , that a delinquency or liability reported pursuant 26 to paragraph a has been satisfied, and that all of the 27 application information is correct, the secretary of state 28 shall cancel the certificate of dissolution and prepare a 29 certificate of reinstatement reciting that determination and 30 the effective date of reinstatement, file the document, and 31 deliver a copy to the corporation under section 504.504 . 32 (2) b. If the corporate name in subsection 1 , paragraph 33 c , is different from the corporate name in subsection 34 1 , paragraph a , the certificate of reinstatement shall 35 -5- LSB 5345XD (6) 90 da/jh 5/ 8
S.F. _____ H.F. _____ constitute an amendment to the articles of incorporation 1 insofar as it pertains to the corporate name. A corporation 2 shall not relinquish the right to retain its corporate name 3 if the reinstatement is effective within five years of the 4 effective date of the corporations dissolution. 5 EXPLANATION 6 The inclusion of this explanation does not constitute agreement with 7 the explanations substance by the members of the general assembly. 8 BACKGROUND (TREATMENT OF BUSINESS ENTITIES). A business 9 entity may be organized on a profit, nonprofit, or cooperative 10 basis. This bill provides for each type of business entity, 11 including a limited liability company and business corporation 12 organized on a profit basis for the benefit of its investors 13 (members or shareholders), a closed cooperative (closed coop) 14 organized for the benefit of its investor-patrons (members), 15 and a nonprofit corporation organized under principles other 16 than investor benefit (members). Each of these business 17 entities is governed under its own Code chapter and a specific 18 form of organic document (e.g., articles of incorporation or 19 operating agreement) that sets forth its powers and duties. 20 These powers and duties include the rights and obligations 21 of its interest holders (e.g., exercising voting power) and 22 management (e.g., a board of directors or officers), and the 23 use or distribution of its assets including earnings with 24 related tax consequences. The business entity exercises 25 its powers and duties under the general oversight of the 26 secretary of state (secretary). The bill addresses statutory 27 requirements for the reinstatement of a dissolved business 28 entity. 29 DISSOLUTION OF A BUSINESS ENTITY. Each Code chapter 30 governing a business entity specifies how it may be dissolved 31 and its activities and affairs are wound up (e.g., its assets 32 liquidated). For dissolution procedures governing each type of 33 covered business entity, see Code chapter 489, subchapter VII, 34 for limited liability companies; Code chapter 490, subchapter 35 -6- LSB 5345XD (6) 90 da/jh 6/ 8
S.F. _____ H.F. _____ XIV, for business corporations; Code chapter 501, subchapter 1 VIII, for closed cooperatives; and Code chapter 504, subchapter 2 XIV, for nonprofit corporations. Generally, a dissolution may 3 be initiated by the business entity on a voluntary basis (with 4 the consent of its interest holders) or on an involuntarily 5 basis pursuant to a legal action for administrative dissolution 6 commenced by the secretary. Administrative dissolution is 7 the outcome caused by a business entity failing to comply 8 with a statutory duty (e.g., a failure to maintain a place of 9 business or be represented by a registered agent for purpose 10 of receiving service of process). Once the secretary issues 11 a certificate of dissolution, the subject business entity 12 can no longer do business in the state other than winding 13 up its affairs. The grounds for administrative dissolution 14 may be intentional or unintentional (e.g., the inadvertent 15 failure of an officer of the business entity to file a biennial 16 report with the secretary). Several escape procedures allow a 17 business entity to avoid dissolution. First, the secretary of 18 state is required to notify the business entity of its pending 19 administrative dissolution to allow the business entity to 20 cure the violation. Second, a business entity that has been 21 issued a certificate of dissolution may apply to the secretary 22 of state to cancel the certificate and be reinstated. If the 23 secretary approves the application, the secretary issues a 24 certificate of reinstatement. The effect of the cancellation 25 and reinstatement is to retroactively place the business entity 26 in the same position it would have been in if there were no 27 dissolution, subject to certain limitations (e.g., restrictions 28 on the right of the business entity to regain its name if the 29 application was not timely filed). 30 BILLS PROVISIONS (TAX STATUS NO LONGER REQUIRED AS A 31 CONDITION FOR REINSTATEMENT). The bill eliminates provisions 32 that require any of these covered business entities to include 33 their federal tax identification number (tax ID number) in 34 its application for administrative reinstatement. Secondly, 35 -7- LSB 5345XD (6) 90 da/jh 7/ 8
S.F. _____ H.F. _____ the bill eliminates a requirement that the secretary refer 1 the applicants tax ID number to the department of workforce 2 development (department) and that the department report to the 3 secretary the applicants tax status. The department (see 4 Code chapter 84A) is primarily responsible for administering 5 laws relating to unemployment compensation insurance supported 6 by taxes collected from employers. The provisions to be 7 eliminated currently prohibit the secretary from canceling a 8 certificate of dissolution until the business entity satisfies 9 its tax payment obligation. 10 -8- LSB 5345XD (6) 90 da/jh 8/ 8