{"id":14782,"date":"2025-06-30T22:01:20","date_gmt":"2025-06-30T22:01:20","guid":{"rendered":"https:\/\/taxops.com\/?p=14782"},"modified":"2025-06-30T22:01:24","modified_gmt":"2025-06-30T22:01:24","slug":"business-combinations-taxable-non-taxable-transactions","status":"publish","type":"post","link":"https:\/\/taxops.com\/business-combinations-taxable-non-taxable-transactions\/","title":{"rendered":"Business Combinations: Taxable &#038; Non-taxable Transactions"},"content":{"rendered":"\n<div style=\"height:41px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" width=\"1024\" height=\"576\" src=\"data:image\/gif;base64,R0lGODlhAQABAIAAAAAAAP\/\/\/yH5BAEAAAAALAAAAAABAAEAAAIBRAA7\" data-src=\"https:\/\/taxops.com\/wp-content\/uploads\/2025\/06\/Business-combinations-1024x576.png\" alt=\"\" class=\"wp-image-14787 lazyload\" data-srcset=\"https:\/\/taxops.com\/wp-content\/uploads\/2025\/06\/Business-combinations-980x551.png 980w, https:\/\/taxops.com\/wp-content\/uploads\/2025\/06\/Business-combinations-480x270.png 480w\" sizes=\"(min-width: 0px) and (max-width: 480px) 480px, (min-width: 481px) and (max-width: 980px) 980px, (min-width: 981px) 1024px, 100vw\" \/><noscript><img decoding=\"async\" width=\"1024\" height=\"576\" src=\"https:\/\/taxops.com\/wp-content\/uploads\/2025\/06\/Business-combinations-1024x576.png\" alt=\"\" class=\"wp-image-14787 lazyload\" srcset=\"https:\/\/taxops.com\/wp-content\/uploads\/2025\/06\/Business-combinations-980x551.png 980w, https:\/\/taxops.com\/wp-content\/uploads\/2025\/06\/Business-combinations-480x270.png 480w\" sizes=\"(min-width: 0px) and (max-width: 480px) 480px, (min-width: 481px) and (max-width: 980px) 980px, (min-width: 981px) 1024px, 100vw\" \/><\/noscript><\/figure>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p class=\"wp-block-paragraph\"><em><em><em><em><em><em>Business combinations can be structured as either taxable or non-taxable transactions, each with distinct tax and accounting implications<\/em>.<\/em><\/em><\/em><\/em><\/em><\/p>\n<\/blockquote>\n\n\n\n<p class=\"wp-block-paragraph\">By <a href=\"https:\/\/taxops.com\/lindsay-haskell\/\">Lindsay Haskell<\/a> and <a href=\"https:\/\/taxops.com\/lauren-staub-2\/\">Lauren Staub<\/a><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The combination of two or more businesses can be structured as either a taxable or a non-taxable transaction. The choice affects both financial reporting and tax planning.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Whether a transaction is structured as a&nbsp;taxable asset acquisition&nbsp;or a&nbsp;non-taxable stock acquisition&nbsp;determines how the tax bases of assets and liabilities are handled\u2014and whether&nbsp;deferred tax assets (DTA)&nbsp;and&nbsp;deferred tax liabilities (DTL)&nbsp;arise. Further, this distinction drives how temporary differences are recognized and how goodwill and other intangible assets are accounted for under U.S. GAAP.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">In a taxable acquisition, the acquirer purchases the target\u2019s assets and assumes its liabilities. The tax bases of those assets and liabilities are stepped up \u2013 or down &#8212; to their fair market value (FMV). As a result, there is typically no difference between the book and tax bases of the acquired net assets.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">In a non-taxable acquisition, the acquirer purchases the target\u2019s equity interest, such as corporate shares (i.e., a stock acquisition). The target\u2019s historical tax attributes\u2014including the historical tax bases of assets and liabilities, net operating losses (NOLs), and other carryforwards&#8211;carry over to the acquirer. However, the book basis of the acquired assets and liabilities is adjusted to FMV for financial reporting purposes, creating temporary differences.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">In certain cases, a stock acquisition can be treated as an asset acquisition for tax purposes through elections such as&nbsp;IRC Section 338(h)(10).<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>Deferred Taxes in Stock Acquisitions<\/strong><\/h4>\n\n\n\n<p class=\"wp-block-paragraph\">Temporary differences arise when the tax <a><\/a><a>bases<\/a><a href=\"#_msocom_1\">[KN1]<\/a>&nbsp;<a href=\"#_msocom_2\">[LS2]<\/a>&nbsp;<a><\/a><a href=\"#_msocom_3\">[KN3]<\/a>&nbsp; of acquired assets and assumed liabilities are different than the financial reporting basis (FMV). These differences give rise to deferred tax assets (DTA) and deferred tax liabilities (DTL) under ASC 740.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">There are exceptions, however, where deferred taxes are not recognized, which include:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Non-deductible goodwill<\/li>\n\n\n\n<li>Differences between a parent\u2019s book basis in a subsidiary and its tax outside basis in the shares of that subsidiary<\/li>\n<\/ul>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>Non-Deductible Goodwill<\/strong><\/h4>\n\n\n\n<p class=\"wp-block-paragraph\">For any book-tax basis difference related to acquired goodwill, generally, a deferred asset or liability is recognized. However, deferred taxes are not recognized for temporary differences related to goodwill that is not deductible for tax purposes. Therefore, any subsequent book impairments are treated as a permanent difference.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">This exception does not apply to identifiable intangible assets (e.g., patents, licenses, core deposit intangibles, customer lists, trademarks, franchise agreements, noncompete agreements, reacquired rights, or in-process research and development), even if those assets have indefinite useful lives under ASC 350 or amortization is not deductible for tax purposes. For these assets, deferred taxes must be recognized on temporary differences.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">In a stock acquisition, an identifiable intangible asset can have a zero tax basis and a positive book basis (FMV), resulting in taxable temporary differences and corresponding DTLs. Put another way, when there is no tax basis in these assets, the total FMV assigned to an identifiable intangible asset for financial statement purposes represents a taxable temporary difference for which a DTL should be recognized.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">If, however, the identifiable intangible assets are assigned some value for tax purposes (i.e., they have a tax basis greater than zero), any difference between the amount assigned to the identifiable intangible asset for financial reporting purposes and its tax basis is also a temporary difference for which deferred taxes should be recognized.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>Tax-Deductible Goodwill<\/strong><\/h4>\n\n\n\n<p class=\"wp-block-paragraph\"><em>Excess Book Goodwill over Tax-Deductible Goodwill<\/em><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">When book goodwill exceeds tax-deductible goodwill:<\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li>A DTA is recorded for the total tax basis<\/li>\n\n\n\n<li>A DTL is recorded for an equivalent amount, which represents only a portion of the book basis (Component 1 Goodwill)<\/li>\n\n\n\n<li>The excess book basis over tax basis (Component 2 Goodwill) <em>is not<\/em> recorded for deferred taxes and results in permanent differences upon amortization or impairment<\/li>\n<\/ol>\n\n\n\n<p class=\"wp-block-paragraph\"><em>Excess Tax-Deductible Goodwill Over Book Goodwill<\/em><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">When tax-deductible goodwill exceeds book goodwill:<\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li>A DTA is recorded for the tax basis equal to the total book basis (FMV), which represents only a portion of the tax basis, and a DTL is recorded for the total book FMV (Component 1 Goodwill)<\/li>\n\n\n\n<li>The remaining goodwill tax basis exceeding book FMV <em>is<\/em> recorded as a DTA; any future amortization or impairment related to this portion is treated as a temporary difference (Component 2 Goodwill)<\/li>\n<\/ol>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Increases values assigned to acquired net assets and correspondingly decreases book goodwill. Therefore, measuring the deferred tax asset associated with an excess of tax-deductible goodwill over goodwill for financial reporting purposes is an iterative process because both goodwill for financial reporting purposes and the deferred tax asset are established in the same allocation of the fair value of the acquired entity.<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The iterative formula to use is: <\/li>\n<\/ul>\n\n\n\n<figure class=\"wp-block-image aligncenter size-full is-resized\"><img decoding=\"async\" width=\"653\" height=\"70\" src=\"data:image\/gif;base64,R0lGODlhAQABAIAAAAAAAP\/\/\/yH5BAEAAAAALAAAAAABAAEAAAIBRAA7\" data-src=\"https:\/\/taxops.com\/wp-content\/uploads\/2025\/06\/image-1.png\" alt=\"\" class=\"wp-image-14786 lazyload\" style=\"width:513px;height:auto\" data-srcset=\"https:\/\/taxops.com\/wp-content\/uploads\/2025\/06\/image-1.png 653w, https:\/\/taxops.com\/wp-content\/uploads\/2025\/06\/image-1-480x51.png 480w\" sizes=\"(min-width: 0px) and (max-width: 480px) 480px, (min-width: 481px) 653px, 100vw\" \/><noscript><img decoding=\"async\" width=\"653\" height=\"70\" src=\"https:\/\/taxops.com\/wp-content\/uploads\/2025\/06\/image-1.png\" alt=\"\" class=\"wp-image-14786 lazyload\" style=\"width:513px;height:auto\" srcset=\"https:\/\/taxops.com\/wp-content\/uploads\/2025\/06\/image-1.png 653w, https:\/\/taxops.com\/wp-content\/uploads\/2025\/06\/image-1-480x51.png 480w\" sizes=\"(min-width: 0px) and (max-width: 480px) 480px, (min-width: 481px) 653px, 100vw\" \/><\/noscript><\/figure>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p class=\"wp-block-paragraph\">For example, let\u2019s assume a purchase price of $100 million and $90 million in identifiable net assets, excluding goodwill. DTAs are calculated at $5 million due to excess tax-deductible goodwill.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">In this example, net assets equal $90 million plus $5 million DTA for a total of $95 million. Goodwill is calculated as $100 million purchase price, less the DTA of $95 million, for a total of $5 million.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Net assets = $90M + $5M DTA = $95M<\/li>\n\n\n\n<li>Goodwill = $100M \u2013 $95M = $5M<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">The new goodwill amount can affect the temporary difference used to calculate the DTA, requiring the DTA to be recalculated, which changes goodwill again. The loop continues until the values converge.<\/p>\n<\/blockquote>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>Valuation Allowances in Business Combinations<\/strong><\/h4>\n\n\n\n<p class=\"wp-block-paragraph\">Under ASC 805, a valuation allowance established against an <em>acquired<\/em> DTA is recorded as part of the initial acquisition accounting. Importantly, the need for a valuation allowance is part of the acquisition-date measurement of the DTA and is factored into the initial accounting for the business combination. If a valuation allowance is required, the net recognized DTA is reduced, which in turn increases goodwill (or reduces a bargain purchase gain) at the acquisition date.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">However, post-acquisition changes in the <em>acquirer\u2019s <\/em>valuation allowance should not be included as part of the acquisition accounting under ASC 805. Instead, they are governed by the income tax provisions of ASC 740:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>If, as a result of the acquisition, the acquirer determines that previously unrecognized DTA are now realizable (e.g., due to future income expected from the acquiree), the release of the valuation allowance is recognized in the income statement, not as part of goodwill or the bargain purchase gain.<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li>If the change in realizability relates to tax attributes of the acquirer, and not the acquiree, that distinction is critical \u2014 the effect still goes through income tax expense or benefit, not acquisition accounting.<\/li>\n<\/ul>\n\n\n\n<h4 class=\"wp-block-heading\"><strong>The Takeaway<\/strong><\/h4>\n\n\n\n<p class=\"wp-block-paragraph\">Understanding the tax implications of business combinations is key to understanding how to structure, record and tax plan for a transaction. The distinction between&nbsp;taxable (asset) and non-taxable (stock)&nbsp;acquisitions drives how tax bases are measured and the value of DTAs and DTLs to be recorded.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">There are several items to keep in mind:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Asset acquisitions\u00a0reset tax bases to FMV, eliminating temporary differences.<\/li>\n\n\n\n<li>Stock acquisitions\u00a0preserve historical tax attributes, often creating temporary differences between book and tax bases.<\/li>\n\n\n\n<li>Goodwill treatment\u2014especially when tax-deductible goodwill exceeds book goodwill\u2014may require iterative calculations to properly recognize DTAs.<\/li>\n\n\n\n<li>Valuation allowances\u00a0must be assessed at the acquisition date under ASC 805, while post-acquisition changes follow ASC 740.<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">Adherence to these principles supports compliance with ASC 805 and ASC 740 as well as accurate purchase accounting and helps avoid misstatements in deferred tax balances and goodwill. Yes, it\u2019s complicated. That\u2019s why we\u2019re here. Reach out to a Please reach out to a <a href=\"https:\/\/taxops.com\/contact\/\">Tax Advocate<\/a> to discuss accounting for your business combination.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<p class=\"wp-block-paragraph\"><a id=\"_msocom_1\"><\/a><\/p>\n\n\n\n<div style=\"height:50px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<p class=\"wp-block-paragraph\"><em>Disclaimer: This content is for educational purposes only and is not intended, nor should it be relied upon, as legal, tax, accounting or investment advice. You should consult with a competent professional to discuss specifics of your situation and the applicability of the information presented.&nbsp;<\/em><\/p>\n\n\n\n<div style=\"height:57px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<div class=\"wp-block-buttons is-content-justification-center is-layout-flex wp-container-core-buttons-is-layout-fe48e5de wp-block-buttons-is-layout-flex\">\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link wp-element-button\" href=\"https:\/\/taxops.com\/contact\/\">Talk to a Business Tax Advocate<\/a><\/div>\n<\/div>\n\n\n\n<div style=\"height:53px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n\n<h2 class=\"wp-block-heading\">Read more<\/h2>\n\n\n<ul class=\"wp-block-latest-posts__list wp-block-latest-posts\"><li><a class=\"wp-block-latest-posts__post-title\" href=\"https:\/\/taxops.com\/auditor-independence-in-the-age-of-private-equity\/\">Auditor Independence in the Age of Private Equity: What CFOs Need to Know<\/a><\/li>\n<li><a class=\"wp-block-latest-posts__post-title\" href=\"https:\/\/taxops.com\/r-d-credits-for-software-companies\/\">R&amp;D Credits for Software Companies: Scrum Teams, Qualifiers, and Section 174 After OBBBA<\/a><\/li>\n<li><a class=\"wp-block-latest-posts__post-title\" href=\"https:\/\/taxops.com\/section-174-decoupling-what-tax-pros-need-to-know-state-by-state\/\">Section 174 Decoupling: What Tax Pros Need To Know State By State<\/a><\/li>\n<li><a class=\"wp-block-latest-posts__post-title\" href=\"https:\/\/taxops.com\/sean-espy-new-partner\/\">TaxOps Welcomes Sean Espy as Partner, Tax Minimization<\/a><\/li>\n<li><a class=\"wp-block-latest-posts__post-title\" href=\"https:\/\/taxops.com\/state-nexus-demystified-navigating-tax-compliance-after-wayfair-episode-1-2\/\">Your Tax Footprint Is Probably Bigger Than You Think: What Finance Leaders Need to Know About State Nexus<\/a><\/li>\n<\/ul>","protected":false},"excerpt":{"rendered":"<p>Business combinations can be structured as either taxable or non-taxable transactions, each with distinct tax and accounting implications. By Lindsay Haskell and Lauren Staub The combination of two or more businesses can be structured as either a taxable or a non-taxable transaction. The choice affects both financial reporting and tax planning. Whether a transaction is [&hellip;]<\/p>\n","protected":false},"author":3,"featured_media":14787,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"off","_et_pb_old_content":"<!-- wp:spacer {\"height\":\"41px\"} -->\n<div style=\"height:41px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n<!-- \/wp:spacer -->\n\n<!-- wp:image {\"id\":14221,\"sizeSlug\":\"large\",\"linkDestination\":\"none\"} -->\n<figure class=\"wp-block-image size-large\"><img src=\"https:\/\/taxops.com\/wp-content\/uploads\/2025\/01\/2025-Colorado-State-and-Local-Tax-Legislation-1024x576.png\" alt=\"\" class=\"wp-image-14221\"\/><\/figure>\n<!-- \/wp:image -->\n\n<!-- wp:quote -->\n<blockquote class=\"wp-block-quote\"><!-- wp:paragraph {\"align\":\"center\"} -->\n<p class=\"has-text-align-center\"><em>Judy Vorndran, lead partner of state and local tax at TaxOps, testified before the Colorado Senate Finance Committee on January 28, 2025. She addressed SB25-018 and SB25-046, proposed legislation that would create a searchable database and enhance audit confidentiality. Below is a summary of her remarks<\/em>.<\/p>\n<!-- \/wp:paragraph -->\n\n<!-- wp:paragraph {\"align\":\"center\"} -->\n<p class=\"has-text-align-center\"><em>Following testimony and discussion, the Finance Committee unanimously passed both bills. SB25-018 now moves to the Committee on Appropriations while SB25-046, as amended, has been referred to the full Senate and placed on the Senate consent calendar.<\/em> <\/p>\n<!-- \/wp:paragraph -->\n\n<!-- wp:paragraph {\"align\":\"center\"} -->\n<p class=\"has-text-align-center\"><em>\"It was an amazing experience to look in all of their faces and explain why these laws make Colorado more competitive and are good for both government and taxpayers<\/em>,\"<em>  ~ Judy Vorndran <\/em><\/p>\n<!-- \/wp:paragraph --><\/blockquote>\n<!-- \/wp:quote -->\n\n<!-- wp:group {\"layout\":{\"type\":\"constrained\"}} -->\n<div class=\"wp-block-group\"><!-- wp:spacer {\"height\":\"34px\"} -->\n<div style=\"height:34px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n<!-- \/wp:spacer -->\n\n<!-- wp:heading {\"textAlign\":\"center\"} -->\n<h2 class=\"wp-block-heading has-text-align-center\">Testimony on SB25-018, Online Search of Sales and Use Tax, and SB25-046, Local Government Tax Audit Confidentiality Standards<\/h2>\n<!-- \/wp:heading -->\n\n<!-- wp:spacer {\"height\":\"42px\"} -->\n<div style=\"height:42px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n<!-- \/wp:spacer --><\/div>\n<!-- \/wp:group -->\n\n<!-- wp:paragraph -->\n<p>Good afternoon, members of the <a href=\"https:\/\/leg.colorado.gov\/committees\/finance\/2024-regular-session\" target=\"_blank\" rel=\"noopener\" title=\"Senate Finance Committee\">Senate Finance Committee<\/a>. My name is <a href=\"https:\/\/taxops.com\/judith-vorndran\/\" target=\"_blank\" rel=\"noopener\" title=\"Judy Vorndran\">Judy Vorndran<\/a>. I am a partner in the tax specialty firm TaxOps and a member of the &nbsp;Sales and Use Tax Simplification Task Force.<\/p>\n<!-- \/wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>I am here to testify in support of two bills, SB25-018 and SB25-046. A summary of my statement follows.<\/p>\n<!-- \/wp:paragraph -->\n\n<!-- wp:spacer {\"height\":\"43px\"} -->\n<div style=\"height:43px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n<!-- \/wp:spacer -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3 class=\"wp-block-heading\">SB25-018, Online Search of Sales and Use Tax<\/h3>\n<!-- \/wp:heading -->\n\n<!-- wp:paragraph -->\n<p>SB25-018 aims to create a searchable database for sales and use tax licenses and exemption certificates. This bill is crucial for improving transparency and compliance in our tax system.<\/p>\n<!-- \/wp:paragraph -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3 class=\"wp-block-heading\">Key Points<\/h3>\n<!-- \/wp:heading -->\n\n<!-- wp:list -->\n<ul class=\"wp-block-list\"><!-- wp:list-item -->\n<li><strong>Importance of a Searchable Database:<\/strong><\/li>\n<!-- \/wp:list-item -->\n\n<!-- wp:list-item -->\n<li>SB25-018 proposes the creation of a database at the state and department of revenue level, allowing taxpayers to look up licenses and entities.<\/li>\n<!-- \/wp:list-item -->\n\n<!-- wp:list-item -->\n<li><strong>Benefits for Taxpayers:<\/strong><ol><li>Having access to a searchable database would be a significant advantage for taxpayers. It would help them ensure that vendors are properly licensed and collecting the correct tax amounts.<\/li><\/ol><!-- wp:list {\"ordered\":true} -->\n<ol class=\"wp-block-list\"><!-- wp:list-item -->\n<li>This measure would also align Colorado with other states, such as Texas, which already have similar databases in place. These databases have proven to be extremely helpful for taxpayers in those states.<\/li>\n<!-- \/wp:list-item --><\/ol>\n<!-- \/wp:list --><\/li>\n<!-- \/wp:list-item -->\n\n<!-- wp:list-item -->\n<li><strong>Improved Compliance:<\/strong><!-- wp:list {\"ordered\":true} -->\n<ol class=\"wp-block-list\"><!-- wp:list-item -->\n<li>The searchable database would facilitate better compliance with tax laws. Taxpayers would be able to verify the status of vendors and themselves, reducing the risk of errors and ensuring accurate tax collection.<\/li>\n<!-- \/wp:list-item --><\/ol>\n<!-- \/wp:list --><\/li>\n<!-- \/wp:list-item --><\/ul>\n<!-- \/wp:list -->\n\n<!-- wp:paragraph -->\n<p>SB25-018 is a vital step towards enhancing transparency and compliance in Colorado's tax system. I urge the Committee to support this bill and help create a more efficient and taxpayer-friendly environment.<\/p>\n<!-- \/wp:paragraph -->\n\n<!-- wp:spacer {\"height\":\"46px\"} -->\n<div style=\"height:46px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n<!-- \/wp:spacer -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3 class=\"wp-block-heading\">SB25-046, Local Government Tax Audit Confidentiality Standards<\/h3>\n<!-- \/wp:heading -->\n\n<!-- wp:paragraph -->\n<p>SB25-046 addresses the confidentiality standards for local government sales or use tax audits. This bill would both protect taxpayer information and ensure fairer audit practices.<\/p>\n<!-- \/wp:paragraph -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3 class=\"wp-block-heading\">Key Points<\/h3>\n<!-- \/wp:heading -->\n\n<!-- wp:list {\"ordered\":true} -->\n<ol class=\"wp-block-list\"><!-- wp:list-item -->\n<li>Confidentiality Concerns:<ol><li>SB25-046 aims to establish uniform confidentiality standards for local government tax audits. This is important because third-party auditors often conduct these audits, and there are concerns about how taxpayer information is handled and shared.<\/li><\/ol><!-- wp:list {\"ordered\":true} -->\n<ol class=\"wp-block-list\"><!-- wp:list-item -->\n<li>Currently, third-party auditors are not always licensed professionals, and there is no regulation ensuring their confidentiality practices. This raises significant concerns about the protection of sensitive taxpayer information.<\/li>\n<!-- \/wp:list-item --><\/ol>\n<!-- \/wp:list --><\/li>\n<!-- \/wp:list-item -->\n\n<!-- wp:list-item -->\n<li>Issues with Third-Party Auditors:<ol><li>Many home-rule cities do not have captive auditors and rely on third-party auditors who may conduct audits on behalf of multiple jurisdictions. This can lead to inefficiencies and increased taxpayer burdens.<\/li><\/ol><!-- wp:list {\"ordered\":true} -->\n<ol class=\"wp-block-list\"><!-- wp:list-item -->\n<li>There are instances where third-party auditors may target large taxpayers, leading to multiple audits across different cities. This practice is also burdensome and raises concerns about the confidentiality of taxpayer information.<\/li>\n<!-- \/wp:list-item --><\/ol>\n<!-- \/wp:list --><\/li>\n<!-- \/wp:list-item -->\n\n<!-- wp:list-item -->\n<li>Need for Regulation:<ol><li>There is a need for stricter regulation and oversight of third-party auditors to ensure they adhere to uniform confidentiality standards. This includes establishing ethical and fiduciary duties similar to those required of licensed professionals.<\/li><\/ol><!-- wp:list {\"ordered\":true} -->\n<ol class=\"wp-block-list\"><!-- wp:list-item -->\n<li>The bill also highlights the importance of transparency in the contracts between cities and third-party auditors. These contracts should be subject to public scrutiny to ensure accountability.<\/li>\n<!-- \/wp:list-item --><\/ol>\n<!-- \/wp:list --><\/li>\n<!-- \/wp:list-item --><\/ol>\n<!-- \/wp:list -->\n\n<!-- wp:paragraph -->\n<p>SB25-046 is essential for protecting taxpayer information and ensuring fair audit practices. I urge the Finance Committee to support this bill and help create a more transparent and accountable audit process. <\/p>\n<!-- \/wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>I would be happy to answer related questions you may have, and I thank you for the opportunity to weigh in on these important pieces of legislation.<\/p>\n<!-- \/wp:paragraph -->\n\n<!-- wp:spacer {\"height\":\"57px\"} -->\n<div style=\"height:57px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n<!-- \/wp:spacer -->\n\n<!-- wp:buttons {\"layout\":{\"type\":\"flex\",\"justifyContent\":\"center\"}} -->\n<div class=\"wp-block-buttons\"><!-- wp:button -->\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link wp-element-button\" href=\"https:\/\/taxops.com\/contact\/\">Talk to a Business Tax Advocate<\/a><\/div>\n<!-- \/wp:button --><\/div>\n<!-- \/wp:buttons -->\n\n<!-- wp:spacer {\"height\":\"53px\"} -->\n<div style=\"height:53px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n<!-- \/wp:spacer -->\n\n<!-- wp:separator -->\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n<!-- \/wp:separator -->\n\n<!-- wp:heading -->\n<h2 class=\"wp-block-heading\">Read more<\/h2>\n<!-- \/wp:heading -->\n\n<!-- wp:latest-posts \/-->","_et_gb_content_width":"","spt_transcript":"","footnotes":""},"categories":[228,226],"tags":[252,1145,284,12,1144,1158,126,26,265,1135,492,1134,18,19,316,1136,30,810,101,799,605,262,79,267,620,80,712,1138,1137,74],"class_list":["post-14782","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-federal-tax","category-tax-news","tag-accountant","tag-advocate","tag-cfo","tag-colorado","tag-colorado-society-of-cpa","tag-continuous-education","tag-cpa","tag-cpe","tag-finance-professional","tag-iaas","tag-leadership","tag-saas","tag-sales-and-use-tax","tag-sales-tax","tag-salt","tag-software-providers","tag-state-and-local-tax","tag-state-income-tax","tag-state-tax","tag-tax-advisor","tag-tax-automation","tag-tax-planning","tag-tax-preparer","tag-tax-professional","tag-tax-professionals","tag-tax-provider","tag-tax-school","tag-tax-tools","tag-tax-vendors","tag-taxops"],"aioseo_notices":[],"jetpack_featured_media_url":"https:\/\/taxops.com\/wp-content\/uploads\/2025\/06\/Business-combinations.png","_links":{"self":[{"href":"https:\/\/taxops.com\/wp-json\/wp\/v2\/posts\/14782","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/taxops.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/taxops.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/taxops.com\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/taxops.com\/wp-json\/wp\/v2\/comments?post=14782"}],"version-history":[{"count":2,"href":"https:\/\/taxops.com\/wp-json\/wp\/v2\/posts\/14782\/revisions"}],"predecessor-version":[{"id":14788,"href":"https:\/\/taxops.com\/wp-json\/wp\/v2\/posts\/14782\/revisions\/14788"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/taxops.com\/wp-json\/wp\/v2\/media\/14787"}],"wp:attachment":[{"href":"https:\/\/taxops.com\/wp-json\/wp\/v2\/media?parent=14782"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/taxops.com\/wp-json\/wp\/v2\/categories?post=14782"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/taxops.com\/wp-json\/wp\/v2\/tags?post=14782"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}