On March 13, 2024, Utah's governor signed S.B. 14 - Corporate Dissolution Amendments, which is effective beginning this month. Previously, a business entity that had been administratively dissolved for failing to file an annual report only had two years from dissolution in which to file for retroactive reinstatement. Under this new law, entities can apply for reinstatement "under the corporation's same corporate name at any time after the effective date of dissolution," if the corporate name is still available.
This new law is a significant improvement to Utah's corporate regime. Previously, "[t]he termination of the status of an entity as a corporation (for state law purposes) could possibly cause a change in the treatment of the entity for federal income tax purposes, unless the state law action can be treated as irrelevant or is subsequently reversed retroactively." Streng, "IRS Treatment of the State Law Dissolution (and Revitalization) of a Corporation", Real Estate Journal (BNA). In other words, there was at least a question of whether an inadvertent entity dissolution could create irreparable federal income tax problems in Utah simply because retroactive reinstatement after two years was unavailable.
Under the new law, a dissolved entity retains its corporate name for five years and can reinstate under that same name within that five-year timeframe. If the prior name is unavailable, it appears that the same entity can still retroactively reinstate, just under a new name. S.B. 14 will remove legal uncertainty created by inadvertent administrative dissolution of Utah entities.
This new law is a significant improvement to Utah's corporate regime. Previously, "[t]he termination of the status of an entity as a corporation (for state law purposes) could possibly cause a change in the treatment of the entity for federal income tax purposes, unless the state law action can be treated as irrelevant or is subsequently reversed retroactively." Streng, "IRS Treatment of the State Law Dissolution (and Revitalization) of a Corporation", Real Estate Journal (BNA). In other words, there was at least a question of whether an inadvertent entity dissolution could create irreparable federal income tax problems in Utah simply because retroactive reinstatement after two years was unavailable.
Under the new law, a dissolved entity retains its corporate name for five years and can reinstate under that same name within that five-year timeframe. If the prior name is unavailable, it appears that the same entity can still retroactively reinstate, just under a new name. S.B. 14 will remove legal uncertainty created by inadvertent administrative dissolution of Utah entities.
