New plan Tax credit

[Tom]

I had a CPA ask this question (which is really his responsibility to find the answer) about a predecessor employer:

Dentist A sells practice to dentist B.  Dentist B decides to assume sponsorship even though I recommended that not be the case because the financial advisor did not want to complete new plan setup forms, deal with rollovers, etc.  The question: can dentist B take the new plan credits since this is a new plan adoption for his business EIN?  

Another situation like the above except the selling and purchasing dentist formed a partnership for one year.  So the plan adoption went from Dentist A, to Dentists AB partnership, and then to dentists B for 2023.  A CPA is asking about this one also.   With the partnership in the middle, I told him the credit would not be available in my opinion even though the sponsorship for 2023 is under a new business EIN and this a "new" plan for that entity.  But I told him I'd ask.

I'd be surprised if the IRS would give any attention to this credit given the massive PPP and ERC funds given away.

Thank you in advance.

Tom

[Paul I]

One of the requirements for being a new qualified employer plan includes a 3-year look-back - including predecessor employers - that had a plan that covered substantially the same group of employees.  Note that EINs in particular are not a factor.

See  Sec. 45E Small employer pension plan startup costs, subsection (c)(2):

"(2) Requirement for new qualified employer plans. Such term shall not include an employer if, during the 3-taxable year period immediately preceding the 1st taxable year for which the credit under this section is otherwise allowable for a qualified employer plan of the employer, the employer or any member of any controlled group including the employer (or any predecessor of either) established or maintained a qualified employer plan with respect to which contributions were made, or benefits were accrued, for substantially the same employees as are in the qualified employer plan."

I suggest that you let the CPA know that you are not providing advice, and the CPA should decide what is appropriate when preparing their client's tax return.