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Total Articles: 17

Determining the Taxability of Employer-Provided Executive Health Examination Programs

Employers historically have maintained executive health examination programs to provide a convenient and efficient means for executives to visit several doctors in one visit, including for vision and annual health checkups. Generally, these programs are covered under employers’ self-insured health policies. This article discusses the taxability of employer-provided executive health examination programs and the associated employment tax withholding and reporting requirements.

Severance Agreements for Executives at Tax-Exempt Organizations: Beware Unintended Consequences of Excise Taxes, Early Inclusion, and Intermediate Sanctions

When it’s time for tax-exempt organizations such as colleges/universities, museums, and hospital systems to part ways with their senior executives, these institutions are most often considering how to best transition these executives off into the sunset rather than a morass of special tax rules (I will mention Internal Revenue Code citations just once for reference) under the unholy quartet of IRC Sections 409A, 457(f), 4958, and new(ish) Section 4960.

IRS Notice 2019-9 Provides Interim Guidance for Tax-Exempt Organizations Paying Excess Executive Compensation

The IRS has released a technical interim guidance on Section 4960, which was added to the Internal Revenue Code of 1986, as amended, as part of the Tax Cuts and Jobs Act. Very generally, Section 4960 imposes an excise tax in an amount equal to the corporate tax rate (currently, 21 percent) on that portion of a covered employee’s pay that exceeds $1 million or is treated as an excess parachute payment (as explained below). The tax is imposed upon the applicable tax-exempt organization and its related organizations and became effective for tax years beginning after December 31, 2017. For a high-level summary of the law change, please see our earlier blog post.

Don’t Forget About Section 4960 Compliance

Section 4960 of the Internal Revenue Code of 1986 (IRC), as amended, imposes an excise tax on compensation of certain highly compensated employees of tax-exempt organizations. In an apparent attempt to level the playing field for tax-exempt and public corporations, Section 4960 imposes an excise tax of 21 percent on compensation paid to a covered employee in excess of $1 million and on any excess parachute payments paid to a covered employee. For purposes of Section 4960, any remuneration paid to a covered employee by a related entity is included in the calculation of the covered employee’s total remuneration for the year.

Tax-Exempts and Public Companies Beware – Major Changes to Executive Compensation Tax Rules Loom

On December 2, 2017, the U.S. Senate passed its version of the Tax Cuts and Jobs Act (the “Senate Bill”).

Code Section 409A and You: The IRS Issues New Guidance

Earlier this summer, the Internal Revenue Service (IRS) issued proposed regulations under Sections 409A and 457 of the Internal Revenue Code (the Proposed Regulations) that modify the final regulations issued on April 17, 2007 (the Final Regulations). The Proposed Regulations include new and clarifying provisions that will affect how employers design and operate their nonqualified deferred compensation plans. Primarily, these changes clarify rules relating to (1) income inclusion, (2) exemptions from Section 409A, and (3) opportunities for acceleration and deferral of payments. The following summarizes the more practical changes that affect how employers operate their deferred compensation plans.

Proposed Changes to Section 409A are Welcome (for the Most Part)

The Internal Revenue Service recently issued proposed regulations under Section 409A of the Internal Revenue Code (“Section 409A”) in an effort to clarify and modify parts of the current final regulations (issued in 2007) and proposed income inclusion regulations. For the most part, the proposed regulations are consistent with how most practitioners have been interpreting and applying the final regulations. The proposed regulations do provide some helpful new guidance as well. However, the revisions to the proposed income inclusion regulations limit the ability to make changes to unvested amounts without incurring Section 409A penalties.

(Video) Unique Executive Compensation Issues for Tax Exempt Organizations

In this installment, Sue discusses how exempt organizations are unique when it comes to structuring executive benefit programs. Exempt organizations are subject to 2 additional tax rules that do not apply to for-profit enterprises.

Equity and “Phantom” Equity Based Compensation for LLCs

Due to the popularity of limited liability companies (LLCs) as a form of business entity, we have been approached lately more than ever to structure equity and “phantom” equity based compensation for LLC businesses, including private equity firms and other businesses that embrace an employee ownership culture. Phrases such as “restricted stock”, “stock options” and “stock appreciation rights”, all applicable to corporations, are commonly known. There are, however, equivalent terms applicable to LLCs.

FAQs on the SEC’s Proposed Clawback Rule

On July 1, 2015, the U.S. Securities and Exchange Commission (SEC) proposed a rule directing national securities exchanges and associations to establish listing standards that require public companies to adopt and enforce a written executive compensation clawback policy.

New Compensation Disclosures for Public Companies

The Securities and Exchange Commission (SEC) has adopted a final rule requiring publicly traded corporations to disclose, to the SEC and shareholders, the ratio of CEO compensation to the "median compensation" of the corporation's employees (except the CEO).

New Compensation Disclosures for Public Companies

The Securities and Exchange Commission (SEC) has adopted a final rule requiring publicly traded corporations to disclose, to the SEC and shareholders, the ratio of CEO compensation to the "median compensation" of the corporation's employees (except the CEO).

IRS Begins Section 409A Compliance Initiative

The Internal Revenue Service (IRS) is getting ready to ramp up enforcement of Section 409A of the Internal Revenue Code. The federal agency recently announced the launch of a new project to assess the level of taxpayer compliance with Section 409A—the provision that regulates nonqualified deferred compensation plans. At the American Bar Association’s Section of Taxation meeting last month, an IRS attorney spoke unofficially about the compliance initiative summarizing its key points as follows:

Tax Alert: New Executive Compensation Regulations Clarify Timing of Taxation

The Internal Revenue Service recently published final regulations under Section 83 of the tax code.

FAQ's on FINRA's Broker Compensation Proposal

On March 10, 2014, FINRA filed proposed Rule 2243 with the SEC. The proposed rule would require firms and registered reps to disclose certain financial incentives offered to reps in connection with a change in employment and would require firms to report information concerning the same subject to FINRA. I spoke about the proposed rule this morning at SIFMA's C&L Annual Seminar in Orlando. Following are the most frequently asked questions concerning the proposed Rule.

Financial Reform Package Affects Incentive-Based Compensation.

One of the provisions of the "Dodd-Frank Wall Street Reform and Consumer Protection Act" (the so-called financial reform act) is a requirement that public companies implement a "clawback" policy for their incentive-based compensation. This policy must provide that if the company is required to restate its financial statements because of material noncompliance with any financial reporting requirements under the Securities laws, the company will recover from any current or former executive officer who receives inventive-based compensation (including stock options) during the three-year period preceding the date of the restatement any amount in excess of the amount that would have been paid to the executive under the restated financial statements.

Executive Compensation Rules Under EESA (pdf).

The Emergency Economic Stabilization Act of 2008 includes important requirements with respect to the executive compensation and corporate governance practices of participating financial institutions. The U.S. Department of the Treasury issued additional guidance with respect to these requirements. We have included links in the summary below to the newly issued Treasury guidance.
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