The Tax Cuts and Jobs Act of 2017 added Code Section 4960 to the Internal Revenue Code, which is intended to tax excessive compensation of executives providing services to tax-exempt entities. The limitations apply to tax years beginning on or after January 1, 2018.
Articles Discussing Executive Compensation.
On March 11, 2021, President Joe Biden signed the American Rescue Plan Act of 2021 (ARPA). The ARPA is the latest installment of COVID-19–related stimulus packages passed by Congress in the last 12 months. Similar to the Families First Coronavirus Response Act (FFCRA) and the Coronavirus Aid, Relief, and Economic
The American Rescue Plan Act of 2021 expands upon some popular tax credit provisions and makes other changes to a key tax provision regarding compensation deduction limitations. These changes are summarized below.
The 2021 executive compensation season will be more challenging than usual for most companies due to the financial and economic consequences of the COVID-19 pandemic. To meet these challenges, companies should be aware of several key issues relating to executive compensation as they design their 2021 executive compensation programs.
Employers that have experienced significant disruptions to their executive compensation programs as a result of the COVID-19 pandemic should consider our top 10 cost saving/incentivization strategies as they begin to reopen.
The IRS issued proposed regulations under Section 4960 of the Internal Revenue Code of 1986, as amended (the “Code”), which was added as part of the Tax Cuts and Jobs Act. The proposed regulations published in the Federal Register on June 11, 2020, largely follow the IRS interim guidance under
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.
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.
On December 2, 2017, the U.S. Senate passed its version of the Tax Cuts and Jobs Act (the “Senate Bill”).
Sue says there are three main options for this model: stock options, phantom stock and restricted stock. Each comes with its own advantages.
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.
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.
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.
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).
The Internal Revenue Service recently published final regulations under Section 83 of the tax code.