ABA Comment Letter
"Section 409A was enacted in part as a response to the issues identified in the Enron Report; however, section 409A is a broad and complex provision that covers
arrangements that were not the subject of the Enron Report. Inevitably, thousands of taxpayers will violate section 409A through honest errors, and not due to any form of abuse. We believe that the establishment of a permanent correction program would promote the efficient and equitable administration of the tax laws (including voluntary compliance) by permitting self-correction of inadvertent violations of the complex requirements of section 409A. Nothing in the Enron Report or other legislative history precludes such a program."
Wednesday, May 28, 2008
Tuesday, May 27, 2008
Black Box Corp Incurs 409A Costs
Earnings Release
"409A expenses
The Company incurred significant costs as a result of measures taken to address the application of Section 409A of the Internal Revenue Code of 1986, as amended, related to its stock options. Management excludes these expenses and their related tax impact for the purpose of calculating non-GAAP financial measures when it evaluates the continuing operational performance of the Company because these costs are generally non-recurring and cannot be changed or influenced by Management."
"409A expenses
The Company incurred significant costs as a result of measures taken to address the application of Section 409A of the Internal Revenue Code of 1986, as amended, related to its stock options. Management excludes these expenses and their related tax impact for the purpose of calculating non-GAAP financial measures when it evaluates the continuing operational performance of the Company because these costs are generally non-recurring and cannot be changed or influenced by Management."
Tuesday, May 13, 2008
Sen. Clinton Introduces Bill to Amend 409A
Bill Seeks to Cap Deferred Compensation
The Bill
S.2866
Corporate Executive Compensation Accountability and Transparency Act (Introduced in Senate)
SEC. 2. LIMITATION ON ANNUAL AMOUNTS WHICH MAY BE DEFERRED UNDER NONQUALIFIED DEFERRED COMPENSATION ARRANGEMENTS.
(a) In General- Section 409A(a) of the Internal Revenue Code of 1986 (relating to inclusion of gross income under nonqualified deferred compensation plans) is amended--
(1) by striking `and (4)' in subclause (I) of paragraph (1)(A)(i) and inserting `(4), and (5)', and
(2) by adding at the end the following new paragraph:
`(5) ANNUAL LIMITATION ON AGGREGATE DEFERRED AMOUNTS-
`(A) LIMITATION- The requirements of this paragraph are met if the plan provides that the aggregate amount of compensation which is deferred for any taxable year with respect to a participant under the plan may not exceed the applicable dollar amount for the taxable year.
`(B) INCLUSION OF FUTURE EARNINGS- If an amount is includible under paragraph (1) in the gross income of a participant for any taxable year by reason of any failure to meet the requirements of this paragraph, any income (whether actual or notional) for any subsequent taxable year shall be included in gross income under paragraph (1)(A) in such subsequent taxable year to the extent such income--
`(i) is attributable to compensation (or income attributable to such compensation) required to be included in gross income by reason of such failure (including by reason of this subparagraph), and
`(ii) is not subject to a substantial risk of forfeiture and has not been previously included in gross income.
`(C) AGGREGATION RULES- For purposes of this paragraph, all nonqualified deferred compensation plans maintained by all employers treated as a single employer under subsection (d)(6) shall be treated as 1 plan.
`(D) APPLICABLE DOLLAR AMOUNT- For purposes of this paragraph, the term `applicable dollar amount' means, with respect to any participant, $1,000,000.'.
The Bill
S.2866
Corporate Executive Compensation Accountability and Transparency Act (Introduced in Senate)
SEC. 2. LIMITATION ON ANNUAL AMOUNTS WHICH MAY BE DEFERRED UNDER NONQUALIFIED DEFERRED COMPENSATION ARRANGEMENTS.
(a) In General- Section 409A(a) of the Internal Revenue Code of 1986 (relating to inclusion of gross income under nonqualified deferred compensation plans) is amended--
(1) by striking `and (4)' in subclause (I) of paragraph (1)(A)(i) and inserting `(4), and (5)', and
(2) by adding at the end the following new paragraph:
`(5) ANNUAL LIMITATION ON AGGREGATE DEFERRED AMOUNTS-
`(A) LIMITATION- The requirements of this paragraph are met if the plan provides that the aggregate amount of compensation which is deferred for any taxable year with respect to a participant under the plan may not exceed the applicable dollar amount for the taxable year.
`(B) INCLUSION OF FUTURE EARNINGS- If an amount is includible under paragraph (1) in the gross income of a participant for any taxable year by reason of any failure to meet the requirements of this paragraph, any income (whether actual or notional) for any subsequent taxable year shall be included in gross income under paragraph (1)(A) in such subsequent taxable year to the extent such income--
`(i) is attributable to compensation (or income attributable to such compensation) required to be included in gross income by reason of such failure (including by reason of this subparagraph), and
`(ii) is not subject to a substantial risk of forfeiture and has not been previously included in gross income.
`(C) AGGREGATION RULES- For purposes of this paragraph, all nonqualified deferred compensation plans maintained by all employers treated as a single employer under subsection (d)(6) shall be treated as 1 plan.
`(D) APPLICABLE DOLLAR AMOUNT- For purposes of this paragraph, the term `applicable dollar amount' means, with respect to any participant, $1,000,000.'.
Friday, May 9, 2008
Marvell Technology Incurs 409A Penalties
Relates to Options Backdating
From the 10-K: "During the fourth quarter of fiscal 2007, the Internal Revenue Service notified our U.S. subsidiaries that fiscal 2004 through 2006 would be audited and would include an audit of Section 409A and payroll tax issues arising out of the stock option investigation. In fiscal 2007, we accrued $24.2 million of Section 409A liabilities for each of the restated years (including interest and penalties), accrued payroll taxes (including interest and penalties), where applicable. We elected to join and completed the IRS program Announcement 2007-18 and its California equivalent. Through the close of fiscal 2008 we paid $21.8 million for Section 409A liabilities under the available programs, including interest and penalties where applicable. During fiscal 2008, based on development of our IRS payroll tax audit, we accrued an additional penalty of $7.2 million related to the conversion of incentive stock options into nonstatutory stock options due to the mispricing of the original option grant."
The 10-K
Director Resigns
Another Director Resigns
From the 10-K: "During the fourth quarter of fiscal 2007, the Internal Revenue Service notified our U.S. subsidiaries that fiscal 2004 through 2006 would be audited and would include an audit of Section 409A and payroll tax issues arising out of the stock option investigation. In fiscal 2007, we accrued $24.2 million of Section 409A liabilities for each of the restated years (including interest and penalties), accrued payroll taxes (including interest and penalties), where applicable. We elected to join and completed the IRS program Announcement 2007-18 and its California equivalent. Through the close of fiscal 2008 we paid $21.8 million for Section 409A liabilities under the available programs, including interest and penalties where applicable. During fiscal 2008, based on development of our IRS payroll tax audit, we accrued an additional penalty of $7.2 million related to the conversion of incentive stock options into nonstatutory stock options due to the mispricing of the original option grant."
The 10-K
Director Resigns
Another Director Resigns
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