Wachtell Lipton Calls for 409A Relief.

Wachtell Lipton Critical of 409A Tax; Calls for Relief

"At this point, it is clear that the government’s mandate of complete and error-free
documentary compliance by year end (or ever) is unattainable and unnecessary to achieve its original goals. Treasury and the IRS must take action to delay the documentary compliance requirements of Section 409A. In the absence of a delay, the burden on companies would be significantly eased if the application of the 2008 deadline was limited to the executive officers of public companies (i.e., the
Section 16 officers). Moreover, the IRS should announce that good faith efforts to comply with the final regulations, both in form and operation, will be acceptable. America’s corporate resources should be focused on business matters in this critical and uniquely difficult time, without the worry that a vast portion of its workforce will be subject to a punitive and draconian tax on New Year’s Day."

Others Agree

"It is submitted here that these unexpected and changed circumstances may well justify a reconsideration of the current deadline generally - not because the existing deadline did not confer sufficient time, but because things, simply put, have changed. The need to devote significant attention to Section 409A compliance may be inconsistent with the attention that will have to be devoted to the economic crisis. And, notwithstanding the ongoing bail-out efforts, query whether any exacerbation of the current crisis in the coming weeks might make broader relief downright necessary."

Rumor about a Rumor about a Rumor About Further Extension - from XtremeERISA Blog

IRS Announces Guidance Plan for Next Year; Includes Guidance for 409A Corrections.

2009 Guidance Plan

More Info From PPA Blog

CompensationStandardsBlog Notes That Repricing Options Upwards To Comply with 409A Could Trigger Rule 701 Limits

Repricing Options Upwards Could Trigger SEC Rule 701 Limitations

"Presumably, options whose exercise price is increased to avoid being treated as a discounted option under 409A must also be recalculated for purposes of Rule 701 using the higher option exercise price. Would the recalculation be retroactively performed for the period when the initial grant was made or would the value of the amended option be included in Rule 701 numerical analysis as of the date of the amendment?"

409A Valuations of Private Venture-Backed Companies

Valuation Methodology Explained

"In summary, to value the common stock of an early-stage, privately held company, the appraiser can value the company's BEV using traditional valuation methodologies including the cost, market, and income approaches. But then he must allocate the BEV amongst the company's various classes of securities, and although this may appear to be a complex task, it can be accomplished by a competent appraiser following the guidance of the AICPA."