Wednesday, January 21, 2009

Tax Pros Make Grim Predictions for Companies that Missed 409A Deadline

Companies may need to offer employees cash make-whole bonuses, or face litigation.

"“If I’m an employee who for whatever reason is assessed a penalty because their employer did not meet 409A requirements, about the only remedy at this point — assuming that employer is willing because they might not have responsibility or liability — is to bonus the employee to cover the penalty and income tax from the bonus itself,” said Sonia Agee, a tax attorney at Hoge, Fenton, Jones & Appel Inc. in San Jose."

Wednesday, January 14, 2009

D.C. Insider Believes More Dismay for Executives in 2009

409A Draconian; More Compensation Legislation Coming

"First, Mr. Iwry discussed the near future of executive compensation legislation. After providing the great truism, “it is easier to afflict the comfortable than to comfort the afflicted,” Mr. Iwry explained how it is likely that Congress has yet to finish punishing executives for earning money. While providing no opinion as to whether limiting executive compensation is a laudable goal, Mr. Iwry was simply making the point that it is easier for Congress to hinder the rich through policy changes than it is to make life better for other. Certainly, it is easier to garner support from their constituents for such work. Therefore, despite the recent effectiveness of the Draconian 409A requirements, more is still to come. Ironically, around the time Mr. Iwry was talking , Barney Frank was introducing legislation to further limit executive compensation under the Emergency Economic Stabilization Act."

Monday, January 12, 2009

457A Dismay

Section 457A

From Plan Advisor:

Included in the guidance are answers to (and some examples of ) the following:
What is a nonqualified deferred compensation plan for purposes of § 457A?
What is a substantial risk of forfeiture for purposes of § 457A?
What is a short-term deferral for purposes of § 457A (a § 457A short-term deferral)?
To which types of service providers does § 457A apply?
What is a nonqualified entity for purposes of § 457A?
How is it determined whether an entity is a foreign corporation or a partnership for purposes of determining whether an entity is a nonqualified entity under § 457A?
How is it determined whether substantially all of a foreign corporation’s income is subject to a comprehensive foreign income tax?
How is it determined whether substantially all of a foreign corporation’s income is effectively connected with the conduct of a trade or business in the United States?
When is a foreign person eligible for the benefits of a comprehensive income tax treaty for purposes of § 457A?
How is it determined whether substantially all of a partnership’s income for a taxable year is allocated to persons other than (A) foreign persons with respect to whom such income is not subject to a comprehensive foreign income tax and (B) organizations which are exempt from tax under Title 26 of the United States Code?
Does § 457A apply to deferred compensation that would have been deductible against income of a foreign corporation which is taxable under § 882 if the compensation had been paid in cash on the date that such compensation ceased to be subject to a substantial risk of forfeiture?
When is the determination made whether an entity is a nonqualified entity?
How is it determined whether a nonqualified deferred compensation plan is a plan of a nonqualified entity?
Does § 457A apply to a right to earnings on deferred compensation that is subject to § 457A?
How is the amount includible in income under § 457A determined?
If an amount is included in gross income under § 457A before the amount is paid to the service provider, is the amount also includible in income when the amount is paid to the service provider?
If an amount is included in income under § 457A before the amount is paid to the service provider, and before such amount is paid the right to the amount is forfeited or otherwise permanently lost, is the service provider entitled to a loss?
When is the deferred amount to which a service provider is entitled treated as not determinable for purposes of § 457A?
When is a deferred amount that is treated as not determinable at the time that the compensation is otherwise includible in gross income under § 457A required to be included in income?
What additional taxes apply to a deferred amount that is treated as not determinable at the time that the compensation is otherwise includible in gross income under § 457A?
What is the effective date of § 457A?
For purposes of applying the effective date, how are the periods of service to which the compensation is attributable determined?
How does § 457A coordinate with § 409A?
What transition rules apply under § 409A with respect to amounts covered by § 457A that are attributable to services performed before January 1, 2009?
What transition rules apply under § 409A with respect to amounts covered by § 457A that are attributable to services performed after December 31, 2008?
What transition rules apply under § 409A with respect to certain back-to-back arrangements attributable to services performed before January 1, 2009?