409A Tax Hits Income Earned Overseas

Article by EisnerAmper Here

Attorney Barker Shares the Roadmap for 409A Corrections

The secret recipe for 409A Corrections - HERE

Professor Lazar Urges Congress to Refrain from Regulating Executive Compensation

Buffalo Law Review Here

IRS Focusing 409A Audits on Do-It-Yourself Valuations

Article from Matt Armanino via AccountingToday.com

3rd Circuit Affirms Strange 409A Case

Plaintiff claimed imposing 409A 6-month-wait was illegal retaliation under the New Jersey Law Against Discrimination (LAD).

TV Show "Suits" Jokes about 409A

Hat Tip to xtreme Erisa blog.

New Regs on Deferred Comp for Non-Profits and Government

457(f) to be updated to in line with 409A

Mintz Levin Article HERE

Pillsbury Article HERE

Stockholder "Say On Pay" Initiatives Blocked by 409A

409A Wreaks New Havoc

"To illustrate the complexity of the interaction between Section 409A and corporate governance, let's say there's a negative say-on-pay vote against XYZ Corp. that appears to result, in part, from the CEO having accrued a $20 million vested SERP benefit. In order to convince shareholders that their concerns have been properly taken into account, the compensation committee negotiates a $5 million reduction to this SERP benefit with the CEO. This reduction, if implemented, would result from disregarding certain types of incentive pay that had counted as eligible compensation when calculating the SERP.

As a practical matter, XYZ's compensation committee intends to make larger annual equity compensation awards in future years based on the company meeting objective and challenging performance goals. The awards would allow the executive an opportunity to make up for the loss of the $5 million through future performance. It would seem that this type of negotiation and restructuring is what Congress had in mind when it enacted the say-on-pay provisions in Dodd-Frank.

Well, not so fast. The CEO could be stuck with a significant tax bill. As noted above, the SERP is nonqualified deferred compensation subject to Section 409A. So, if the later performance share awards are viewed as a substituted payment for the forfeited portion of the CEO's SERP, then there will be a Section 409A violation."

Article from CFO Magazine HERE

Start-Up America Says: 409A Stymies Access to Talent and Gain Sharing

The problem is that many regulations assume — or almost mandate — a traditional workaday paycheck relationship between company and labor. In particular, IRS tax code elements (e.g., contractor/employee tax rules and Section 409A deferred compensation) and SEC regulations (e.g., on secondary markets of shares in private companies and stock-option accounting rules) stymie the kind of flexible access to skilled talent and gain-sharing that high-growth companies need.

Article Here

Private Equity Investors Demanding Strict 409A Compliance and Indemnifications

Article Here

409A Common Errors

Trucker Huss Article via Plansponsor.com

Treasury Counsel Says No Re-Write of 409A Regs - But Willing to Help Taxpayers

"Treasury Department and Internal Revenue Service officials do not intend to rewrite regulations issued under tax code Section 409A but the agencies do want to hear about specific compliance problems that employers and practitioners have encountered, George Bostick, Treasury benefits tax counsel, said May 6."

click Here

409A Nominated for Repeal under "Just Plain Dumb" Initiative

By Donald Kalfen on Boardmember.com:

"Imagine a day when the President of the United States tells federal regulators to conduct a government-wide review to “root out regulations that conflict, that are not worth the cost, or that are just plain dumb.” That day arrived on January 18, 2011. President Obama penned an op-ed piece appearing in the January 18th issue of The Wall Street Journal in which he announced the signing of an executive order directing regulators to toss in the trash bin ill-advised regulations of commerce...

...It is time to mark for extinction three well-known, often written about and little admired tax sections that have been wreaking havoc for some time – 162(m), 280G and 409A. The first two sections represent the misguided attempts by Congress to dictate the design of officer compensation through the heavy hand of the tax code. The last section represents a case of Congressional overreaching."

ARTICLE HERE

Secondary Market May Impact 409A Valuations

Article by Greenstein, Rogoff, Olson & Co.

xtremErisa: Dividend Equivalent Rights and 409A

Discussion Here

"Dividend equivalent rights ("DERs") were specifically addressed in the 162(m) regulations regarding the question of whether the grant thereof in connection with an option grant disqualifies the option from favorable treatment as performance-based compensation. Not a whole lot of fuss was made about it at the time. Now we get DER II, set in 409A-Land, and, just when you thought it was safe to go back in the water (thanks, Jaws II), things get a little scary."

VentureBeat Discusses 409A Valuations - Why is My Common Stock Worth So Much?

See Article HERE

Hollywood Stars Hot Over 409A - Lobby for Change

Stars turn down cash advances - advances come to a "screeching halt;" stars turn away TV contracts; studios in a pinch; 409A "killed a mosquito with a cruise missile; "percentage of profits" or "points" is deferred compensation.

Article Here

409A Valuation is Key Issue in Facebook Litigation

From All Things Digital - HERE

From Facebook's legal brief:

“First, the CU Founders try to leave this Court with the impression that the only valuation figure they knew was the $15 billion figure from the Microsoft press release, and that they, therefore, had reason to enshrine it as gospel. They also portray the one 409A valuation on which they rely here as some seismic event in the life of the company, as if an unexpected bolt of lightning from on high emblazoned $8.88 onto a couple of tablets. Both the impressions are false.”

409A Reference Guide from Principal Financial

HERE

409A: Top 100 Questions

Popular Topic: New Volume Published by Berglund & Richey, 409A: 100 Most Frequently Asked Questions

IRS Releases Notice 2010-80 - Additional Relief Provided

Summary from Charles Shulman, Esq. - HERE

11th Circuit Rules on 409A - 6 Month Wait

Plan was not clear as to when the RSU's should have been valued.

Guidance on "Unforseeable Emergency" Distributions

IRS issues Rev. Rul. 2010-27 clarifying that events must be beyond the control of the participant.

Article from Spencer's Benefits Reports - HERE

"Three Situations Addressed

The three fact situations addressed in Rev. Rul. 2010-27 do not fit within any of the examples used in Reg. Sec. 1.457-6(c)(2)(i) nor those used by the plan.

In the first situation, an emergency distribution was requested to repair the participant’s principal residence because of significant water damage that is not covered by insurance but is substantially similar to the need to pay for damage to a home as a result of a natural disaster. This is a permissible emergency distribution because it is the result of events beyond the control of the participant, the IRS said.

In the second situation, an emergency distribution was requested to pay for the funeral expenses of an adult son who is not a dependent. The IRS stated that was a permissible emergency distribution because “the need to pay for the funeral expenses of a non-dependent adult son is an extraordinary and unforeseeable circumstance that arises as a result of events beyond the control of the participant and that is substantially similar to the need to pay for funeral expenses of a dependent.”

The facts in the third situation involve a participant who requests an emergency distribution to pay for accumulated credit card debt. This is not a permissible emergency distribution the IRS said because it not arise “due to any events that are extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the participant.”"

409A Can "Screw Up" Your Exit Strategy; "Incredibly Complex"

VentureBeat Article - Curtis Smolar, Esq. - HERE

409A Lawyers (and clients) Cartooned - How to Price Startup Company Options

XtraNormal Presents "A Short Video Explaining Option Pricing Under 409A" HERE