http://www.aboutbusinessarticle.com/2008/07/27/section-409a-and-its-regulatory-cousins-what-it-means-for-private-companies/
"The IRS recently threw down the gauntlet and placed pressure on private companies to get their valuations right at no matter what stage of development they are. The Service has backed up this gesture by exposing private companies to substantial tax liabilities and penalties if they do not."
Sunday, July 27, 2008
Tuesday, July 22, 2008
Wednesday, July 9, 2008
Wednesday, July 2, 2008
IRS May Soon Solve School Teacher 409A Problem
IRS expects that upcoming guidance will solve problem of recurring part-year compensation for school teachers.
"The regulations to be proposed are expected to address certain types of arrangements involving recurring part-year compensation, including common arrangements involving public school employees who provide services during a 10 month school year and elect to be paid ratably over 12 months. It is expected that the regulations would provide that if certain conditions described below are satisfied, §457(f) would not apply to such arrangements. It is also expected that a conforming change will be proposed for regulations under § 409A, so that § 409A also will not apply to such arrangements if such conditions are met."
NOTE FROM TEACHERS UNION
"The regulations to be proposed are expected to address certain types of arrangements involving recurring part-year compensation, including common arrangements involving public school employees who provide services during a 10 month school year and elect to be paid ratably over 12 months. It is expected that the regulations would provide that if certain conditions described below are satisfied, §457(f) would not apply to such arrangements. It is also expected that a conforming change will be proposed for regulations under § 409A, so that § 409A also will not apply to such arrangements if such conditions are met."
NOTE FROM TEACHERS UNION
Friday, June 27, 2008
Thursday, June 26, 2008
Wednesday, June 11, 2008
Sunday, June 1, 2008
Law Firm Publishes Notes From IRS Meetings on 409A
409A Gossip
"Representatives from the IRS and the Treasury Department have been making rounds in recent weeks to talk about compliance with section 409A of the Internal Revenue Code transitional guidance. The presentations have been conversational in tone and have included deep drilling on technical niceties that make for dense reading. The following notes include information provided by Treasury in May to the AICPA National Conference on Employee Benefit Plans in Las Vegas and the ABA Section of Taxation conference in Washington, D.C."
"Representatives from the IRS and the Treasury Department have been making rounds in recent weeks to talk about compliance with section 409A of the Internal Revenue Code transitional guidance. The presentations have been conversational in tone and have included deep drilling on technical niceties that make for dense reading. The following notes include information provided by Treasury in May to the AICPA National Conference on Employee Benefit Plans in Las Vegas and the ABA Section of Taxation conference in Washington, D.C."
Wednesday, May 28, 2008
ABA Comments to IRS Regarding 409A Correction Program
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."
"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."
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
Thursday, May 8, 2008
Thursday, April 24, 2008
KLA-Tencor Violates 409A; Takes Charge Relating to Backdating; Reimburses Employees for 409A Penalties
KLA-Tencor takes big charge relating to backdating stock options, reimbursing employees for 409A penalty taxes, and related costs.
Press Release (see footnotes)
Stock option backdating; $65 million payout; $400 million in restatements.
Tender Offer to replace bad options
CFO Resigns
Press Release (see footnotes)
Stock option backdating; $65 million payout; $400 million in restatements.
Tender Offer to replace bad options
CFO Resigns
Monday, April 14, 2008
Friday, April 4, 2008
Tuesday, April 1, 2008
$50 Million in 409A Additional Taxes Incurred by Lam Research
http://www.bizjournals.com/eastbay/stories/2008/03/31/daily19.html
Lam (NASDAQ: LRCX) expects to record cash expenses for the quarter ended in March of $50 million to $55 million "to assume responsibility for the 409A tax liabilities of employees."
Lam Research 8-K
Lam Research Tender Offer to Optionees
Lam (NASDAQ: LRCX) expects to record cash expenses for the quarter ended in March of $50 million to $55 million "to assume responsibility for the 409A tax liabilities of employees."
Lam Research 8-K
Lam Research Tender Offer to Optionees
Tuesday, March 18, 2008
409A and Non-U.S. Arrangements
http://www.mercer.com/referencecontent.jhtml?idContent=1296475
"Although there are lengthy compliance requirements to avoid the tax consequences, a number of potential exemptions are available to non-US plans. These exemptions are quite complex and are discussed in the article."
"Although there are lengthy compliance requirements to avoid the tax consequences, a number of potential exemptions are available to non-US plans. These exemptions are quite complex and are discussed in the article."
Thursday, March 13, 2008
Thursday, February 28, 2008
Tech CFOs Cite 409A Third on List of Biggest Challenges
http://www.cscpa.org/Content/23081.aspx
"Forty-nine percent of the 100 CFOs surveyed identified Section 404 as the greatest challenge, 36 percent said FIN 48, and 12 percent cited 409A. "
"Forty-nine percent of the 100 CFOs surveyed identified Section 404 as the greatest challenge, 36 percent said FIN 48, and 12 percent cited 409A. "
Monday, February 18, 2008
Option Reprice Wave Builds
http://www.financialweek.com/apps/pbcs.dll/article?AID=/20080218/REG/287644456
"With top executives and rank-and-filers at many U.S. companies holding now-worthless stock options, the time seems right for a round of repricing. New rules requiring companies to get the blessing of shareholders, themselves freshly gored by falling stock prices, will force boards to devise friendlier, or at least less objectionable, ways to pitch the controversial practice."
409A not discussed, but see Preamble to final regulations relating to re-pricing options.
"With top executives and rank-and-filers at many U.S. companies holding now-worthless stock options, the time seems right for a round of repricing. New rules requiring companies to get the blessing of shareholders, themselves freshly gored by falling stock prices, will force boards to devise friendlier, or at least less objectionable, ways to pitch the controversial practice."
409A not discussed, but see Preamble to final regulations relating to re-pricing options.
Friday, February 15, 2008
IRS Reverses Position on 162(m); Public Companies Confused
http://taxprof.typepad.com/taxprof_blog/2008/02/irs-reverses-co.html
"In earlier rulings, the IRS had treated payments upon an executive's involuntary termination or termination for good cause as coming within the death, disability, or change in control exception. In PLR 200804004 (1/25/2008), the IRS reversed course and ruled that an incentive pay award would not qualify as performance-based compensation exempt from the § 162(m) $1 million cap where the executive is entitled to the payment in the event of an involuntary termination or termination for good reason."
IRS PROVIDES TRANSITION RELIEF (February 21, 2008)
http://www.irs.gov/pub/irs-drop/rr-08-13.pdf
LAW FIRMS FIGHT BACK
http://www.deweyleboeuf.com/files/News/c7df8e65-4b85-47b3-bda4-52470ea3df67/Presentation/NewsAttachment/c1a267bb-2c43-45aa-9265-5368ee28c7c5/6336.pdf
RESULTS FROM THIS?
http://www.law.harvard.edu/programs/olin_center/corporate_governance/MediaMentions/09-05-06_BusinessWeek.pdf
"In earlier rulings, the IRS had treated payments upon an executive's involuntary termination or termination for good cause as coming within the death, disability, or change in control exception. In PLR 200804004 (1/25/2008), the IRS reversed course and ruled that an incentive pay award would not qualify as performance-based compensation exempt from the § 162(m) $1 million cap where the executive is entitled to the payment in the event of an involuntary termination or termination for good reason."
IRS PROVIDES TRANSITION RELIEF (February 21, 2008)
http://www.irs.gov/pub/irs-drop/rr-08-13.pdf
LAW FIRMS FIGHT BACK
http://www.deweyleboeuf.com/files/News/c7df8e65-4b85-47b3-bda4-52470ea3df67/Presentation/NewsAttachment/c1a267bb-2c43-45aa-9265-5368ee28c7c5/6336.pdf
RESULTS FROM THIS?
http://www.law.harvard.edu/programs/olin_center/corporate_governance/MediaMentions/09-05-06_BusinessWeek.pdf
Wednesday, February 6, 2008
IRS Signals More Intense Scrutiny of Executive Compensation for Tax-Exempt Organizations
http://www.pearlmeyer.com/knowledgecenter/alerts/NewForm990.pdf
"Tax-exempt organizations face significantly expanded disclosure of executive compensation programs and related Board policies in the 2008 tax year under new IRS rules. As a result, potential donors are more likely to review pay programs with greater scrutiny."
"Tax-exempt organizations face significantly expanded disclosure of executive compensation programs and related Board policies in the 2008 tax year under new IRS rules. As a result, potential donors are more likely to review pay programs with greater scrutiny."
Friday, January 25, 2008
Time to end the 'talent tax' in Silicon Valley
http://www.pacificresearch.org/publications/id.1202/pub_detail.asp
"President Bush wants to make the American work force globally competitive, but new government rules may soon push the best and brightest of Silicon Valley out of the country. Unless the U.S. wants to add talented professionals as a new national export, Congress should revoke the tax disaster known as Section 409A."
"President Bush wants to make the American work force globally competitive, but new government rules may soon push the best and brightest of Silicon Valley out of the country. Unless the U.S. wants to add talented professionals as a new national export, Congress should revoke the tax disaster known as Section 409A."
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