Friday, November 21, 2008
EMCORE Corporation Launches Tender Offer to Fix Employee Stock Options Subject to 409A
"As a result of the Company's previously announced voluntary inquiry into its historical stock option granting practices, which was concluded in 2006, the Company determined that an incorrect grant date was used in the granting certain options. As a result, the options were granted at an exercise price below the fair market value of the Company's common stock as of the correct date of grant. Consequently, employees holding these options face a potential tax liability under Section 409A of the Internal Revenue Code and similar sections of certain state tax codes, unless remedial action is taken to adjust the exercise price of these options prior to December 31, 2008."
EMCORE Press Release
Tender Offer
Monday, November 17, 2008
Friday, November 14, 2008
Monday, November 10, 2008
409A Valuation Calculator From VC Experts.com
"With the launch of the new 409A calculator, companies can now calculate their stock option prices so that they meet the requirements under Internal Revenue Code Section 409A. The 409A calculator was designed to provide a comprehensive list of "comparable" companies (i.e. similar companies based on industry, valuation and/or geography) and to assist in offsetting the rising cost of outside consultants and auditors as the company CFO's determine fair value."
Press Release
Calculator
Press Release
Calculator
Thursday, November 6, 2008
Coming Soon to Theaters - Documentary "An Inconvenient Tax"
I received this email from the producer of an upcoming documentary about taxes and tax reform. I thought some might enjoy the movie trailer which is linked below.
Hello, this is Nathan Padgett with Life Is My Movie Entertainment. I'm writing to let you know about the upcoming feature length documentary about taxes and tax reform, "An Inconvenient Tax".
This film sheds light on one of America’s messiest problems — a fundamentally broken tax code that affects every part of people's lives. With the U.S. Congress making over 16,000 changes to the tax code in the last two decades alone, many Americans want something better, but few know where to start. This feature-length documentary film reveals the many ways Congress uses the tax code to achieve political goals that have nothing to do with raising revenue. It also tackles the controversial issue of tax reform through a non-partisan presentation of U.S. tax history and current proposals to fix the code. In a time when America faces fiscal crisis, An Inconvenient Tax brings a crucial exploration of the tax code to the big screen.
We know that the subject matter within this film is a hot topic for your viewers and all Americans alike. While we have yet to begin our major marketing campaign, we are currently contacting specific tax and accounting outlets in hopes that they will be willing to inform their viewers of the film's newly redesigned website and possibly showcase the teaser. I'm including links to the website, press packet, and the teaser.
Feel free to contact us if you have any questions or comments about the film. press@lifeismymovie.com 770-881-7500 ext: 2
Thank you for your interest in our film. Now sit back, relax and enjoy the show,
Nathan Padgett
Website:
www.aninconvenienttax.com
Press Packet:
www.aninconvenienttax.com/downloads/AITpressPacket.pdf
Film Teaser:
www.vimeo.com/2050141
Nathan Padgett
[o] 770-881-7500 ext: 714
[f] 678-748-3106
[c] 404-405-1617
440 South Perry Street Suite #8
Lawrenceville, Georgia 30045
www.lifeismymovie.com
Hello, this is Nathan Padgett with Life Is My Movie Entertainment. I'm writing to let you know about the upcoming feature length documentary about taxes and tax reform, "An Inconvenient Tax".
This film sheds light on one of America’s messiest problems — a fundamentally broken tax code that affects every part of people's lives. With the U.S. Congress making over 16,000 changes to the tax code in the last two decades alone, many Americans want something better, but few know where to start. This feature-length documentary film reveals the many ways Congress uses the tax code to achieve political goals that have nothing to do with raising revenue. It also tackles the controversial issue of tax reform through a non-partisan presentation of U.S. tax history and current proposals to fix the code. In a time when America faces fiscal crisis, An Inconvenient Tax brings a crucial exploration of the tax code to the big screen.
We know that the subject matter within this film is a hot topic for your viewers and all Americans alike. While we have yet to begin our major marketing campaign, we are currently contacting specific tax and accounting outlets in hopes that they will be willing to inform their viewers of the film's newly redesigned website and possibly showcase the teaser. I'm including links to the website, press packet, and the teaser.
Feel free to contact us if you have any questions or comments about the film. press@lifeismymovie.com 770-881-7500 ext: 2
Thank you for your interest in our film. Now sit back, relax and enjoy the show,
Nathan Padgett
Website:
www.aninconvenienttax.com
Press Packet:
www.aninconvenienttax.com/downloads/AITpressPacket.pdf
Film Teaser:
www.vimeo.com/2050141
Nathan Padgett
[o] 770-881-7500 ext: 714
[f] 678-748-3106
[c] 404-405-1617
440 South Perry Street Suite #8
Lawrenceville, Georgia 30045
www.lifeismymovie.com
Monday, November 3, 2008
409A Video Clip - Brief Summary From BNA
Not much information, but this is the first (and only?) YouTube offering relating to 409A.
Thursday, October 30, 2008
Tuesday, October 28, 2008
IRS May Waive 2008 Form Y Reporting
IRS May Waive 2008 Form Y Reporting
According to a BNA news report, Treasury Deputy Benefits Tax Counsel Helen H. Morrison said in a recent Clark Consulting Webinar that the IRS expects to issue a notice before the end of 2008 waiving the requirement for reporting this year, "and until such time as we have issued regulations on how to calculate the amount that would be included in income."
Morrison also said the Treasury expects to soon issue proposed regulations on how to calculate amounts that would be included in income due to a failure to meet 409A requirements. The proposed regulations will also "serve as a foundation for providing guidance as to what would be reported for compliant plans," using Code Y on Form W-2, she said.
According to a BNA news report, Treasury Deputy Benefits Tax Counsel Helen H. Morrison said in a recent Clark Consulting Webinar that the IRS expects to issue a notice before the end of 2008 waiving the requirement for reporting this year, "and until such time as we have issued regulations on how to calculate the amount that would be included in income."
Morrison also said the Treasury expects to soon issue proposed regulations on how to calculate amounts that would be included in income due to a failure to meet 409A requirements. The proposed regulations will also "serve as a foundation for providing guidance as to what would be reported for compliant plans," using Code Y on Form W-2, she said.
Friday, October 24, 2008
Forbes Advises Financial Execs on Deferring
Think twice before deferring, and get your money out if you can.
"No. 1: Carefully consider whether to defer any of your 2009 compensation.
No. 2: If you can, elect to accelerate the distribution of your prior years' deferred compensation."
Article notes that WaMu executives used IRS Transition Relief to withdraw deferred compensation prior to meltdown. Form 8-K.
"No. 1: Carefully consider whether to defer any of your 2009 compensation.
No. 2: If you can, elect to accelerate the distribution of your prior years' deferred compensation."
Article notes that WaMu executives used IRS Transition Relief to withdraw deferred compensation prior to meltdown. Form 8-K.
Thursday, October 16, 2008
UnitedHealth Group Incurs Costs for 409A Violation
Company Slammed with 409A Tax Reimbursements
Financial Statement Footnote:
"Includes $87 million of pre-tax Operating Costs for the settlement
of Internal Revenue Code Section 409A (IRS Section 409A) surtax
liabilities on behalf of non-officer employees who exercised certain
options in 2006 and 2007, and $89 million of non-cash Operating Costs
for the modification charge due to repricing unexercised options
subject to IRS Section 409A."
Financial Statement Footnote:
"Includes $87 million of pre-tax Operating Costs for the settlement
of Internal Revenue Code Section 409A (IRS Section 409A) surtax
liabilities on behalf of non-officer employees who exercised certain
options in 2006 and 2007, and $89 million of non-cash Operating Costs
for the modification charge due to repricing unexercised options
subject to IRS Section 409A."
WuXi PharmaTech Executives Face 409A Penalty Taxes
Company Executives to sell Stock to Cover Penalty Taxes from in-the-money Options
"...we expect up to 350,000 ADSs may be sold by other management members and employees prior to year-end for 409A purposes. Prior to 2008, a number of our management members and employees who were U.S. taxpayers were granted options with an exercise price potentially below fair market value on the date of grant, as determined under Section 409A of the U.S. Tax Code. To avoid the adverse tax consequences imposed under Section 409A to these U.S. taxpayers, the options were amended previously to require that they be exercised, if at all, on or prior to December 31, 2008 (no other changes were made). If unexercised by year-end those options will expire, and those individuals may need to sell ADSs to pay related taxes and the purchase price payable upon exercise."
"...we expect up to 350,000 ADSs may be sold by other management members and employees prior to year-end for 409A purposes. Prior to 2008, a number of our management members and employees who were U.S. taxpayers were granted options with an exercise price potentially below fair market value on the date of grant, as determined under Section 409A of the U.S. Tax Code. To avoid the adverse tax consequences imposed under Section 409A to these U.S. taxpayers, the options were amended previously to require that they be exercised, if at all, on or prior to December 31, 2008 (no other changes were made). If unexercised by year-end those options will expire, and those individuals may need to sell ADSs to pay related taxes and the purchase price payable upon exercise."
Friday, October 10, 2008
Tuesday, October 7, 2008
Wednesday, September 24, 2008
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
"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
Friday, September 12, 2008
Friday, September 5, 2008
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?"
"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?"
Tuesday, September 2, 2008
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."
"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."
Thursday, August 28, 2008
Article Suggests QSERP Practice May Be Problem Under 409A
Author notes potential 409A issue for QSERPS by virtue of removal of risk of forfeiture.
"These plans must be constructed under IRC §409A rules, which includes a requirement that the SERP funds remain an asset of the company, subject to substantial risk of forfeiture...Moving monies from non-qualified plans into qualified plans provides an immediate tax break for the company, and, in essence, removes the risk and virtually guarantees payment of the benefit to the executives. As deferred compensation, the executive maintains the tax-deferral advantage associated with the benefit, without the inherent risk of forfeiture. It will be interesting to see how this practice relates to 409A rules on deferrals."
"These plans must be constructed under IRC §409A rules, which includes a requirement that the SERP funds remain an asset of the company, subject to substantial risk of forfeiture...Moving monies from non-qualified plans into qualified plans provides an immediate tax break for the company, and, in essence, removes the risk and virtually guarantees payment of the benefit to the executives. As deferred compensation, the executive maintains the tax-deferral advantage associated with the benefit, without the inherent risk of forfeiture. It will be interesting to see how this practice relates to 409A rules on deferrals."
Tuesday, August 26, 2008
Amending "Good Reason" at the last Minute - From CompensationStandards Blog
Interesting discussion on amending the definition of "good reason." Interesting difference of opinion.
"Max correctly notes that this paragraph of the Notice keys the ability to reform the good reason definition on whether the right to payment is “subject to a substantial risk of forfeiture” – not on whether the good reason condition is tantamount to an “involuntary termination” condition under Section 409A. He also points out that the final regulations (§1.409A-1(d)(1)) say that if a right to payment is conditioned on “involuntary termination” it will be subject to a “substantial risk of forfeiture” -- but do not say the converse – i.e., that if a right to payment is not conditioned on involuntary termination it is not subject to a substantial risk of forfeiture (because there other ways to be subject to a substantial risk of forfeiture).
Given that these are two distinct standards (with involuntary termination being a subset of substantial risk of forfeiture), he concludes that as long as the right to payment is still subject to a substantial risk of forfeiture, you can fix at will (for the rest of 2008)."
"Max correctly notes that this paragraph of the Notice keys the ability to reform the good reason definition on whether the right to payment is “subject to a substantial risk of forfeiture” – not on whether the good reason condition is tantamount to an “involuntary termination” condition under Section 409A. He also points out that the final regulations (§1.409A-1(d)(1)) say that if a right to payment is conditioned on “involuntary termination” it will be subject to a “substantial risk of forfeiture” -- but do not say the converse – i.e., that if a right to payment is not conditioned on involuntary termination it is not subject to a substantial risk of forfeiture (because there other ways to be subject to a substantial risk of forfeiture).
Given that these are two distinct standards (with involuntary termination being a subset of substantial risk of forfeiture), he concludes that as long as the right to payment is still subject to a substantial risk of forfeiture, you can fix at will (for the rest of 2008)."
Monday, August 25, 2008
More From XremeERISA Blogger - Anti-Toggling Rule
Discussion of Anti-Toggling Rule and providing for alternative time and form of payments.
"Under what have come to be known as the anti-"toggling" rules (of Section 1.409A-3(c)), you can generally (unless an exception applies) only have one time and form of payment per particular type of cap-A triggering event.
There may be some emerging informal evidence (rely at your own risk) that, showing some flexibility, Treasury personnel are gravitating to what I'll call a permissible "subset" analysis."
"Under what have come to be known as the anti-"toggling" rules (of Section 1.409A-3(c)), you can generally (unless an exception applies) only have one time and form of payment per particular type of cap-A triggering event.
There may be some emerging informal evidence (rely at your own risk) that, showing some flexibility, Treasury personnel are gravitating to what I'll call a permissible "subset" analysis."
Monday, August 18, 2008
Xtreme ERISA Blog Discusses Unclear Short Term Deferral Issue
Interesting Article Regarding Olympics and Short Term Deferral Rules. Unclear whether this approach is permitted under the regulations.
"So what of a stream of severance payments? If one is terminated on 12/31, only two-and-a-half months' of payments would be made within the S-TD period? Does that possibility doom all but two-and-a-half months' of payments to the Curse of Cap-A?
The answer seems a resounding "no." Under the Regulations as technically corrected, the focus is on whether vesting could occur too long before payment or, stated conversely, whether payment is contemplated to be deferred by too much after a possible vesting event. The focus is not on whether a payment stream might be other than the one that it is. Essentially, you test your stream of payments as it runs, not as it may run. Thus, if the termination is in fact early enough in the year, all of the payments could be S-TDs."
"So what of a stream of severance payments? If one is terminated on 12/31, only two-and-a-half months' of payments would be made within the S-TD period? Does that possibility doom all but two-and-a-half months' of payments to the Curse of Cap-A?
The answer seems a resounding "no." Under the Regulations as technically corrected, the focus is on whether vesting could occur too long before payment or, stated conversely, whether payment is contemplated to be deferred by too much after a possible vesting event. The focus is not on whether a payment stream might be other than the one that it is. Essentially, you test your stream of payments as it runs, not as it may run. Thus, if the termination is in fact early enough in the year, all of the payments could be S-TDs."
Friday, August 8, 2008
Article on 409A Valuations from Quist Valuation
Article relating to 409A valuations for start-up companies.
"The impact and pressure to appropriately price equity grants has just begun. While many companies will continue to price stock options using their own internal expertise, the proposed IRC 409A rules have created a signficant demand for independent valuations. Numerous law firms have concluded that the Independent Appraisal Presumption, which is a valuation performed by a qualified indepedent appraiser is the clearest presumption available under the regulations and provides the best protection against the consequences of IRC 409A."
"The impact and pressure to appropriately price equity grants has just begun. While many companies will continue to price stock options using their own internal expertise, the proposed IRC 409A rules have created a signficant demand for independent valuations. Numerous law firms have concluded that the Independent Appraisal Presumption, which is a valuation performed by a qualified indepedent appraiser is the clearest presumption available under the regulations and provides the best protection against the consequences of IRC 409A."
Sunday, July 27, 2008
409A and "Regulatory Cousins" Leading Private Companies to Valuations
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."
"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."
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