California Reduces 409A Shadow Tax

In a rare piece of good news relating to Section 409A of the Internal Revenue Code, on October 4, 2013, California reduced its additional state tax on income failing to comply with Section 409A from 20 percent to 5 percent. This reduction is effective for taxable years beginning January 1, 2013 and later.

Article Here

IRS Prevails in Court Case: Discounted Options Subject to 409A

From Benefits Notes Blog:

"I also found the case interesting because of the time periods involved and the role of the taxpayers in the stock issuance. The case involved actions taken during the 409A transition period, the period of time between January 1, 2005, when the statute became effective, and January 1, 2008, when final regulations became effective. During that transition period, employers and employees had a certain amount of leeway to fix arrangements that had not violated tax laws at inception but now were caught by the broad sweep of Section 409A."

Blog Post HERE

Court Decision HERE

California 409A "Double Tax" May Violate State Constitution

Article indicates that tax was not approved by Legislative Super Majority. See Law Review Article Here