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Executive benefits


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NQDC Issues for the 2019 Tax Season
"The IRS has still not finalized the Section 409A rules on W-2 reporting. Therefore, your company does not need to indicate deferred income on your Form W-2, though it may do so voluntarily in Box 14.... If your plan violates Section 409A and you need to pay a penalty and interest: Report this on Line 62 of IRS Schedule 4 (no longer directly reported on Form 1040).... Nonqualified deferred compensation itself is not an AMT preference item. However, deferrals of income can serve to prevent you from triggering the AMT in a tax year; conversely, income you receive in a distribution can trigger the AMT." (myNQDC.com)
[Guidance Overview] Executive Compensation: Section 162(m) and the Grandfather Rule
"If the company retains the right to unilaterally amend the plan to reduce or eliminate deferrals and/or accruals ... only the amounts deferred prior to January 1, 2018, would be excluded [from the $1,000,000 deduction limitation]. This becomes important because of the change under TCJA to the definition of 'covered employee,' from those employed in certain positions during the year to a 'once covered always covered' approach." (Hawley Troxell)
Parties Reach Settlement in Investors Bancorp Stockholder Litigation
"Under the settlement agreement, the parties agree that: [1] 2.5 million stock options granted to outside directors as part of the 2015 Equity Awards will be cancelled. [2] 95,694 RSUs granted to outside directors as part of the 2015 Equity Awards that are scheduled to vest in 2020 will be cancelled. [3] All stock options and RSUs granted to [two executive directors] as part of the 2015 Equity Awards and any shares delivered to them under the 2015 Equity Awards will be cancelled." (Thomson Reuters Practical Law)
Beware These Tax-Return Errors with Restricted Stock and RSUs
"[1] Not reporting income until the full grant vests.... [2] Double-reporting income on Form 1040.... [3] Not reporting the stock sale.... [4] Using too low a cost basis for the capital gains calculation.... [5] Miscalculating the number of shares surrendered or sold for taxes." (myStockOptions.com)
[Guidance Overview] Excise Tax on Executive Compensation and Excess Parachute Payments
"On December 31, 2018, over a year after the release of the TCJA, the IRS released Notice 2019-09, which provided 92 pages of much anticipated informal guidance regarding IRC Section 4960. The Notice provided some clarity for tax-exempt organizations ... Excess remuneration ... Common-law employees ... Medical and veterinary services ... Excess parachute payments ... Effective date ... Reporting the liability under Section 4960." (WithumSmith+Brown, PC)
How to Reduce the Tax Impact of Your Stock Options or Restricted Stock Units
"Exercise early-stage ISOs before their value increases ... Make the 83(b) election for early exercise ... Exercise ISOs to AMT crossover point ... Raise your ordinary income with same-day sales ... Exercise ISOs early in the year ... Take deductions in years with high RSU vesting income." (Moss Adams LLP)
Examples of 2019 Pay Ratio Disclosures
"[This article provides] examples of pay ratio disclosures from recently filed proxies where registrants chose to rely on the median employee identified in the prior year. [1] Sabre Corporation ... [2] Seaboard Corporation ... [3] Superior Industries International, Inc.... [4] The Goodyear Tire & Rubber Company." (Dodd-Frank.com)
Planning for the 4960 Excise Tax on Compensation by Tax-Exempt Organizations
"[T]ax-exempt systems that include more than one related tax-exempt organization will likely have more than five covered employees.... Determine covered employees -- once a covered employee, always a covered employee.... Compile remuneration for covered employee status and the annual $1 million limit.... Calculate potential parachute payments.... Determine when tax is payable.... Create term sheets and termination scenarios.... Consider fiscal year tax-exempt organization remuneration special rules.... Begin long-term planning." (Willis Towers Watson)
State and Local Taxes: Nonqualified Plans Can Help Protect Retirement
"Some states ... attempt to tax nonresidents on this income on the basis that it was earned, or had its source, in the first state. Retirement income has always been a key target of this type of state taxation. Under the federal 'Source Tax Law,' however, retirement income meeting certain conditions will be taxable only by the recipient's state of residence at the time of payment, regardless of its 'source'.... The Source Tax Law ... covers retirement income paid from tax-favored vehicles such as tax-qualified retirement plans and IRAs. It also protects income from nonqualified deferred compensation arrangements if the income either is paid from a certain type of plan or in substantially equal periodic payments over life or life expectancy or a period of at least ten years." (Fulcrum Partners LLC)
[Guidance Overview] Change-in-Control Consequences on Specified Employee Status Under Code Section 409A
"If a corporate transaction occurs during the applicable 12-month period for which the specified employee group has been set, the successor(s) are required to determine how specified employees will be identified following the transaction during a transition period. [This article] describes the transition rules applicable to several different types of corporate transactions." (Morgan Lewis)
[Guidance Overview] Loophole for State University Coaches Excess Compensation Is a Congressional Fumble
"The 2017 Tax Act enacted ... a new provision imposing a 21% tax on 'applicable tax exempt organizations' ... that pay any of their top five paid employees more than $1 million in annual compensation.... [In] Notice 2019-09, the IRS admitted that the statutory language does not reach public colleges and universities exempt under implied statutory immunity. In fact, the Notice advises that such institutions that have received a determination letter from the IRS recognizing them as exempt under Code section 501(c)(3) may relinquish this status to avoid being subject to the tax." (Murphy Austin)
[Guidance Overview] Tax-Exempt Employers May Owe New Excise Tax for 2018 Tax Year (PDF)
"Although parts of the interim guidance likely will require taxpayers to go through additional administrative hurdles and compliance steps, the notice appears relatively taxpayer-friendly and may even minimize the impact of section 4960." (Groom Law Group, via Tax Notes)
Consider These Executive Pay Issues When Preparing for IPO
"In preparing for an IPO, there are a number of tactical issues, such as drafting plan documents, preparing required disclosures and ensuring plan designs are compliant with applicable securities and tax rules. But there are six critical compensation issues a board must consider in preparation for an IPO on a US-based exchange." (Meridian Compensation Partners, LLC)
An Executive Compensation Primer for the HR Professional
"This article addresses three primary responsibilities of the HR professional: [1] understanding the core elements of a typical key employee compensation package; [2] understanding the primary duties and roles of the HR professional with respect to the design and administration of incentive packages; and [3] being aware of hot topics impacting the provision of executive compensation." (Fisher Phillips)
[Guidance Overview] A Deeper Look at Tax Reform's Evolving New Game Plan for Tax-Exempt Organizations (PDF)
"As a practical matter, tax-exempt organizations will need to watch the payments triggered by an involuntary separation from employment to keep that amount at a multiple of 2.99 or less. Organizations who compensate covered employees at an annual amount that exceeds the $1 million dollar limit will need to budget for the excise tax on the compensation the tax-exempt organization pays the executive above the annual limit. Affected tax-exempt and governmental employers will also need to maintain lists of which individuals are amongst the 'High Five' in each calendar year after December 31, 2016, because the excise tax follows the change to Section 162(m) by adopting a 'once-in-always-in' rule." (M. J. Asensio and Greta E. Cowart, via Bloomberg Tax Management Compensation Planning Journal)
[Guidance Overview] SEC Adopts Final Rules for Disclosure of Hedging Policies
"The new rule will require a public company to disclose whether, and to what extent, it has adopted practices or policies regarding the ability of employees, officers, and directors to engage in certain hedging transactions with respect to the company's equity securities." (Cadwalader, Wickersham & Taft LLP)
A Beginner's Guide to Deferred Compensation
"For employees who do elect to participate in a deferred compensation plan there are two important choices to make -- when to take distributions and how to take them.... In most cases, these elections are difficult to change and require a five-year waiting period if changes are allowed under IRS rules governing deferred compensation plans." (Voya)
[Guidance Overview] How Non-Profit Organizations Can Plan for the Executive Comp Excise Tax
"While the code section is simply written, the guidance takes into account the code and regulations that have been established in the compensation area. These can be complex and lead to more questions than answers. The guidance centers around defining each element of Section 4960 and provides answers to some common questions." (Moss Adams LLP)
Winning Say-on-Pay: Top Ten Executive Comp Proxy Tips For 2019
"Companies should [1] clearly set forth the relationship between pay results and actual financial and total shareholder return (TSR) performance.... [2] tell a good story on why their compensation programs benefit shareholders and disclose performance goals and results in a manner that is succinct and easy to follow.... [3] consider litigation trends surrounding non-employee director compensation and changes to 162(m)." (Pillsbury Winthrop Shaw Pittman LLP)
[Guidance Overview] Unexpected Effect of Section 4960 Excise Tax (PDF)
"New Code Section 4960 imposes a 21% tax on excess compensation (over $1,000,000) paid to the current and former top-5 paid employees of tax-exempt organizations.... Under initial IRS guidance, however, the additional tax could ensnare corporations (public and private) and plan sponsors." (Ivins, Phillips & Barker)
[Guidance Overview] IRS Issues Guidance on New Excise Tax on Excess Compensation Paid by Not-for-Profit Entities
"The [JCT] Explanation indicates that Congress intended to apply the excise tax to state colleges and universities (and thus highly paid athletic directors and coaches), but a technical correction may be necessary to reflect this intent. Notice 2019-09 does not make this assumption.... The same rules that apply in determining a related entity for reporting on Form 990 apply here.... While remuneration from the related entities is aggregated, each tax-exempt entity in a control group has its own covered employees." (Buck)
Compensation Committee Reminders
"The only reason for continuing to maintain a compensation committee that satisfies the requirements of Code Section 162(m) ... is if there are any unvested or unpaid performance-based awards outstanding and grandfathered. If there are any such awards outstanding, a Committee consisting solely of 'outside directors' would need to certify that the performance goals were achieved in order to ensure/preserve their deductible status." (Fulcrum Partners LLC)
Repeal of Section 162(m)'s Performance-Based Exception Makes Inducement Awards More Viable
"In the past, one drawback of an inducement award had been that it would not qualify for the stock option/SAR or qualified performance-based compensation exemption from the $1 million deductibility limit of Code Section 162(m). However, with that exception gone, that drawback no longer exists! To qualify as an inducement award, other requirements must be met[.]" (Winston & Strawn LLP)
Giving Nonqualified Deferred Compensation Plans Their Due Diligence in M&As (PDF)
"Section 409A compliance present[s] perhaps the most challenging question for sponsors of nonqualified deferred compensation plans (NDCPs) during a merger and acquisition (M&A) due diligence test.... Two [additional] questions are 'fit' related: [1] will the NDCPs still fit within the top-hat exemption post-merger; and [2] have the NDCPs' [FICA] taxes been properly applied to the benefits? This article prepares NDCP sponsors to answer these two important topics and alert them to any trick questions they may pose." (Milliman, via Benefits Law Journal)
Trends in Executive Compensation and Compensation Committee Practices
"Impact of tax legislation on pay practices ... Key considerations for 2019 proxy season ... The SEC's new hedging policy disclosure rule ... The SEC cracks down on inadequate perquisite disclosures.... Pay audits and disclosures: best practices." (Skadden)
[Guidance Overview] Payment of Annual Incentive Bonus by March 15
"Payments to an employee within 2-1/2 months after the end of the year in which the payment amount is no longer subject to a substantial risk of forfeiture (vested) qualify as short-term deferrals.... If the plan or agreement is well drafted or another special rule applies, a payment of annual incentive after March 15 will not violate 409A." (Winston & Strawn LLP)
[Guidance Overview] ISS Releases Its 2019 Pay-for-Performance Methodology
"ISS is making certain minor changes and clarifications to its pay-for-performance methodology for shareholder meetings taking place on or after February 1, 2019." (Thomson Reuters Practical Law)
Securities Disclosure as Soundbite: The Case of CEO Pay Ratios
"This Article analyzes the history, design, and normative impact of the ... CEO pay ratio disclosure rule, which went into effect in 2018.... [The authors] propose that the SEC should seek to improve the rule's informational integrity by mandating a narrative disclosure approach that provides information about median worker pay and the resulting pay ratio with more context, nuance, and explanation." (Steven A. Bank and George S. Georgiev, via SSRN)
[Guidance Overview] IRS Provides Interim Guidance on Executive Compensation for Tax-Exempt Organizations
"Each employer liable for tax is responsible for separately reporting and paying its share of the tax on Form 4720. For calendar year [applicable tax-exempt organizations (ATEOs)], the excise tax for the 2018 year must be paid on May 15, 2019, which is the due date for Form 4720. The due date for the tax payment is determined without regard to whether the employer files for an extension to file Form 4720." (Morgan Lewis)
Tenth Circuit Smack Down of Serial Section 16(b) Plaintiff
"[D]espite the existence of some discretion as to the payment of withholding taxes in the plan and award agreements, the Court concluded that the tax withholding transactions satisfied the Rule 16b-3 exemption. The compensation committee was not required to separately approve a tax withholding transaction, because it had approved the plan and the RSU agreements, and the tax withholding transactions were specifically contemplated in those documents." [Olagues v. Muncrief, No. 18-5018 (10th Cir. Jan. 16, 2019)] (Winston & Strawn LLP)
Review Equity Award Forms for Massachusetts Employees
"[U]nder the new [Massachusetts] rules: [1] Employers must pay or provide for 'garden leave' or 'other mutually-agreed upon consideration' if a post-employment noncompete covenant is included; [2] The duration, geographic reach and scope of the noncompete must fit within specified parameters; and [3] A post-employment noncompete restriction is enforceable only in limited circumstances[.]." (Skadden)
[Guidance Overview] New Guidance for Tax-Exempt Organizations Calculating Excise Tax on Pay of Highly Compensated Employees
"Parachute payments can be subject to excise tax even if the covered employee's remuneration is less than $1 million, provided only that the employee also qualifies as 'highly compensated' for purposes of the employer's retirement plans. For 2018, that category included employees who received at least $120,000 of compensation in 2017." (McGuireWoods)
[Guidance Overview] IRS Notice Offers Good News for State Colleges and Universities (at Least for Now)
"Of particular interest to state colleges and universities is the answer to Q-5 of [Notice 2019-09]. It provides that the Section 4960 excise tax does not apply to a governmental entity (including a state college or university) that is not tax-exempt under Section 501(a) and does not exclude income under Section 115(l).... [This] means the institution could compensate its athletic coaches (or other covered employees) in excess of the $1 million threshold and not be subject to the 21 percent excise tax." (Ogletree Deakins)
So You Have Stock Compensation and Your Form W-2 Just Arrived: Now What?
"Vesting of restricted stock, share delivery from restricted stock units (RSUs), and vesting of performance shares all trigger W-2 reporting of the income received. The treatment on the W-2 is essentially the same for all three grant types, assuming you did not elect to defer share delivery at vesting (only permitted in RSU plans at small number of companies)." (myStockOptions.com)
How Would Your Company Respond to a CEO Pay Ratio-Related Shareholder Proposal?
"Each company that received the proposal [from the New York State Common Retirement Fund (NYSCRF)] during 2018 took a different approach to their settlement and disclosure that reflect the diverse viewpoints over how workforce compensation fits in to the executive pay setting process. [The authors provide] examples of how companies have responded[.]" (Willis Towers Watson)
[Guidance Overview] Code Section 162(m) Grandfathering Rule Under TCJA
"Many practitioners are applying the Treasury's 162(m) guidance in ways that unnecessarily narrow the scope of the grandfathering protection and therefore could lead to unnecessary tax charges." (Ivins, Phillips & Barker)
[Guidance Overview] IRS Provides Interim Guidance for Tax-Exempt Organizations Paying Excess Executive Compensation
"Notice 2019-09 creates a vast web of defined terms and potential pitfalls.... The guidance not only will drive the design and implementation of executive employment agreements and deferred compensation plans, but it also will influence the structuring of severance payments and settlement agreements. It also may necessitate changes to management service agreements, payroll systems, and internal controls to better manage and account for executive compensation." (Jackson Lewis P.C.)
Making Sense of Form W-2 When You Have Stock Compensation
"If you exercised nonqualified stock options (NQSOs) last year, the income you recognized at exercise is reported on your W-2.... With incentive stock options (ISOs), the value of the exercise income appears on Form W-2 only if you made what is technically called a disqualifying disposition.... The W-2 reporting for ESPP income depends on whether your company's ESPP is tax-qualified or not and, if it is tax-qualified, how long you have held the shares." (Forbes)
[Guidance Overview] 457(f) Landmine Lurks for All Tax-Exempt Organizations -- Even the Small Ones!
"Once an employee is classified as an HCE for any year, that employee will always be considered an HCE for Section 4960 purposes.... Section 4960's 3x limit is exceeded if an HCE receives 'contingent payments' exceeding three times the HCE's average W-2 income for the five calendar years ending before the year in which employment terminates.... There is not yet any grandfathering for amounts already accrued under existing 457(f) plans.... Rolling risks of forfeiture have long been an effective tax planning device under Section 457(f) plans. Now, however, their use could 'roll-up' parachute payments to levels that trigger Section 4960 problems." (The Wagner Law Group)
[Guidance Overview] Treasury and IRS Issue Interim Guidance on Executive Compensation Excise Tax Under Section 4960
"[Notice 2019-09] includes an extensive preamble that discusses the various alternatives that the Treasury Department and the IRS considered when developing their positions on certain issues. It is likely that this discussion was included to provide the agencies with a basis for applying certain positions in the Notice retroactively to the date of the interim guidance (which was December 31, 2018) when they propose and finalize regulations. This may allow the IRS to assert that some of its positions apply for all tax years for which section 4960 is effective." (Eversheds Sutherland)
Compensatory Action Items to Consider this Proxy Season
"The most common reason for a negative recommendation from ISS is a perceived pay-for-performance disconnect within the compensation structure. Robust disclosure on this point can help ... [I]ssuers with non-grandfathered arrangements should consider simplifying compensation administration by eliminating certain procedure requirements that were required under Section 162(m).... Consider whether to revise the net withholding rate within the equity incentive plan from the supplemental rate of 22% to the highest marginal rate." (Hunton Andrews Kurth)
[Guidance Overview] IRS Releases Interim Guidance on New Excise Tax on Executive Comp Paid by Tax-Exempt Organizations
"What is an 'applicable tax-exempt organization'? ... Who is the 'employer'? ... What is a 'related organization'? ... Who is a 'covered employee'? ... What is the applicable 'taxable year'? ... What is 'remuneration'? ... Who is a licensed medical or veterinary professional and how do you determine what amounts are paid for 'medical and veterinary services'? ... What are 'excess parachute payments'?" (Proskauer)
2019 Deadlines Approach to Furnish Incentive Stock Option and Employee Stock Purchase Plan Information Statements and Returns
"In addition to the employee information statements, corporations must file returns with the [IRS] on Forms 3921 and 3922 no later than February 28, 2019, if filed on paper, or April 1, 2019, if filed electronically. These information returns, Form 3921 for ISO exercises and Form 3922 for initial ESPP share transfers, must be filed electronically by any corporation required to file 250 or more of a particular return and may otherwise be filed either electronically or in paper form." (DLA Piper)
[Guidance Overview] What You Need to Know About the New Tax on 'Excess' Nonprofit Compensation
"[1] Compensation that is 'reasonable' under other federal tax rules can still be taxed as 'excess' compensation.... [2] To know whether it might pay compensation that triggers the tax, a nonprofit ... must keep track of its 'related' entities and any compensation paid by those entities to shared employees.... [3] 'Remuneration' counts once there is no substantial risk of forfeiture.... [4] Each common-law employer, whether it is the nonprofit or a related entity, must pay its share of the tax based on its proportional share of remuneration paid to a covered employee." (Caplin & Drysdale)
[Guidance Overview] Reminder: Employers Must Report 2018 ISO and ESPP Transactions
"Corporations that offer incentive stock options (ISOs) or maintain a tax-qualified employee stock purchase plan (ESPP) have an obligation to file returns with the IRS and to deliver information statements to employees and former employees regarding the acquisition of shares under such arrangements.... These forms are due regardless of any partial shutdown of the Federal government." (Latham & Watkins)
[Guidance Overview] IRS Provides Interim Guidance Regarding the New Excess Compensation Excise Tax Applicable to Tax-Exempt Organizations
"[T]he IRS narrowly construed many of the statutory provisions, which ultimately will result in additional administrative burden and cost to tax-exempt organizations subject to the rules. In particular, large, multiple-entity tax-exempt organizations (e.g., hospital or university systems) will need to be careful in determining which employees are subject to the excise tax, how much compensation is paid to each such employee, and which employers throughout the system will be liable for the tax." (Seyfarth Shaw LLP)
[Guidance Overview] IRS Issues Interim Guidance on the New Excise Tax on Executive Compensation for Tax-Exempt Employers
"If the tax applies, who pays it? ... Which tax-exempt employers are affected? ... Who is a covered employee? ... What types of payments trigger the excise tax? ... What is a 'taxable year' for purposes of the tax? ... How do you report and pay the excise tax? ... Is there room for interpretation as to how code section 4960 applies?" (Drinker Biddle)
Revising 162(m) Disclosures in Proxy Statements
"The Section 162(m) deduction limit for performance-based compensation was repealed by the Tax Cuts and Jobs Act, effective for taxable years beginning after December 31, 2017, subject to transition relief. Public companies should consider revising disclosures in their upcoming proxy statements. Recently filed proxy statements may provide some ideas, a sample of which is noted [in this article]. The disclosures seem to range from 'compensation in excess of $1,000,000 will no longer be tax deductible, get used to it' to 'it may not be deductible, but we still intend to tie pay to performance.' " (Dodd-Frank.com)
[Opinion] Shareholder Letter May Prompt More Descriptive CEO Pay Ratio Disclosures
"[A] shareholder letter ... that was sent to Fortune 500 company compensation committees from a group of 48 institutional investors ... requests far more information than needed to provide shareholders insights on these issues, many of which may give employee advocates and unions more information to leverage in negotiations or provide competitors with critical proprietary business information. In many cases it would greatly increase the amount of information collected and the burden on internal systems." (Willis Towers Watson)
[Guidance Overview] Hedging Disclosure Is Here: SEC Adopts Final Rules
"The final rules ... require public companies to disclose their hedging practices and policies (whether or not written) for employees, officers and directors in proxy and information statements relating to the election of directors. This leaves only three sets of executive compensation-related rulemaking under the DFA that have not been finalized, related to performance-based compensation disclosures, clawback policies and excessive compensation at certain financial institutions." (K&L Gates)
[Guidance Overview] SEC Adopts Hedging Policy Disclosure Requirements
"Companies will be able to satisfy the new rules either by disclosing the practices or policies in full or by providing a fair and accurate description of their hedging practices or policies, including the categories of people affected and types of hedging transactions specifically allowed or not allowed. If a company does not have hedging policies, it will be required to state that fact or to state that hedging transactions generally are permitted." (Skadden)
[Guidance Overview] Details on the SEC's Final Rules on Hedging Policies
"The SEC resisted all requests to provide a definition of hedging, instead placing that burden entirely on the company ... However, the rules make it very clear that the SEC intends the disclosure requirement to apply very broadly.... There is less risk of misleading investors if the policy is disclosed word-for-word." (Winston & Strawn LLP)
ISS Updates U.S. Compensation and Equity Compensation Plan Policies for 2019
"Equity plan amendments that involve removal of general references to Section 162(m) qualification (including references to approved metrics for use in performance plan-based awards) will be viewed as administrative and neutral. However, the removal of individual award limits in an equity plan will be viewed as a negative change, as ISS considers such limits to be consistent with good governance practices." (Benefits BCLP)
[Guidance Overview] IRS Issues Guidance on Excise Tax on Executive Compensation of Tax-Exempt Entities
"In determining the total remuneration paid, payments by the [applicable tax exempt organization (ATEO)] and all related entities are considered. Related entities can include for-profit organizations and governmental organizations. Related entities share common control. The IRS guidance specifically rejects the control group test for qualified plans that uses 80% and adopts a 50% test -- more than 50% ownership for stock corporations; partnerships; trusts, using beneficial interests -- and more than 50% of directors or trustees who are representatives of nonstock entities." (Nelson Mullins)
[Guidance Overview] IRS Issues Notice 2019-09 Providing Interim Guidance Under Code Section 4960
"Among other topics, the Notice addresses: [1] What year is used in calculating the excise tax? [2] Who is liable for the excise tax? [3] What is an [applicable tax-exempt organization (ATEO)]? [4] Who is a covered employee under Section 4960? [5] What is an excess parachute payment under Section 4960? [6] How do you compute excess parachute payments under Section 4960? [7] How do ATEOs and related organizations report and pay the excise tax imposed under Section 4960? [8] What is the effective date of Section 4960?" (Thomson Reuters Practical Law)
[Guidance Overview] Top Takeaways for Tax-Exempts from IRS Guidance on Executive Compensation
"Multiple employers within a tax-exempt system can each be separately subject to the excise tax.... Employees earning significantly less than $1 million can be covered employees and covered employee status never ends.... The determination of who is a covered employee is complicated.... Multiple entities within a tax-exempt system may be liable for a portion of the excise tax.... The excise tax can apply to governmental entities.... The excise tax is determined based on the calendar year.... Payments made upon separation from service that are less than $1 million can be subject to the excise tax." (McDermott Will & Emery)
[Guidance Overview] SEC Adopts Final Hedging Policy Disclosure Rules
"The final rules require companies to disclose certain hedging policies or practices, but do not require companies to adopt any new hedging policies or to amend any existing hedging policies. Many companies had already adopted some form of hedging policy when the SEC published the proposed rules in 2015 ... and have been voluntarily disclosing their hedging policies as part of their corporate governance disclosure. SEC proxy rules ... have also required some hedging disclosure in the Compensation Disclosure and Analysis (CD&A) section." (Goodwin Procter)
[Guidance Overview] IRS Answers Questions on Tax-Exempt Executive Compensation
"[Notice 2019-09] appears to answer most of the outstanding section 4960 questions and uses familiar concepts from other related areas as often as possible.... [Applicable Tax Exempt Organization (ATEOs)] and their related entities will have to determine the related entities, choose a reasonable method for allocating compensation among the entities, and determine the appropriate remuneration for each calculation. Exempt organization professionals and compensation and benefits professionals will likely have to work together on some of the issues to address overlapping concepts." (RSM US)
[Official Guidance] Text of IRS Notice 2019-09: Interim Guidance Under Section 4960 -- Tax on Excess Tax-Exempt Organization Executive Compensation (PDF)
92 pages. "Until further guidance is issued, ... taxpayers may base their positions upon a good faith, reasonable interpretation of the statute ... The positions reflected in this notice constitute a good faith, reasonable interpretation of the statute.... [T]his preamble describes certain positions that the Treasury Department and the IRS have concluded are not consistent with a good faith, reasonable interpretation of the statutory language. The Treasury Department and the IRS intend to embody these positions as part of the forthcoming proposed regulations." (Internal Revenue Service [IRS])
Rewarding and Retaining Nonprofit Executives Through Incentive Plans: Practical and Legal Considerations
"[This article highlights] current trends as well as practical and legal considerations regarding the use of incentive plans ... [discusses] the prevalence and function of incentive plans, considerations for establishing and managing plans, applicable legal standards to keep in mind when establishing such plans, and key considerations regarding 457(f) plans (common vehicles for longer-term incentive awards).... [and addresses] two related topics that nonprofits often ask about: whether it is appropriate to incorporate financial metrics into incentive plans, and how the recent 2017 tax act's 21 percent excise tax on nonprofit compensation may affect incentive awards." (Bloomberg BNA)
 
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